INDIA’S E-COMMERCE EXPORTS

INDIA’S E-COMMERCE EXPORTS

CONTEXT :

• India’s e-commerce exports have the potential to grow at a faster pace than IT exports in early 2000s.

ABOUT INDIA’S E-COMMERCE EXPORTS :

• India’s current e-commerce exports remain far below their potential.
• Currently, they account for only $2 billion, less than 0.5 per cent of India’s total goods export basket.
• The country must plan to export $350 billion, or about one-third of its total goods, through e-commerce by 2030.

INDIA’S STRENGTH IN E-COMMERCE EXPORT SECTOR :

• With global Business to Consumer (B2C) e-commerce exports estimated to grow from $800 billion to $8 trillion by 2030.
• India’s strength is in high-demand customised products.
• Constant expanding seller base.
• Higher profit margins per unit of export.

REASONS FOR SUCH LOW EXPORTS :

• Developing the ecosystem for e-commerce exports as India’s current e-commerce export provisions are a patchwork of rules framed for regular B2B exporters.
• This creates an enormous compliance burden on small firms, and India needs to address all such issues in one place.
• Shipping and delivery of products to foreign countries can be expensive and time-consuming, leading to dissatisfaction among customers.
• Lack of standardization in terms of product quality, delivery, and customer service.
• Same set of policy and regulations for e-commerce export as of normal exports of goods and services.

ACTION STEPS : WHAT NEEDS TO BE DONE?

• Various recommendations have been identified to increase e-commerce exports from India.

These cover four broad categories :

1. REDEFINE THE RESPONSIBILITIES OF SELLERS :

• Small and medium-sized firms rely on e-commerce platforms for global exposure and value-added services, such as timely payment assurance.
• However, this conflicts with FEMA regulations as the platform is responsible for receiving payment, while the ownership of goods remains with the seller.

2. SIMPLIFY PAYMENT RECONCILIATION :

• Payment reconciliation is a major roadblock for third-party e-commerce exporters.
• The RBI guidelines for B2B exports need changes to accommodate B2C exports.
  The changes needed to simplify payment reconciliation are :
• Sellers must receive forex within nine months of shipment, which is challenging for shipments sold over 12-18 months. More time is needed to reconcile payments.
• Lower restrictions on receipt of export proceeds: Forex received must not vary more than 25 per cent of the value stated in the export document. A 25 per cent reduction cap is too restrictive for e­commerce sales that involve discounts and returns.
• E­commerce exports have a high number of small shipments and invoices per large shipment, which increases the payment reconciliation burden.
• Simplify foreign inventory management documentation: Documentation burden for forward deploy inventory to an overseas warehouse is cumbersome. Foreign inventory management documentation must be simplified.
• Online bank processes : Issuing Authorised Dealer (AD) code letters and submitting documents to banks are done offline. For e­commerce exports, banks don’t recognise the fund flow as an export transaction, causing a delay (around two weeks) in AD code letter generation.

3. SIMPLIFY EXPORT POLICY AND PROCESSS :

• Raise the value cap for e­commerce exports from ₹5 lakh to ₹25 lakh.
• As most trade is shifting to GVCs (global value chains) requiring timely deliveries, exporters must be allowed to choose the shipment mode as per their business requirements.
• Create separate customs codes for e­commerce shipments to avoid delays caused by ad hoc document requests by customs officials and allow green channel clearance for e­commerce shipments, similar to China’s customs supervision codes.
• Exempt import duties on rejects and treat reimports as duty-exempt imports in line with global practices to reduce costs and expedite the delivery of merchandise.
• Reduce the Courier Shipping Bill processing time from 3­4 hours to less than 20 minutes by making changes in the Express Cargo Clearance System (ECCS).

4. SET UP E-COMMERCE NATIONAL TRADE NETWORK :

• This network will bring together the RBI, Customs, DGFT, GSTN, India Post, courier companies, platforms like Amazon and eBay, and the user to create a central technology platform that streamlines the entire process.

WAY FORWARD :

• E-commerce will democratise export process by allowing lakhs of small firms to export.
• Exports will grow exponentially with removal of onerous regulatory compliances.
• The E-Commerce Export Policy should be an independent document addressing all pain points faced by exporters.

SOURCE : THE HINDU BUSINESS LINE

SYLLABUS : MAINS, GS-3, INDIAN ECONOMY