Determining the Relevant Market for Digital Multi-Sided Platforms

Description: The report highlights the challenges and peculiarities of regulating digital platforms in multi-sided markets, emphasizing the need for competition regulators to adapt traditional antitrust tools for digital economies. It discusses the inadequacy of current market determination methods in capturing the complex dynamics of digital platforms, suggests incorporating platform typology and indirect network effects into analyses, and critiques the inconsistent use of qualitative factors in regulatory decisions. The report concludes with recommendations for legislative amendments and the establishment of guiding principles to better address the multi-faceted nature of digital platforms, urging objective, evidence-based approaches for determining market substitutability.

Attribution: Chawdhry, Mohit. Determining the Relevant Market for Digital Multi-Sided Platforms. Issue No. 013, December 2021, Esya Centre.

Regulating Crypto Assets in India

Description: The report outlines India's booming crypto industry, advocating for clear regulations to balance innovation with policy risks. It suggests adopting a safe harbour similar to internet intermediaries, analyzing international regulatory models, and recommending a co-regulatory approach involving SEBI, RBI, and the Ministry of Finance. Key proposals include defining crypto assets broadly, making exchanges the focal point of regulation, enhancing investor protection, and ensuring interoperability and safety in crypto transactions.

Attribution: Bal, Meghna; Venkatesan, Shweta and Ramdas, Varun. Regulating Crypto Assets in India. Monograph, November 2021. Observer Research Foundation and Esya Centre.

First Principles for Competition Regulation in the Digital Economy

Description: The report emphasizes the importance of fostering innovation and maintaining competition in digital markets, similar to traditional markets. It highlights the challenges and peculiarities of digital markets, including scalability and influence on socio-political discourse, prompting global regulatory efforts. It critiques preemptive regulation and advocates for principles balancing oversight with innovation incentives, emphasizing the need for a holistic approach to competition, protection of novel business practices, and safeguarding innovation incentives.

Attribution: Bal, Meghna. First Principles for Competition Regulation in the Digital Economy. Issue No. 012, October 2021. Esya Centre

Securing ICT Supply Chains: An Evidence Based Approach

Description: This report highlights the increasing complexity and security concerns associated with global ICT supply chains. It discusses the impact of repeated cyber-attacks on supply chain vulnerabilities and outlines national security measures adopted by governments, such as the exclusion of Chinese vendors and app bans. The report emphasizes the need for a balanced approach, citing the evidence-based executive order issued by US President Joe Biden as a model for securing ICT supply chains without hindering innovation or trade. The brief concludes with an analysis of how the Indian cybersecurity framework aligns with these principles.

Attribution: Chawdhry, Mohit. Securing ICT Supply Chains: An Evidence Based Approach. Issue No. 011, August 2021, Esya Centre.

Bridging the Transparency Gap: A Comparative Assessment of Surveillance-Related Transparency Efforts in the United States and India

Description: This report delves into the extensive government surveillance programs in the United States and India, emphasizing the need for transparency in operations involving user data. It suggests recommendations for both governments and companies to enhance accountability, aligning with international principles on human rights in communication surveillance. Specific recommendations include legal reforms, granular data publication on surveillance requests, transparency on data audit processes, and collaboration with civil society. The report encourages U.S. companies to disclose more information related to government surveillance activities in India.

Attribution: Singh, Spandana and Bal, Meghna. Bridging the Transparency Gap: A Comparative Assessment of Surveillance-Related Transparency Efforts in the United States and India. Special Report, August 2021. Esya Centre and Open Technology Institute.

The Future of Indian Retail: Stories from the Ground

At the end of 2020, we conducted a study to understand the impact of technology on Indian retail in the backdrop of the COVID-19 pandemic. The culmination of this study has been published in the form of a book titled “The Future of Indian Retail: Stories from the Ground”. 

The study documented the experiences of a diverse group of two dozen proprietors of small and medium enterprises that represent the domestic retail market.  The book showcases these voices from the ground through their experiences of interaction with technology. More specifically, it provides perspective on how digital adoption helped sustain some segments of Indian retail and brought the country closer to the vision of an Aatmanirbhar Bharat, even amidst a crippling public health crisis. 

