E-Commerce in India: A Matter of Concern? Archives

UPSC DAILY CURRENT AFFAIRS (23RD AUGUST, 2024) CCI Raises Objections on Reliance-Disney Deal Syllabus: GS3/ Economy In News The Competition Commission of India (CCI) has raised concerns regarding the proposed merger of media assets between Reliance Industries and Walt Disney in India. About According to the Competition (Amendment) Act 2023, if the CCI believes a merger may have an appreciable adverse effect on competition (AAEC), it issues a statement of objections to the involved parties, requiring them to justify the merger within 25 days. Earlier this year, Reliance, Viacom 18 Media Private Ltd, and The Walt Disney Company announced the signing of binding definitive agreements to form a joint venture (JV) that would combine the businesses of Viacom18 and Star India. The merged entity would have near-monopoly control over digital and TV cricket rights, including the highly valuable Indian Premier League (IPL). The Competition Commission of India (CCI) previously imposed a fine of ₹1,337.76 crore on Google for engaging in anti-competitive practices concerning Android mobile devices. Adverse effect on competition (AAEC) & its Impacts It is a situation where a business practice, merger, or agreement has the potential to significantly harm competition within a market. Impacts of AAEC Reduction in Consumer Choices: When competition is diminished, consumers often have fewer choices in terms of products or services. This can lead to a lack of diversity in the market. Higher Prices: With reduced competition, companies may have the power to set higher prices, as consumers have fewer alternatives. Barrier to Entry for New Players: AAEC can create significant barriers to entry for new companies, making it difficult for startups or smaller firms to enter the market. Exploitation of Market Power: Such as unfair terms of trade, tying arrangements, or restrictive covenants. Decreased Innovation: AAEC can lead to a reduction in innovation because the incentive to innovate diminishes when competition is weak. About Competition Commission of India (CCI) It is an autonomous statutory body established in 2009 under the Competition Act, 2002. The CCI eliminates practices that adversely affect competition, promote and sustain competition in markets, protect the interests of consumers, and ensure freedom of trade in the markets of India. Guidelines for Seaplane Operations in India Syllabus: GS3/Infrastructure Context Union Minister for Civil Aviation, has launched the Guidelines for Seaplane Operations in India under RCS-UDAN. About Seaplane Operations Seaplanes can land and take off from the sea. Waterdromes are for landing and taking off seaplanes. India had seaplane operations in Andaman & Nicobar as well as in Gujarat but they couldn’t sustain for long. The government plans to set up water aerodromes at 18 places spread across Andaman & Nicobar, Lakshadweep, Goa, Assam, Andhra Pradesh and Himachal Pradesh. Guidelines for Seaplane Operations The relaxed norms are aimed at encouraging seaplane operations under the regional air connectivity scheme UDAN (Ude Desh ka Aam Nagrik). The guidelines prioritise the safety and security of seaplane operations and clearly outline the responsibilities of each stakeholder, from the operators to the regulatory bodies. There will be no need for a waterdrome license and compliance requirements have also been reduced. Fresh Commercial Pilot License (CPL) holders can now directly obtain seaplane ratings that will allow them to fly seaplanes. The revised regulations incorporated easier training requirements and simplified approval processes for seaplane operations. The new guidelines allow non-scheduled entities to operate such services and put in place a simplified certificate process. Other Initiatives The minister also launched the 5.4 version of the UDAN. Under UDAN 5.4, fresh bids would be invited for the routes which were cancelled for some reason or the other, to provide connectivity on unserved routes. After the success of RCS-UDAN, the government is considering to propose RCS-UDAN 2.0 for the next 10 years. UDAN– The Regional Connectivity Scheme (RCS) – UDAN (Ude Desh Ka Aam Nagrik) is an initiative to improve infrastructure and connectivity in India, especially in remote and underserved regions. – It is a vital component of India’s National Civil Aviation Policy (NCAP) 2016, launched by the Ministry of Civil Aviation (MoCA) in 2016, with a 10-year vision.– The first RCS-UDAN flight was inaugurated in 2017, connecting Shimla to Delhi. – The scheme focuses on improving unserved air routes in underserved regions of the country and fulfilling the aspirations of the common citizens. Significance The integration of seaplanes into the existing aviation system will provide last-mile connectivity to the regions that have remained isolated due to geographical challenges. This new mode of transportation will provide faster and more comfortable travel to these areas but also open up new avenues for economic growth, particularly in the tourism sector. The country is uniquely positioned to leverage the potential of seaplane operations and the government is committed to unlocking the potential and transforming coastlines, rivers, lakes, and islands for connectivity, avenues of economic opportunity, and pathways to inclusive