Benefits and Challenges of E-commerce Growth in India

Source: The post benefits and challenges of e-commerce growth in India has been created, based on the article “Express View on ‘predatory pricing’: Market facts and spectres” published in “Indian Express” on 23rd August 2024.

UPSC Syllabus Topic – GS Paper 3 – Indian Economy – industries and industrial policies

Context: The article discusses concerns about e-commerce platforms using predatory pricing, which may hurt small retailers. Minister Piyush Goyal highlighted these issues. It highlights the benefits and challenges of e-commerce growth in India and emphasizes the need for fair competition and transparency.

For detailed information on the online marketplace is skewed in favor of big players and hurts small businesses read this article here

Why is E-commerce Under Scrutiny?

1. Investigations for Unfair Practices: The Competition Commission of India (CCI) launched an investigation into Amazon and Flipkart in 2020. These platforms were examined for alleged deep discounting and favoring certain sellers.
2. Allegations of Predatory Pricing: Companies like Shopee and Ola faced allegations of selling services below cost to eliminate competition. These claims were later dismissed by the CCI.

Note: Predatory pricing is when companies sell goods or services at prices lower than their production costs. This is done to drive competitors out of the market. Once competition is reduced, the company might increase prices, harming consumers in the long run.

3. Market Disruption Concerns: Rapid growth of e-commerce is feared to impact small retailers adversely, potentially leading to market monopolies and reduced competition.

What are the Impacts of E-commerce Market in India?

1. The report by the Pahle India Foundation challenges some accusations against e-commerce platforms.
2. Despite rapid growth, e-commerce made up just 7.8% of total retail sales in 2022.
   3. Around 1.76 million retail enterprises engage in e-commerce, creating 15.8 million jobs, including 3.5 million for women.
3. Many vendors, especially in smaller cities, report increased sales and profits after joining online platforms.
4. The report argues that e-commerce growth hasn’t harmed traditional brick-and-mortar stores, as consumers enjoy more choices and favorable pricing.

What Should Be the Focus of Regulation?

1. To ensure fair competition, the Competition Commission should monitor e-commerce practices closely.
2. There should be greater transparency in pricing and reduced information asymmetry to maintain a level playing field for all businesses.

Question for practice:

Examine the concerns regarding predatory pricing in the e-commerce sector in India and its impact on small retailers.