The real-life stories documented in this publication highlight the entrepreneurial spirit and tenacity with which small entities tackled a fundamental disruption in their business due to the pandemic and the ensuing nationwide lockdown. 

At the same time, the book provides valuable insights into the constraints that small enterprises face while adopting digital solutions. As we move towards the digital transformation of industry, dubbed ‘Industry 4.0’, it will be important for policymakers, business forums and industry associations to work together to overcome these challenges. For example, the improvement of underlying infrastructure and logistics mechanisms will require sustained and targeted investment. Similarly, business owners and employees will require skill and capacity building to effectively integrate digital solution into their operations.

Attribution: Esya Centre. The Future of Indian Retail: Stories from the Ground. New Delhi: Esya Centre, 2021.

Associated Media

The Booming World of India's Social Media Apps

Description: This report examines the evolving landscape of social media apps in India, particularly focusing on the surge of short-video apps. The widespread adoption of affordable smartphones and cheap data has led to a boom in internet users, primarily on mobile phones. Despite progress in bridging the urban-rural digital gap, a significant gender disparity persists. The paper explores the economic implications and societal challenges related to increasing online users, especially women, while emphasizing its unbiased research approach.

Attribution: Bahree, Megha. The Booming World of India’s Social Media Apps. Report 010, July 2021, Esya Centre.

Levelling the Playing Field between Traditional and Digital Businesses

Description: This report explores the impact of over-the-top (OTT) services on various sectors, emphasizing the advantages for consumers and businesses in going digital. It highlights the disruptive growth of internet-based services, especially in India's e-commerce sector, prompting calls for regulatory intervention to ensure a level playing field between digital and traditional businesses. The report argues against applying a legacy regulatory framework to digital services, proposing a two-pronged strategy of deregulation and institutional strengthening to foster fair competition and innovation.

Attribution: Chawdhry, Mohit. Levelling the Playing Field between Traditional and Digital Businesses. Report Issue 009, June 2021, Esya Centre.

India's G20 Presidency: Promoting Trust and Inclusivity in a Digital World

Description: This report discusses the G20's evolution as a key global financial forum and its increasing focus on digital technologies. With India set to lead in 2023, it proposes a digital agenda, emphasizing trust-building and reducing the digital divide. Seven focus areas include digital corridors, infrastructure, MSME capacity building, open data, technical cooperation, regional collaboration, and frameworks for emerging technologies like AI and 5G. The aim is to foster international cooperation and inclusive development.

Attribution: Chawdhry, Mohit and Agarwal, Rohan. India’s G20 Presidency: Promoting Trust and Inclusivity in a Digital World. Report Issue 008, May 2021, Esya Centre.

Aligning Labour Reforms with India's Digital Aspirations

This Policy Brief comes on the heels of reports that the Central Government has deferred the implementation of the latest Labour Codes, for want of state-level rules.

The latest labour law reforms of the Modi Government constitute four distinct Codes on (a) wages; (b) social security; (c) industrial relations; and (d) occupational, health, safety and working conditions. They were enacted to consolidate and update an obsolete framework.

While the proposed labour reform extends social security benefits to gig workers, its overall implications for the digital economy remains mixed.

The Policy Brief suggests that certain elements of the Codes, remain out of sync with key attributes of the digital economy, namely economies of scale, network effects and the importance of momentum.

Moreover, the new labour codes add rigidity, uncertainty and regulatory discretion in terms of hiring, work hours, labour management and firing costs—that will negatively impact the digital economy.

For instance, the Occupational Safety, Health and Working Conditions (“OSHWC”) Code restricts employers from engaging contract labour in their ‘core’ activities.

The Policy Brief concludes with concrete suggestions which can improve the framework’s overall suitability for Digital India.

These suggestions include a strong focus on targeted income support for gig workers and specific measures to operationalise the delivery of benefits for gig workers under the Social Security Code.

Further, the Policy Brief suggests means to reduce regulatory discretion through i) adoption of clear standards and procedures; and ii) promotion of self-certification schemes for digital businesses.

Attribution: Deb, Sidharth and Chawdhry, Mohit. Aligning Labour Reforms with India’s Digital Aspirations. Policy Brief No. 206, April 2021, Esya Centre.

