Unshackle e-commerce for Covid recovery

Rohan Seth | Updated on June 21, 2021

While e-commerce is still in a nascent stage in India, it has been a key driver for growth. It has laid the foundation for India to adopt technology and withstand the effects of a global pandemic

As India comes to terms with the second wave Covid infections, lockdowns and curfews are set to become more frequent to reign in the rising number of cases. The recent surge in infections has crippled the existing healthcare system. India had only started to cope with the after-effects brought about by the pandemic last year, it has been engulfed in another crisis which has eclipsed global numbers.

Maharashtra, Delhi and more recently Karnataka and Puducherry have announced lockdowns to break the chain and curb the relentless spread of the virus. Human lives need to be protected at all costs and while lockdowns seem like an extreme step, signs point towards them being effective. For example, the number of daily cases in Mumbai has come down to around 3,000 from a peak in excess of 10,000 in the last month. However, it is imperative for governments to apply learnings from 2020 to ensure there is no financial meltdown 2021.

Recently, Bank of America Securities India economists Indranil Sen Gupta and Aastha Gudwani stated that, “It remains to be seen if the second wave subsides without a national level lockdown. A month of nationwide lockdown costs 100-200 bps of GDP. This poses a 300 bps risk to our 9 per cent real GVA growth forecast for FY22.”

Lockdown impact

Quantifying the losses, Confederation of All India Traders (CAIT) mentioned that the lockdown in Delhi and other States has already caused a business loss of about ₹5 lakh crore in past 25 days due to Covid pandemic and subsequent restrictions including night curfew, weekend lockdown, partial lockdown and full lockdown. Further, CAIT stated that due to the fear of corona, about 80 per cent of the people across the country have stopped coming to the markets for shopping.

Shutting down or severely restricting some sectors to contain the pandemic seems inevitable. However, at the same time, both the Central and State governments need to apply some method to the madness. As regions across the country enter various stages of lockdown, it is important to ensure that the retail sector can function to capacity under Covid protocol. In this regard, we need to understand the role played by e-commerce in the preceding year and how it has emerged as a critical function of our economy.

The pandemic has caused a major shift in consumer patterns and behaviour in India. As per latest reports and surveys, the e-commerce sector has seen sustained growth in the wake of the pandemic. The pandemic forced a sizeable portion of India’s workforce to shift to a work-from-home lifestyle. The total annual online shoppers increased from 135 million in 2019 to 160 million in 2020 causing an unprecedented growth of 40 per cent in 2020 [RedSeer; 2020].

In fact, this growth presented companies with new challenges as several e-commerce platforms started facing unprecedented demand and items went out of stock frequently. The latest lockdowns have also resulted in a sharp rise in the prices of essential items such as medicine [ILO; 2020] and food grains [FAO, United Nations; 2020].

Key driver

While e-commerce is still in a nascent stage in India and only accounted for 4.3 percent of India’s retail market in 2020, it has been a key driver for growth. In fact, e-commerce has laid the foundation for India to adopt technology and withstand the effects of a global pandemic. The e-commerce sector has been successful in creating a robust and resilient ecosystem.

In order to establish a viable business model, the Indian e-commerce sector has consolidated supply chains, provided back-end technology integration and strengthened digital payments [MEITY]. It has achieved comprehensive supply chain integration to access 100 per cent of India’s pin codes leading to higher consumer discretionary spend with access to a more diversified consumption basket.

Instead of curbing e-commerce, governments should be promoting it. The year 2020 saw a swift adoption of technology and was able to pave the way for integration between online and offline channels. Last year, governments curbed the sale of ‘non-essential’ goods through e-commerce and the same has been adopted by Maharashtra and Delhi this year.

However, this move does not do justice to the shifting nature of essential or non-essential goods. It is impossible to define ‘essential’ and ‘non-essential’ items due to their subjective nature. For instance, for people working from home would consider electronics as an ‘essential good’ but according to the government, electronics is listed as a non-essential.

Similarly, the onset of summers would mean that an air-conditioner and allied products will become essential to a large section of the society. Therefore, it’s necessary to either significantly broaden this criteria or better, allow all deliveries through e-commerce.

A preferred mode

The performance of the e-commerce sector in the past year has demonstrated that Indian citizens are willing to adopt change to minimise risks presented by the corona virus. Even when the rate of infections was on the decline between the first and second waves, e-commerce became a preferred mode of shopping for Indian consumers.

Latest figures [Goldman Sachs; 2020] pertaining to e-commerce show that only $3 billion out of the $38 billion of the goods sold online are groceries, the rest fall under non-essentials. It is imperative to allow the sale of all goods through e-commerce, explore synergies between offline and online retail and ensure safe deliveries of goods to safeguard the economy and serve the needs of the consumer.

At such time, when consumers and traders are reeling from the effects of a lockdown, banning non-essentials can have a crippling effect on the economy, and inconveniencing the consumers directly, causing them to go out to get their ‘essentials’, which is the last thing we need today.

The writer is Policy Analyst, Technology, The Takshashila Institution

Published on June 21, 2021

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