How do Indian Policies Compare to China’s E-Commerce Boom?

 Neeraj Singh Manhas
31st October 2021

Picture Courtesy: Reuters

China has dominated the world in e-commerce since 2013, when it surpassed the United States to become the world’s largest market. Since then, growth in this sector has been in the double digits. According to eMarketer, the revenue generated by Chinese companies from their e-commerce sector in 2020 will be 2296.95 billion dollars, nearly tripling that of the US.

The first question that comes to mind is, ‘Is it because of China’s massive population?’ If that were the case, India, which has a population nearly equal to China’s, should also be at the top of the list, which it is not. As a result, the more pressing question is, ‘What prevents India from leading the world in the e-commerce sector?’

Several factors, such as demographics and consumer trust, may be considered when answering the question. To narrow our focus, we will only compare the effectiveness of the two countries’ government policies and regulations. The policies will cover two areas: internet development and domestic e-commerce.

China adopted the internet in 1994 and, quickly realising its importance, began rapidly developing the internet sector. In 1995, there were only 6000 computers and 40,000 users connected to the internet; by mid-2001, there were 10.2 million computers and 26.5 million users online. The Chinese government’s initiative in promoting the internet deserves credit for this accomplishment. They launched 13 Golden Projects to build the country’s information infrastructure and developed their internet in three stages – Asteroids (1996-2003), Bees (2004-2010), and Coliseums (2010-present). In addition, the Chinese focused on expanding their technological infrastructure, which resulted in an increase in telephone networks, PC manufacturing, and internet awareness.

While the internet arrived in India in 1986, many years before China, it did not progress as quickly. Its first initiative toward internet development, the IT Action Plan 1998, came several years after the internet’s introduction. It also eventually enacted new legislation, the IT Act 2000, to address cybercrime and e-commerce. While India was still developing policies and laws, China worked on e-commerce infrastructure as part of the Golden Projects. India’s strategy was thought to be better in the long run, whereas China’s strategy paid off immediately. It is 2021, and the anticipated success of India’s long-term strategy has yet to be realised, as China has 70.4 percent internet penetration, while India has only 45 percent.

The vast differences in their approaches to regulating the market had a significant impact on the market and its players, and thus became an important factor in determining the market’s growth.

Source: eMarketer

For example, China’s e-commerce policies aim to strengthen the development of an e-commerce credit system that includes all stakeholders’ credit information. The government monitors companies with poor credit ratings, which aids in the prevention of counterfeiting and other illegal activities. In addition, the government ensures that all e-commerce enterprises follow information security protection regulations and technical standards. To improve security, the government has encouraged the use of digital certificates and the verification of those certificates by electronic certification authorities. Of course, one could argue that such progress has come at the expense of citizens’ privacy.

China has promoted tax and financial incentive programmes for high-tech SMEs by replacing business taxes with a value-added tax and cultivating a multi-channel financing mechanism to assist e-commerce firms. The government also encourages banks and other financial institutions to offer intangible asset security, real estate pledges, and other financing services to e-commerce SMEs. As Intangible Asset–Based Lending leverages a portfolio of Intellectual Property or other intangible assets to secure a loan, this makes it easier for SMEs to raise capital. It also advises investment funds on how to increase their support for E-commerce start-ups.

In contrast, the Indian government is working to integrate traditionally offline markets, such as vegetable markets, into digital e-commerce platforms. The government has also launched flagship initiatives such as Digital India, Make in India, Start-up India, and Skill India, which have contributed to the sector’s growth.

Although India is making significant efforts to develop its e-commerce market, there are many areas that could be improved. The lack of integration of stakeholders is a significant shortcoming. To increase efficiency and transparency for players in the Indian e-commerce market, government stakeholders such as policymakers, taxation authorities, and the Registrar of Companies should be woven into a single system. The lack of a centralised mechanism for rating or accreditation of the numerous e-commerce sites contributes to inefficiency. People find it difficult to trust such websites as a result of this. The development of a standardised procedure for the same will have a positive impact on the quality of online services.

When the policy approaches of the two countries are compared, it is clear why China has 53.64 percent (as of 2020) of the global e-commerce market and India has 1.29 percent. It is also clear that in the absence of supportive policy, a large population cannot translate into a thriving e-commerce market. As a result, a more thorough examination of China’s experience can be useful in realising the full potential of the Indian e-commerce market.

Customers consider online transactions or turnover and safety to be the second most difficult challenge faced by Indian e-commerce companies. Recent news about online fraud, deceptive coupons, phoney advertisements, spam e-mail, and the theft of credit card information has dented customers’ confidence in this system. In the current scenario, the majority of customers in India prefer to buy items on a cash-on-delivery (COD) basis. Due to a lack of trust in the security system, the majority of customers use (COD) service. Developing successful Electronic Commerce solutions across the Organization necessitates the creation of dependable, scalable systems. Poor infrastructure, a lack of proper cyber laws, a lack of privacy and security, and virus problems are just a few of the limitations and challenges that must be addressed.

*The Author is a Research Intern at the Kalinga Institute of Indo-Pacific Studies

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