Digitalising Indian Retail: Capacity Building for a Global Context

E-commerce gained significant attention at the 11th Ministerial Conference in Buenos Aires in 2017, where 71 member states released a Joint Statement affirming their intent to advance negotiations on trade related aspects of e-commerce under the WTO ambit. E-commerce was first recognised in global trade agreements at the Second Ministerial Conference in Geneva in 1998, where member states adopted a Declaration on Global Electronic Commerce and called to establish a Work Programme to examine issues of e-commerce related to trade).

The Work Programme was required to pay specific attention to the economic, financial and development needs of developing countries. India participated in the early rounds of discussion, raising key issues of intellectual property in e-commerce in its communication to the Council for Trade Related Aspects of International Property Rights in 1999. Its representative noted before the General Council the importance of e-commerce, specifically e-retail, for development. But he also stressed the importance of providing adequate policy space for developing states to establish domestic policies to govern e-commerce, and to build capacity among domestic MSMEs. These concerns were echoed by other developing states. As a result of this fundamental disagreement, progress under the Work Programme has been slow in the past two decades.

Recent years have seen a marked shift in the positions of several developing and Less Developed Countries, which are moving now toward a global compact on e-commerce. China, Saudi Arabia, Thailand and Kenya are just a few of the states to have signed and participated in discussions under the Joint Statement Initiative. Another prominent trend is the emergence of regional, interest-based groupings to promote the use of e-commerce for development. For instance the Friends of E-Commerce for Development, a group of developed and developing countries that include Pakistan, Sri Lanka and Australia, are working together to use e-commerce in a manner supportive of local industry and small enterprises. Further, regional trade agreements or RTAs increasingly incorporate clauses related to e-commerce. A recent study found that of 275 RTAs registered with the WTO, 75 contained at least one clause dealing explicitly with e-commerce. Yet India continues to oppose the formalisation of talks on e-commerce under the WTO. In its communication to the General Council prior to MC11, India advocated continuing talks under the existing Work Programme without altering its mandate. Statements from Indian representatives at the WTO show this opposition remains grounded in apprehension, that the entry of global retail brands would significantly hinder the development of domestic retail enterprises.

Failure to develop a more nuanced negotiation strategy at the WTO may have significant consequences for India. It risks being cut off from the preferential market access to be gained from participation in any multilateral or plurilateral agreement. This would hinder the flow of investments into the country, and its integration with the global supply chain. By choosing to completely distance itself from ongoing negotiations, India also loses the opportunity to shape global rules of digital trade. Historically, states that adopted global rules and technical standards have gained a significant first-mover advantage.

To negotiate more effectively at the WTO, India must first build sufficient local capacity, so that domestic products can effectively compete in global markets. It can learn from the experiences of nations such as Malaysia, Singapore and Thailand, which adopted a state-led approach to online retail development, and are able as a result to participate in deliberations under the Joint Initiative.

The focus of this analysis is online retail, a narrower sector than e-commerce. E-retail is concerned primarily with the online sale and purchase of goods, while e-commerce includes a wide range of services such as OTT platforms. A key impediment to India’s participation in global talks on e-commerce is the apprehension that its domestic retail sector will be unable to compete with large global corporations: this can be overcome through capacity building backed by the state, to let domestic retailers harness online retail opportunities, and eventually compete with foreign entities.

This paper attempts to define the broad contours of a specialised development agency that could undertake such capacity building effectively. The next section surveys the existing literature to identify key capacity deficits faced by Indian MSMEs in adopting digital technologies and e-retail. Section 3 outlines India’s approach to regulating e-commerce, contrasting it with the specialised bodies in other developing countries, and identifying certain principles of regulatory design that inform their functioning. Section 4 suggests how these principles could be applied within the Indian context.

Attribution: Mohit Chawdhry, “Digitalising Indian Retail: Capacity Building for a Global Context,” Issue No. 007, February 2021, Esya Centre.

