TERTIARY SECTOR

TOURISM SECTOR IN INDIA

India, as a country, offers Diversity in its Unity not only in the matter of tribes, communities and religions and ways of life but this diversity also presents itself in its prospects regarding tourism. Only a few nations may have so much to offer in the form of historical sites, geographical diversities, climatic differences and nature’s gifts as India has to offer.

Importance of the Tourism Sector

1. Economic

• Revenue Generation: India’s revenue from international tourism increased from $14.49 billion in 2010 to $30 billion in 2019.
• Service Sector: It gives a push to the service sector. A large number of businesses engaged in the service sector such as airlines, hotel, surface transportation, etc. grows with the growth of the tourism industry.
• Impetus to development: A rising tourism sector makes it imperative to provide proper infrastructural facilities.
  • Example: Uttarakhand’s mobile Tourism Caravans.
• Push to Ancillary Industries: It boosts Railways, aviation and real estate industries.
• Foreign investor Presence: Tourism also creates opportunities for foreign hotel and tourism groups to establish in India.
• Employment: It generates employment in the hospitality sector as well as tour operator businesses.

• Small Business Benefit: Small businesses in tourist centers also benefit from the influx of tourists.

2. Social

• Cultural Heritage: It gives recognition to the cultural and historical sites in India and enables more protection and preservation.
• Regional development: Tourism is a potential tool that enables regional development due to large revenue coming from visiting tourists.
• Traditional Crafts: This sector is also boosted as tourists buy souvenirs and ethnic crafts of the region.
• Social Equality: It brings regions towards more inclusive equitable growth, especially in areas lacking other growth-promoting industries.
• Awareness: It creates an international awareness in the area and draws more attention towards its underlying socio-economic problems.

3. Political

• Soft Power: It creates an outreach to other countries regarding the attractiveness of India.
• Multilateral Funds: It helps seek multilateral funds for the restoration and preservation of monuments and regions.
  • Example: UNESCO world heritage status.
• Sister Cities: Tourism can also help create bilateral linkages between nations, like the Sister Cities programme.

4. Environmental

• Eco-Tourism: It helps India showcase its biodiversity and keystone species like Tigers, Wild Ass, and Red Panda.
• Wildlife Diversity: It also helps in generating global attention to Indian wildlife issues and attracts funding for conservation efforts.

Challenges/Issues

1. Economic

• Seasonality: The tourism sector depends on particular seasons, and many areas do not generate any revenue for the remaining year, reducing growth rates.
• Volatile Exchange Rates: Exchange rates can weaken the rupee and make forex reserves less than anticipated.
• Financial Transactions: Many areas do not accept international cards, causing tourism to suffer as a result.
• High Taxation: Travel and tourism are highly taxed, making India an expensive destination for many tourists.
• Human Resources: There is a shortage of English-speaking guides, skilled workers, and tour operators, with a lack of professionalism and multi-lingual translators.
• Lack of Formalization: This leads to gaps in credit worthiness assessment, lack of infrastructure, and inability to handle currency exchange fluctuations.

2. Infrastructure

• Poor Amenities: Many areas have poor basic amenities like clean toilets and drinking water facilities for tourists.
• Connectivity Issues: Many regions, like the Northeast, have poor roadways and railway infrastructure.
• Transportation Issues: Lack of safe, secure, fast, and quality transport systems and an absence of a unified ticketing system.

3. Safety and Security

• Natural Disasters: Many areas of the Himalayas and North East are prone to landslides and cloudbursts which have in the past killed many tourists.
  • Example: Kedarnath Cloud Burst in 2013.
• Extremist: Tourists have been prone to be kidnapped and killed in many areas by extremists and terrorists, such as in the Kashmir and North East insurgencies.
• Crime: Tourists are prone to being robbed, which reflects poorly on India, and further extremist activities also reduce tourism numbers.

4. Environmental

• Land Degradation: Construction of hotels and other buildings destroys sensitive ecosystems like those in the mountains and coastal areas.
• Forest Disturbances: Wildlife tourism puts increased pressure on endangered species and heightens vulnerability to forest fires.
• Tribal Voyeurism: Tribal tourism was recently banned in the Andamans, where the Jarawa tribe was being seen as a human zoo.
• Pollution: Tourists leave garbage and degrade monuments frequently, which causes pollution of land and water sources.

5. Others

• Regulatory Issues: Visa procedures, inner line permits, and other documentation cause additional delays for tourists.
• Biased Marketing: Tourist numbers are concentrated in a few states, whereas many sights in the North East and interior India are not marketed well enough.
• Under-utilized: Despite high rankings, India’s overall tourism competitiveness ranking at 34 indicates that the sector has not been fully monetized or marketed properly.
• Commercialization: Many ethnic craftsmen are losing their livelihood due to commercial manufacturers of ethnic crafts to meet high demand.
• Pandemic: The pandemic has severely impacted travel due to lockdown and quarantine guidelines.