development. E-Commerce in India: A Matter of Concern? Syllabus: GS3/Economy Context Recently, the Union Trade Minister stirred up debate on India’s e-commerce sector, instead of celebrating its exponential growth, he expressed concern. About status of the e-commerce market in India India, with its rapidly growing digital economy and expanding internet user base, is on the brink of a massive transformation in its retail sector. At present, the e-commerce market in India is valued at $70 billion, which accounts for around 7% of the nation’s overall retail market.It is predicted to grow to a staggering $325 billion, and the country’s digital economy is expected to reach $800 billion. The number of online shoppers in India is projected to increase with a compound annual growth rate (CAGR) of 22% to 88 million in rural India and 15% to 263 million across urban India between 2019 and 2026. It is expected to lead to India surpassing the US as the second largest online shopper base in one to two years. Factors Driving Rise of the E-commerce India currently boasts the second-largest internet user base in the world, with over 900 million users. By 2030, it is expected to rise to the third position in the online retail industry. This growth is driven by increasing internet penetration, with around 87% of Indian households expected to have internet connections by 2025. The duration of internet access through mobiles has seen a 21% rise compared to 2019. Indian consumers with annual incomes ranging from INR 2.5 lakh to INR 10 lakh will be responsible for driving nearly half of the growth in India’s $300 billion e-commerce market by 2030. The growth of e-commerce in India has been done by the advancement of efficient logistics and supply chain networks. Government initiatives, like the National Logistics Policy, have streamlined last-mile deliveries, significantly improving logistical efficiency and cost-effectiveness. E-commerce offers consumers the ease of shopping from their homes or on the go, saving both time and effort. For example, food delivery platforms like Zomato and Swiggy have become incredibly popular due to this convenience. Invest India predicted a significant increase in the number of households engaging in e-commerce transactions, from 60-70 million in 2022 to 120-130 million by 2030. Challenges associated with e-commerce market in India Platform Neutrality and Fairness: There are concerns about lack of platform neutrality, unfair platform-to-business contract terms, exclusive contracts between online marketplace platforms and sellers/service providers, platform price parity restrictions, and deep discounts. Taxation: The provisions on carry-forward of losses need to be more accommodative of business restructuring, and withholding tax norms need more clarity. Inclusion of Small and Medium Enterprises (SMEs): SMEs often find it challenging to participate in the e-commerce ecosystem due to the need for separate infrastructures for different platforms, distinct terms and conditions of each platform, and the costs associated with these. Digital Infrastructure and Internet Penetration: The robustness of digital infrastructure is crucial for smooth and seamless online transactions. Any disruption in the digital infrastructure can lead to transaction failures, affecting the trust and confidence of consumers in e-commerce. While internet penetration is increasing in India, there is still a significant portion of the population, particularly in rural areas, that does not have access to the internet. Regulatory Challenges: E-commerce businesses in India also face regulatory challenges including issues related to data protection, consumer protection, taxation, and other legal and regulatory compliances. Related Initiatives to Overcome Challenges Policy Support: 100% FDI is allowed in B2B e-commerce. 100% FDI under the automatic route is permitted in the marketplace model of E-commerce. Government e-Marketplace (GeM): It has facilitated government procurement, crossing an impressive INR 4 Lakh Cr in GMV. Open Network for Digital Commerce (ONDC): It aims to provide equal opportunities to MSMEs to thrive in digital commerce and democratise e-commerce. Other major initiatives include Digital India (to transform India into a digitally empowered society and knowledge economy), Skill India (to train people in different skills), Startup India (to build a strong ecosystem for nurturing innovation and startups in the country), Make in India (to encourage companies to manufacture their products in India), Innovation Fund (aimed at encouraging entrepreneurship and innovation in the country), and BharatNet (to grow rural broadband penetration) etc. Way Forward (Policy Shift: Striking a Balance) Stricter Regulations: The government is contemplating stricter regulations for e-commerce players. While growth is fantastic, it shouldn’t come at the cost of the well-being of others. There is a need to balance growth with consumer safety. Fair Play and Transparency: The Union Trade Minister wants foreign direct investment (FDI) and technology to thrive but insists on honesty and transparency. Both online and offline businesses should play by the same rules. It’s about finding that sweet spot where progress doesn’t compromise our health and social fabric. Conclusion The rapid growth of India’s digital