Database Regulation: Examining Existing Approaches and Considerations for India

Regulators around the world are scrutinising tech companies—the US, EU, India and other jurisdictions are filing competition lawsuits against large digital platforms, and the EU as part of its digital data strategy recently released drafts of the Digital Services Act, Digital Markets Act, and Data Governance Act on competition, content moderation, platform liability, and other aspects of digital technology. In India the government recently released draft frameworks for non-personal data regulation (the NPD Report) while a Joint Select Committee in Parliament is deliberating on the draft Personal Data Protection Bill, and the government indicates interest in a focus on developing artificial intelligence and related technologies.

Data is at the core of how digital platforms provide the products and services we use today, and is central to their functioning. It also has wider implications, and the transition from a paper-based system to a digital one offers multiple advantages not always related to technology: permitting better management of information, increasing security and efficiency, and providing information and insights to enable better decision making. Data is also being used at an unprecedented scale, in public service delivery, finance, healthcare, transportation, and marketing. A variety of stakeholders are collecting increasing volumes of data, whether personal, non-personal or a combination of the two.

Yet vast amounts of data are not useful in themselves without ways to make sense of them. This is what many emerging technologies do, from machine learning to the wide range of tools named ‘artificial intelligence’—they are methods to analyse and derive value from large volumes of data, and in many cases the way they work improves when given more diverse data to analyse. It is only possible to do so by ordering and organising data into specific formats depending on the intended use: this is the role of a database.

This paper examines how databases are afforded protection and details some key considerations for database regulation in India. It explores database protections in other jurisdictions, primarily the European Union and the United States. Section 1 defines a database, 2 explores the protections afforded by copyright law, 3 examines sui generis or standalone database protections, 4 explores protection by unfair competition laws, 5 examines the protections prevailing in India, and 6 lists emerging considerations and policy recommendations.

Attribution: Aishwarya Giridhar, “Database Regulation: Examining Existing Approaches and Considerations for India,” Special Issue No. 205, Feb. 2021, Esya Centre

Response to the Second Draft Report by the Committee of Experts on Non-personal Data Governance Framework

We at the Esya Centre are grateful for the opportunity given to us by the Ministry of Electronics and Information Technology (MeitY) to respond to the Committee of Expert’s Report on Non-Personal Data Governance Framework (Report). We appreciate that the Committee has attempted to set out a broad framework that seeks to regulate several facets of the use of Non-Personal Data (NPD) while identifying possible areas of concern. In our suggestions, we engage with the Committee’s key recommendations and identify areas which require greater clarity. We recommend actions that assist in creating effective regulation geared towards achieving defined goals and outcomes. Part I contains the summary of recommendations, and Part II contains a detailed analysis of substantive elements of the Report. We have structured our responses into 4 themes namely: i) the definition of Non-Personal Data, ii) overlaps with existing proprietary frameworks, iii) community data and HVDs and iv) the regulatory architecture.

Moderating Social Media in India: User-Generated Content in an Era of Viral False News, Disinformation and Hate Speech

Social media globally, and in India, is widely afflicted by two main problems: hate speech and false news. The reason this is a pressing problem is because eventually both these elements end up hurting democracy. At Esya Centre we have taken an in-depth look at the social media ecosystem in India to identify the problems and come up with potential solutions. While India has multiple bills in the works that aim at tackling some of these issues, the ambit of those bills is very broad and encompasses multiple themes. We’ve kept our paper focused on social media and how to moderate user-generated content.

For this paper, which is not sponsored by any social media company, we spoke with a range of companies, lawyers, researchers, and academicians in the ecosystem. We also studied developments in the U.S. and Europe and adapted from there suggestions that we think will help improve the ecosystem in India without killing business. However, this research does not reflect anyone else’s opinions.

Attribution: Megha Bahree, “Moderating Social Media in India: User-Generated Content in an Era of Viral False News, Disinformation and Hate Speech,” Issue No. 006, January 2021, Esya Centre

Embracing Nonlinearity: The Future of India's Entertainment Industry

India’s media and entertainment industries have always been an important part of our national story. As a young nation born in an era where film and radio were in their infancy, we have seen our triumphs and tribulations reflected in the mass media from the very start. These industries have also become important contributors to Indian economic prosperity. In recognition of their importance, the Union government officially designated audiovisual services as one of 12 ‘champion service sectors’ in 2018.

