Navigating the path to e-commerce success: Insights from trade policy expert

In a conversation with SME Futures, Rajesh Aggarwal, Visiting Professor-Trade at ICRIER and Former Chief-Business and Trade Policy at the International Trade Centre (ITC) in Geneva, offers valuable insights into India’s evolving e-commerce landscape.

Rajesh Aggarwal-ICRIER

It’s no secret that e-commerce, whether in India or elsewhere has grown manifold. In fact, In India, there was an increase of 101 million new online consumers between 2020 and 2022. Also, the number of online registered MSMEs has increased almost three times—from 5.1 million in 2021 to 15 million in 2023.

However, the sudden growth of e-commerce has also brought the need to talk about the regulatory landscape, the various challenges and the opportunities in this arena. Rajesh Aggarwal, a seasoned expert in trade policy and international business, shares valuable insights into the challenges and opportunities facing India’s e-commerce trade landscape and sheds light on the role of regulatory policies in fostering a conducive environment for SMEs and consumers alike. Besides that, he shares his thoughts on India’s recent Free Trade Agreement (FTA) with European nations and its implications for e-commerce trade.

Edited excerpts:

India recently signed a free trade agreement with four European nations. What are your views on any trade agreement in relation to the Indian e-commerce market? How will it grow?

When a trade or collaborative agreement is established with another country, particularly with a significant market like the European Union, it signals a positive development for trade relations. Primarily, such agreements grant Indian manufacturers greater access to foreign markets, offering preferential treatment or shielding them from intense competition. I would say that’s a general trend.

This trend is indicative of the broader benefits of international agreements, especially concerning e-commerce. These agreements often include provisions for doing e-commerce business for collaborations, creating platforms for addressing technical challenges encountered at borders concerning duties and taxes, and navigating non-tariff barriers to trade.

The facilitation of trade policy and e-commerce requires addressing these challenges through dialogue and negotiation. Technical discussions, stemming from political agreements such as Free Trade Agreements (FTAs), play a crucial role in smoothing out the complexities faced by Small and Medium-sized Enterprises (SMEs) during exportation.

Given the evolving nature of technology (cross-border e-commerce) and its impact on trade, fostering channels for collaborative problem-solving is essential. Establishing effective communication mechanisms can aid in resolving these issues, marking a significant stride forward in promoting seamless trade relationships.

Can you highlight some of the challenges for businesses that conduct e-commerce, especially in the hinterlands where most rural enterprises are?

The challenges in transitioning to e-commerce can be broadly categorised into four areas, both globally and in India. Firstly, connectivity and limited internet access pose a significant obstacle for many countries, particularly the least developed ones. Fortunately, India does not face this challenge to the same extent. This advantage allows for smoother online operations.

The second challenge lies in skill levels, particularly in effectively utilising the internet. For example, leveraging WhatsApp for business. While basic internet usage is essential for micro/small entrepreneurs/business owners to go up in the value chain, there’s a need to deepen skill development, especially in the IT sector. Developing these skills is essential for leveraging the full potential of the internet.

The second aspect of skill involves marketing products effectively. Understanding how to navigate online platforms, market products efficiently, and optimise visibility is crucial. Unlike traditional marketing methods, e-commerce demands a different approach to product placement and advertising to capture consumer attention effectively. For instance, if your product appears only after four or five searches, you are likely to miss out on that opportunity, as someone else will attract the buyer’s attention. Understanding how to optimise product visibility and engagement is vital for success in the online marketplace.

Next, regulatory challenges must be addressed, particularly in consumer policies such as return and exchange procedures. Anti-competitive practices by major platforms pose another hurdle, potentially marginalising SMEs. Regulatory frameworks must be designed to foster inclusivity and prevent monopolistic behaviour that could stifle competition.

Cross-border transactions and consumer protection policies play a significant role in shaping the e-commerce landscape. Handling returns and establishing transparent pricing mechanisms are essential components of consumer protection. Creating an environment that fosters trust and reliability is key to attracting and retaining customers.

Finally, technological challenges arise from the network economy’s tendency to favour platforms with a large user base, creating natural monopolies. Regulatory policies must aim to level the playing field, ensuring smaller businesses can thrive in the digital marketplace.

Addressing these challenges requires a multifaceted approach, combining skill development with regulatory reforms. By fostering a conducive environment for SMEs and consumers alike, e-commerce can truly flourish, driving economic growth and innovation.

The government is coming up with the Digital Competition Bill. What are your comments on that?

I am aware that the government is working on the Digital Competition Bill, but I don’t know what its provisions are, etc. They will have to be very country specific because they will have to study the anti-competitive practices which are being pursued in each country. They will differ from country to country because in a big market like India, the issues which will be on the anti-competitive side will be very different from say the issues in a small country where the market size is small, and the anti-competitive practices may be very different there.

That’s why it needs study and I’m sure that they have done the study, which is why they have been put in place.

I can only emphasise that it is imperative to combat anti-competitive practices in the digital arena if we want to benefit the small and medium enterprises as well as the consumers.

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