Government Initiatives

1. FDI Policy:
   • 100% FDI in the tourism industry is allowed under the automatic route.
   • 100% FDI allowed in tourism construction projects, including the development of hotels, resorts, and recreational facilities.
2. Swadesh Darshan Scheme: Under this, the Ministry of Tourism provides assistance to State Governments for the infrastructure development of 13 identified theme-based circuits.
3. PRASHAD Scheme: Integrated development of identified pilgrimage destinations (including employment generation) has been undertaken.
4. All India Permit Rules 2021: Allows a tourist vehicle operator to register online for an All India Tourist Authorization/Permit.
5. Dekho Apna Desh: A webinar series titled ‘12 Months of Adventure Travel’ launched on November 28, 2020, promotes India as an adventure tourism destination.
6. North East: In the recent budget, an allotment of Rs. 1,200 crore (US$ 171.70 million) was made for the development of tourist circuits under Swadesh Darshan for eight Northeast states.
7. Know India Programme (KIP): Provides a unique forum for students and young professionals of Indian origin to visit India, share their views, expectations, and experiences.
8. e-Visas for Tourists: India has extended the provision of applying for e-Visas to multiple nations, making it easier for tourists.
9. Tourist Helpline: The Ministry of Tourism provides a 24×7 Toll-Free Multi-Lingual Tourist Info-Helpline to assist domestic and foreign tourists with travel information in India, ensuring their safety and security.

1. Incredible India: A multi-lingual “Incredible India” website and mobile application assists international and domestic tourists to access information about various tourism destinations and attractions in the country.
2. National Integrated Database of Hospitality Industry (NIDHI): The Ministry of Tourism has set up a platform, NIDHI, for the registration and classification of tourism service providers, namely Tour Operators, Hotels, and other Tourism Service Providers.
3. National Digital Tourism Mission (NDTM): In April 2022, the Ministry of Tourism set up NDTM, which aims to harness the full potential of digitization in the tourism sector. It aims to bridge the existing information gap among different stakeholders of the tourism ecosystem through a digital highway. It is based on the following principles:

Domain Principles:

• Value-driven: The interests of the beneficiaries and users for whose benefit the digital infrastructure and solutions will be developed must be a central focus.
• Unifying Services: Identify, design, and deliver integrated services that cut across agency boundaries to realize the goal of a connected ecosystem.
• Outcome-driven: Define service levels and outcomes benchmarked with the best, and then build services around these outcomes. Define, design, deliver, and measure services by adopting established standards.
• Affordable choices: Availability of affordable choices in solutions (localized, customized, multilingual), with access (anyone, anytime, anywhere) and agency.
• Diversity and Inclusion: Ensure diversity and inclusion across device types, linguistic barriers, geography, and accessibility compliance.

Design and Architecture Principles:

• Building block approach: The ecosystem will be built with minimal and reusable building blocks that are loosely coupled and combinable.
• Federated architecture: The digital ecosystems will be built around the constructs of Single-Source-of-Truth and System-of-Records.
• Be open and interoperable: Develop the digital ecosystem using open standards, licenses, databases, APIs, etc., to promote interoperability. This approach helps inter-platform efficiencies, promotes competitive behavior, and guards against potential monopolies of unfair value capture.
• Resilient: Avoid single points of failure, and build services that can withstand failures by enabling automated recoveries and adaptation.
• Minimal, reusable, unbundled, and shareable: Building blocks must be minimal (both data and functional), atomic, and generalized, allowing solution builders to “reuse and extend” them to build contextual and scalable solutions.

Technology Principles:

• Setting up data marketplace: Design data systems to create, support, maintain, and enhance value for the ecosystem by establishing a Data Marketplace that enables regulated data exchange.
• Data sharing: Develop clear policies specific to relevant domains to enable and regulate data sharing.
• Standards: Ensure existing technology and data standards apply to the ecosystem, with methods for compliance established.

• Privacy-by-Design: The report advocates for designing and publishing a privacy policy that conforms to the principles of privacy-by-design.
• Secure and trust-based: The NDTM should be designed to protect the privacy of users and entities while inducing trust in every interaction.

Way Forward

• Infrastructural Development: Roads, railways, and tourist centers need to be developed in interior areas lacking such facilities.
• Authority: The government can create a National Tourism Authority & Advisory Council to address tourism-specific issues and future initiatives.
• Private Sector: Incentivize private sector participation in building tourist facilities in interior and less visited areas.
• Marketing: Leverage social media to boost inbound tourism or digitally market Indian tourist sites to foreigners as well as domestic tourists.
• Entry Requirements: Extend visa on arrival and eVisa norms to more nations, and rationalize inner line permits to enable access for foreigners from favorable countries.
• Focus on untapped areas: Emphasize development in the North Eastern region, which has immense tourism potential.
• Rural Tourism: Greater coordination at state and grassroots levels can boost rural India and bring revenue to the region.
• Promoting Ease of Tourism: Standardize interstate road taxes and enable a single-point payment system to ensure seamless transportation.
• Strict Environmental Norms: Enforce EIA, ban construction in CRZ, and ensure hotel owners’ liability in case of violations.
• Theme-based Tourism: Promote medical tourism, Buddhist circuits, organic tourism, historic circuits, etc.