The sector is witnessing change at breakneck speed – developments in technology, notably the internet and over the top (OTT) content have indelibly changed the creation, distribution and consumption of content. The growing OTT ecosystem offers flexibility to creators and consumers, expands choice, and lowers distribution and search costs. Other developments such as strides in artificial intelligence, virtual reality and augmented reality, are opening up new possibilities in entertainment, creating entirely new categories of products. In its response to these changes, India could potentially propel the sector to new heights and make the country a global leader in entertainment.

To frame a suitable response, it is important to imagine what the future of entertainment will be. How will storytelling, which is at the heart of entertainment, change with developments in technology? While stories take many forms – from the oral epics of ancient bards to slick modern video games – their narration and consumption form a central pillar of human existence. Storytelling has evolved with technology, with the flexibility of oral tales yielding to the standardization of print. Today we are on the cusp of another transformation: from linear storytelling in the printed word, television and film, to a more dynamic and nonlinear mode. Artificial intelligence, virtual reality and augmented reality offer new and immersive ways for people to engage with stories. In the future that emerges from current trends, entertainment will become a more dynamic, non-linear and immersive process, highly personalized to fit consumer desires and needs.

We examine the factors that can make India a dominant force in this landscape. The country has three innate strengths we must leverage. Its cultural heritage is ancient and diverse, and remains underrepresented on the world stage. It is also well suited to the nonlinear entertainment of the future, as it contains many traditions of oral storytelling that yield multiple threads from a common recognisable narrative. Third, India is one of the world’s largest consumers of data, with thriving creative industries. Our creators are prolific in terms of output, but lag behind in commercializing their works to generate greater economic value. To achieve this, India can learn from the experience of countries like South Korea, which has emerged as a global entertainment hub.

Certain transformations are urgently required to achieve this outcome. We need to promote creative freedom, which can be done through industry-led standards, as is the practice in countries around the world. This will require active and continued engagement by the industry, as well as recognition and support from the state. Second, we must focus on building our hardware capabilities. The bundling of content with devices is already ubiquitous. And finally, we need to move to a principles-based approach to regulation, which would ensure consistency of purpose across the expanding range of technologies in the media ecosystem.

Attribution: Shekhar Kapur, Vani Tripathi Tikoo, Akshat Agarwal, and Vivan Sharan, “Embracing Nonlinearity: The Future of India’s Entertainment Industry,” Issue No. 005, November 2020, Esya Centre.

History of TV Broadcasting Regulation in India

According to the Broadcast Audience Research Council over 197 million Indian households had a television connection in 2019.1 As of July 31, 2020 the Union Ministry of Information and Broadcasting (MIB) had permitted 920 TV channels to operate. The television broadcast ecosystem has three stakeholders: broadcasters, distributors, and consumers. Broadcasters make content for TV and distributors provide it to consumers using one of four technologies: cable, direct to home (DTH), head-end in the sky (HITS) or internet protocol (IPTV).

A complex web of actors regulates the broadcast ecosystem in India, including the MIB, TRAI the Telecommunications Regulatory Authority of India, and self-regulatory bodies such as the Broadcasting Content Complaints Council and the News Broadcasting Standards Authority. The Department of Space and the Department of Telecommunications’ Wireless and Programming Coordination Wing regulate the use of satellites and spectrum.

The Telegraph Act 1885 and the Indian Wireless Telegraphy Act of 1933 require broadcasters and distributors to register their service. The Cable TV Network (Regulation) Act of 1995 (CTN Act) formalized this registration. At the last mile, local cable operators register with post offices in their territory. State governments have empowered Monitoring Committees at the state and district levels to enforce provisions of the CTN Act– mainly its programme and advertising codes.

Since 2004 the broadcast sector has been regulated by TRAI. The central government expanded the Authority’s powers in 2011 through an amendment to the CTN Act, which together with a 2004 notification from the erstwhile Union Ministry of Communications and Information Technology empowers TRAI to regulate tariffs, including the MRP of channels, the terms of interconnection between broadcasters and distributors, and standards for quality of service at the consumer end.

