Most nations imposed some form of shutdown to limit the spread of the Coronavirus. India’s lockdown, which involved a near cessation of all movement and economic activity, has been rated as one of the most stringent across the world. Not surprisingly, it had a severe impact on our economy.
A sector that was hit particularly hard is retail. This is due to several reasons. First, shops and warehouses were closed during the initial phases of the lockdown. This brought the operation of both physical and digital retailers to a standstill. Second, restrictions on inter-State movement of goods and the opening of only specific industries disrupted supply chains. For instance, the Centre recognised both medicines and processed foods as essential goods and allowed their sale. However, similar status was not granted to units which manufacture the packaging for medicines and processed foods. Hence, sellers of these goods found it difficult to operate. Third, the system of issuing passes and permits to personnel working for physical and digital retail was not well-implemented. It was unclear which authority would issue the passes and for how long they would remain valid. Further, personnel having to travel across districts were required to obtain separate passes from the authorities for each district. Fourth, the Ministry of Home Affairs issued an order directing all employers to ensure full payment of wages to all employees even if they were unable to work. As a result of the order, several migrant labourers returned to their towns and villages once restrictions on movement of persons were lifted. A survey of retailers selling their products online, conducted as part of the Esya Centre’s report on e-commerce, shows that nearly 60 per cent of such entities will be unable to recover losses suffered because of the lockdown. Given that people are likely to be wary of entering shops and stores even after lockdowns are eased, it is important to explore different avenues through which retail outlets can avoid further losses.
One such avenue is e-retail. A report by Global Trade and Regional Integration Unit of the World Bank highlights the utility of e-commerce in the post COVID normal. Not only can e-commerce help reduce the risk of new infections and preserve jobs, it can also increase the acceptance of prolonged social distancing measures among the population. Further, previous research has shown that there are numerous benefits for MSMEs that adopt e-commerce, in the form of better price discovery, access to new consumers, support with logistics and inventory management. It is in recognition of the above that several nations, such as the United Kingdom and New Zealand, have given preference to digital forms of retail both during and after the lockdown. However, India is one of the few countries that has not leveraged the numerous benefits that e-commerce brings, particularly during a lockdown.
Policy-making towards e-commerce, both before and during the lockdown, may have hindered the operation of e-commerce entities. Prior to the lockdown, legacy government rule-making on e-commerce presented several barriers to the growth of the sector. These included ever-changing FDI rules, unresolved issues of data localisation and source code disclosure as well as the over-regulation of platforms. During the lockdown, the Government failed to adopt a clear and consistent approach to policy formulation vis-a-vis retail. As an example, both physical and digital retailers were only allowed to sell essential goods in the initial phase of the lockdown. This continued till about mid-April, when the Government issued a notification which allowed e-retailers to deliver non-essential items from April 20. In conformity with this order, e-commerce firms began to make predations to resume their full scale of operations. However, on April 19, the Government withdrew its notification, seemingly under pressure from industry organisations that represented small and medium traders. Subsequently, relaxations regarding delivery of non-essential items were first given to physical outlets while e-retail continued to be limited to essential items for 8-10 days thereafter. The zonation framework introduced by the Government additionally preferred physical outlets in Red zones, as they could sell a wide range of merchandise while e-retail tasks were limited to essential goods.
As pointed out, e-commerce enjoys numerous advantages over physical retail, particularly in a situation where social distancing continues to be important. Hence, there is a need to provide a policy environment that fosters the uptake and adoption of e-commerce by both consumers and sellers. To achieve this, we recommend a five-step recovery process. The first steps are geared towards fostering an atmosphere of trust and credibility between the Government and market entities.
This can be achieved by holding regular consultations, opening avenues for feedback and providing sufficient notice before major changes. Further, policy actions should not skew competition between physical and digital business models. Instead, both models should be allowed to leverage their respective strengths. Finally, the Government must reassess what it seeks to achieve through its proposed e-commerce policy. In the current scenario, a policy framework governing e-retail or e-commerce in general, should look to assist small enterprises in capacity-building for a digitally enabled future through the provision of finance, skill development and underlying infrastructure. There is, therefore, a need to move away from legacy regulatory institutions, based on licensing and control, to an entity that actively participates in capacity-building and development of small and medium retailers in India. In this context, it is worthwhile to explore the role being played by digital economy development authorities in countries such as Malaysia and Vietnam, which actively promote the adoption of digital solutions and e-commerce for SMEs as well as consumers. This approach would be in keeping with the Government’s focus on a Digital India where citizens are able to leverage their connectivity into better opportunities and prospects.
(The writer is a research assistant at the Esya Centre)