economy, coupled with the increasing internet penetration and the rise of the mass consumer segment, is set to propel India to become the world’s third-largest ecommerce market by 2030. It presents a tremendous opportunity for businesses and investors alike, making India one of the most attractive markets for ecommerce in the world. Performance Review of Regional Rural Banks (RRBs) Syllabus: GS3/ Economy Context The Union Minister for Finance and Corporate Affairs chaired a meeting to review performance of nine Regional Rural Banks (RRBs) of 5 states. About The review meeting focused on business performance, upgrading digital technology services, fostering business growth in MSME clusters, and deepening financial inclusion in rural areas. The RRBs were urged to generate awareness of Government schemes, especially in aspirational districts. Achievements of RRBs Consolidated Capital to Risk (Weighted) Assets Ratio (CRAR) of RRBs has increased from 7.8% in FY 2021 to 13.7% in FY 2024. The profitability has improved from losses of Rs. 41 crore in FY 2021 to net profit of Rs. 2,018 crore in FY 2024. The Gross Non-Performing Assets (GNPA) are relatively lower with a ratio of 3.9%. Regional Rural Banks (RRBs) RRBs were established under the provisions of an Ordinance passed on 26 September 1975 and the RRB Act 1987 to provide sufficient banking and credit facilities for agriculture and other rural sectors. The RRBs were established as per the recommendations of the Narasimham Committee to cater to the rural credit needs of the farming and other rural communities. The Prathama Grameen Bank was the first bank to be established on 2nd October 1975. The Syndicate Bank became the first commercial bank to sponsor the Prathama Grameen Bank RRB. Operation of RRBs Regional Rural Banks (RRB) are Indian Scheduled Commercial Banks (Government Banks) operating at regional level in different states of India. They have been created with a view of serving primarily the rural areas of India with basic banking and financial services. RRBs perform various functions in following heads: Providing banking facilities to rural and semi –urban areas. Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pension etc. Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI etc. Ownership of RRBs The equity of the Regional Rural Banks is held by the stakeholders in a fixed proportion. This proportion is 50:35:15, distributed as: Central Government – 50% Sponsor Bank – 35% State Government – 15% Issues with Regional Rural Banks (RRBs) High Non-Performing Assets (NPAs): RRBs experience a high level of NPAs, particularly in the agricultural sector. This is due to factors like crop failures, natural disasters, and the vulnerability of rural borrowers. Limited Capital Base: RRBs often operate with a limited capital base, restricting their ability to expand, invest in technology, and meet regulatory capital requirements. Operational Inefficiencies: RRBs often face operational inefficiencies due to outdated infrastructure, lack of skilled staff, and bureaucratic processes. Regulatory Constraints: RRBs are subject to various regulatory constraints, including strict lending norms and capital adequacy requirements, which can be challenging to meet given their limited resources. Mobilization issue: Practical exclusion of the richer rural population restricts deposit mobilization. Significance of Regional Rural Banks (RRBs) Financial Inclusion: RRBs are crucial in extending banking services to rural and remote areas where commercial banks have limited presence. They help bring the unbanked population into the formal banking system. Support to Agriculture and Allied Sectors: A major focus of RRBs is to provide credit for agricultural activities, including crop production, purchase of agricultural equipment, and other related activities. Promotion of Rural Entrepreneurship: RRBs play a key role in promoting rural entrepreneurship by providing credit and financial services to small and medium enterprises (SMEs), self-help groups (SHGs), and individual entrepreneurs in rural areas. Poverty Alleviation: Through targeted lending programs and government schemes, RRBs contribute to poverty alleviation efforts by providing microfinance and small loans to the poorest segments of society. Implementation of Government Schemes: RRBs are instrumental in the implementation of various government-sponsored schemes and programs like PMJDY, PMJAY etc Stabilization of Rural Credit Markets: RRBs help stabilize rural credit markets by providing consistent and regulated sources of credit, reducing the reliance on informal moneylenders who often charge exorbitant interest rates. Way Ahead Structural Consolidation to Improve Efficiency: Structural consolidation involves merging smaller or weaker RRBs to create larger, stronger entities. Recapitalization of RRBs for Capital Augmentation: Recapitalization involves infusing additional capital into RRBs to strengthen their financial base. Periodic Review and Capacity Building of Human Resources: Regularly reviewing the performance and skills of the workforce in RRBs is essential for maintaining a high standard of service. Capacity building involves training and development programs to enhance the skills and knowledge of RRB employees. ‘Mercury bomb’ in Arctic

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