TRAI’s legacy in the broadcasting sector is one of excessive economic regulation and restrictive price controls. Having expanded its regulatory remit over broadcasting the State did not enhance expertise or capacity, within TRAI or the quasi-judicial Telecom Dispute Settlement Appellate Tribunal (TDSAT). The result has been formulaic, TRP driven television content, and higher costs for subscribers3 and there is no mechanism to enforce quality of service at the last mile.

Since the CTN Act in 1995, Parliament has thrice considered a specialised regulator for the broadcasting sector. On numerous occasions Parliament and specialised committees such as the Nariman Committee have backed the proposal for a specialised regulator, and seminal judicial pronouncements including the ‘Airwaves Judgment’ have highlighted the need for a specific law and a specialised regulator for the sector. Despite these efforts TRAI continues to regulate the broadcast sector, although its oversight was meant to be temporary. This brief explores the history of attempts to introduce a parallel regulatory regime for broadcasting in India, which may help explain why governments have always preferred to expand TRAI’s powers rather than establish a specialised regulator for broadcasting.

Attribution: Varun Ramdas, “History of TV Broadcasting Regulations in India,” Policy Brief No. 204, Oct. 2020, Esya Centre.

Modernising Collective Copyright Management in India

This brief explores the reform of collective copyright management in India. Section 1 sets out the current landscape while Section 2 describes the models of collective management used in other jurisdictions – Brazil, the Nordic countries, the European Union, the United Kingdom, and the United States – and also details some digital solutions. Section 3 concludes with takeaways for India and recommendations for reform – including legislative and administrative reform, structural reform in copyright societies, and increased transparency. Ultimately, the effective functioning of any collective management system will require implementing the Copyright Act’s mandates for CMOs, and ensuring the efficient functioning of administrative bodies in the copyright ecosystem, for effective redressal. While the Copyright Act does provide some safeguards, as discussed, there is ambiguity in the text on its applicability to various organisations. Therefore, there is an urgent need to amend the Copyright Act, reform the functioning of the Intellectual Property Appellate Board, and streamline enforcement mechanisms.

Attribution: Aishwarya Giridhar, “Modernising Collective Copyright Management in India,” Policy Brief No. 203, Oct. 2020, Esya Centre

Nine Principles for India's Digital Economy

Global mobile data traffic was around 456 exabytes in 2019, of which India accounted for around 75 exabytes or around 16 percent, according to Ericsson. Around 14 percent of the global population resides in India and, consequently, the country punches slightly above its weight in terms of mobile data consumption. The size of India’s opportunity to unlock value through such consumption, is perhaps without parallel in the developing world. This can be achieved through a principles-based framework for governance of information technology (IT). The nine principles detailed in this brief can also aid the design of a new-age IT legislation, that fosters innovation, competition and growth:

Principle 1: Legal Recognition

Provide adequate legal recognition and clarity to new digital businesses

Principle 2: Level Playing Field

Level the playing field for small digital businesses and entrepreneurs to compete effectively, through

deregulation

Principle 3: Risk-Based Regulation

Encourage regulations that are activity-specific and prioritise consumer welfare over state control

Principle 4: Functional Classification of Intermediaries through Co-Regulatory Model

Leverage coregulation to help digital intermediaries evolve, innovate and scale

Principle 5: Transparent and Accountable Self-Regulation

Employ self-regulatory and co-regulatory bodies to offset the need for legacy regulatory constructs.

Principle 6: Platform Neutrality

Ensure that large businesses do not discriminate between equal business partners, and consequently reduce the probabilities of gatekeeping.

Principle 7: Privacy and Security by Design

Promote product and platform design that helps local companies access global markets with low compliance costs.

Principle 8: Fair, Reasonable and Non-Discriminatory

(FRAND) Terms Guide business conduct through the FRAND principle, to minimise the need for economic regulation.

Principle 9: Trust and the Global Internet

Promote the use of standards and protocols that build trust in the internet and leverage the wealth of Indian experience in multi-stakeholder collaboration and open design.

Attribution: “Nine Principles for India’s Digital Economy” Special Report, September 2020, Digital India Foundation and Esya Centre.

Response to the Report by the Committee of Experts on Non-personal Data Governance Framework

We at the Esya Centre are grateful for the opportunity given to us by the Ministry of Electronics and Information Technology (MeitY) to respond to the Committee of Expert’s Report on Non-Personal Data Governance Framework (Report). We appreciate that the Committee has attempted to set out a broad framework that seeks to regulate several facets of the use of Non-Personal Data (NPD) while identifying possible areas of concern. In our suggestions, we engage with the Committee’s key recommendations and identify areas which require greater clarity. We recommend actions that assist in creating effective regulation geared towards achieving defined goals and outcomes. Part I contains the summary of recommendations, and Part II contains detailed analysis of the Report. We have structured our responses into 4 sections on Competition and Innovation, Ownership and Access, Privacy and Definitions, and the Regulatory Framework. Within each section, we analyse the key recommendations made by the Committee and propose alternatives. We have sought to engage with the Committee’s recommendations on a first-principles basis and highlight areas which require greater conceptual clarity.

E-Retail, Consumer Demand and the Road to Recovery

I. Demand and E-Retail

The Covid-19 pandemic and ensuing emergency responses across the world are expected to affect firms through supply chain disruptions in the short run and demand declines in the longer run. Given the high share of Micro, Small and Medium Enterprises (MSMEs) as well as the low income of households in India, the country is at risk of a protracted economic downturn, especially given the steady decline in GDP growth.

India needs a two-pronged approach to generate aggregate demand. First, to bring jobs and income back to poorer households, especially for the rural population. Second, to facilitate spending by households who have the willingness and capacity to pay, primarily in and around urban areas. This can be done by facilitating e-retail, which has been a preferred channel during this period. With the element of experience removed from physical shopping, we see a shift in the playing field between online retail and physical stores. E-retail is also more capable of complying with evolving government regulations such as distancing norms, making it both a safe and competitively priced channel to help meet consumer demand.

E-retail regulation in India has a chequered past. For instance, the Government of India’s Draft e-Commerce Policy, which envisions e-retail as a segment within e-commerce, looks to regulate aspects ranging from data and digital infrastructure development to export promotion. It is essential that any future policy on e-commerce should support and incentivise technology adoption and sectoral transitions, such as from offline to e-retail.

II. Restrictions on E-Retail during the Lockdown

A survey of more than 2,000 online sellers conducted between April 27 and May 4 indicates the need for a facilitative policy direction. We find that most firms selling online prefer this channel to offline selling, but faced problems primarily of supply and demand during the lockdown period. A shortage of manpower was another important factor in this period, especially for firms that were previously operating at a larger scale.

Policy also played a role in hindering the operation of e-retail during the lockdown. A great deal of confusion was caused by unclear phrases and terms, for instance the definition of ‘essential goods’ was left unclear.  There was further a degree of inconsistency and differentiation in policy formulation. The adoption of differing standards for online and offline retail during the pandemic, despite the benefits of e-retail such as contactless delivery, is of particular concern.

The lockdown had a substantial impact on retailer supply chains, both online and offline. The initial impact seems to have derived from the lockdown’s sudden nature, and the resulting administrative confusion regarding passes, curfews, and freedom of movement. Businesses operating in multiple states or districts faced a significant challenge in obtaining the necessary permissions for their staff. Later in the lockdown they faced a shortage of labour as several migrant workers had shifted back to their villages or towns.

III. Road to Recovery

Actions by state governments will play a critical role in determining how well small retailers are able to recover. A rapid recovery will require cohesion and collaboration between governments at centre and state. With this in mind a five-step recovery process is suggested in our report.

The first steps are aimed at building trust and confidence in the policy-making process. We suggest that governments at various levels engage with different stakeholders to understand their concerns. Authorities should frame rules on the basis of feedback obtained in such consultation, and the principles of non-discrimination and non-arbitrariness. This will facilitate a level playing field that allows retail market participants to leverage their strengths and explore synergies between the digital and traditional channels.

Authorities must also review the crisis management playbook, including the legislative framework, keeping in mind lessons from the pandemic. A framework governing e-retail, or e-commerce more broadly, can take inspiration from the sectoral development bodies in Malaysia and Singapore, which have enabled local businesses to scale and compete globally.

Attribution: Dr. Megha Patnaik and Mohit Chawdhry. “E-Retail, Consumer Demand and the Road to Recovery,” Report No. 004, September 2020, Esya Centre.