FICCI Recommendations on Post-Covid Tourism

• Reduce interest rates: Banks can be mandated to reduce borrowing interest rates for the hospitality industry, which will take time to revive post-Covid.
• MSME: Treat lending to MSMEs in the hospitality sector as “Priority Sector Lending” to increase access to bank finances.
• Tourism Crisis Fund: Establish a Tourism Fund under the Ministry of Tourism to support the hospitality and travel industry during crises.
• Infrastructure Status: Grant infrastructure status to all hotels to enable access to electricity, water, and land at industrial rates and improve lending rates for infrastructure.
• Tourism Policy: The Ministry of Tourism should issue a national tourism policy covering protocols for tourist entry into states.
• Travel Bubbles: No quarantine should be required if travelers have a Covid-negative test report, which would be sufficient for boarding.

Given the sector’s vast potential and its contribution to GDP and employment, there is a need to revamp the whole sector in the post-Covid world, making it more resilient to future shocks. Growth should be incentivized while ensuring sustainable development that respects environmental norms.

SOFTWARE/IT SECTOR IN INDIA

The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. India is the leading sourcing destination across the world, accounting for approximately 55% market share of the global services sourcing business in 2019-20.

Importance/Potential/Need

1. Economic

• Revenue Generation: The total revenue generated by the IT and BPM industry in India was over 191 billion U.S. dollars in 2020.
• Export Potential: IT and Software sectors are the core of India’s service exports, bringing in high growth and revenue.
• Employment: The sector is responsible for employing 4 million people and also forms a large share of Indian professionals.
• Investments: The IT sector attracts the 2nd most FDI inflows in India through the sector’s 100% FDI limit.
• Lower Labour Costs: Indian developers charge much less compared to those in the US and UK, making outsourcing to India easier.
• Economic Transition: The rise in the IT sector helps India transition from an agro-based economy towards a more secondary and tertiary sector-based economy.
• Economic Growth: The software sector has been responsible for rising growth rates in India over the last two decades.
• E-Commerce: The strength of India’s IT sector helps boost e-commerce and, consequently, the manufacturing sector.
• Innovation: The sector supports innovative software and technology development for both local and global needs.

2. Social

• Rural Development: The IT revolution can help in financial services, education, health services, long-distance communications, and expertise in agriculture and climate, reaching markets and buyers.
  • Example: ITC’s e-Choupal links vegetable procurement with farmers through the internet.
• Skilled Employment: The sector promises to elevate job standards from unskilled to skilled technical positions.
• Woman Empowerment: Various apps and software have been developed to provide security, financial empowerment, and educational opportunities.
  • Example: Mahila E-Haat helps women sell their products online.
• Healthcare: The sector contributes to innovative products such as telemedicine and online consultation services, helping doctors detect diseases through clinical technology.
• Education: The pandemic shifted education to a more online-based model, with the IT sector enabling multiple media formats for online teaching.

• Elderly/Disabled: Many apps and software have helped the elderly and disabled lead a proper life without being restricted.
  • Example: The Reserve Bank of India launched a mobile application, MANI, to help the visually impaired identify banknotes.

3. Strategic

• Defence Technology: The IT sector has frequently collaborated in developing defense and strategic weapons software.
  • Example: DRDO’s IMSAS software provides a global Maritime Situational Picture, marine planning tools, and analytical capabilities to the Indian Navy.
• Space Technology: Indigenous software development is crucial for Indian space technology and its advancements.
• Border Surveillance: The BOSS system has been deployed at the Ladakh border area for day and night surveillance.
• Weather: The IT sector helps in generating models for climate and weather systems over an area or globally.
• E-Governance: The IT sector plays a crucial role in developing and growing e-governance in India.

Challenges/Issues

1. Economic
   • IPR Issues: Indian companies have often faced lawsuits for IPR violations; for example, Tata Consultancy Services was fined for intellectual property theft.
   • Poor Infrastructure: Overseas communication and maintaining solid internet connections require robust infrastructure, which is not present in all areas of India.
   • Brain Drain: A large number of Indian IT professionals migrate to countries with higher income and living standards.
   • Hiring Issues: Hiring rates have decreased by about 40% in the last three years, and layoffs have increased among IT companies.
   • Visa Issues: Many small and medium enterprises in India rely on the US market and H1-B visas.
   • Economic Slowdown: Slowing economic growth in Western countries has impacted the growth of the Indian IT industry.
   • Data Protection: New data protection and privacy rules enforced by other countries prevent Indian companies from operating there.
     • Example: The European Union’s General Data Protection Regulation (GDPR) became effective in May 2018.
   • Immigration Violations: Infosys paid a penalty of $1 million for violating visa and immigration rules in the US.
   • Global Competition: The influx of new entrants in the global software industry may reduce the profits of Indian software companies from traditional services.
2. Social
   • Poor Digital Literacy: Limited digital literacy restricts the absorption of IT sector benefits by large parts of the population, especially in rural India.
   • Poor Internet Penetration: Weak internet penetration in many regions hinders the benefits of the Indian IT sector.
   • Lack of Skills: Insufficient skill development makes many individuals ineligible for employment in the sector.
   • Profit-seeking nature: The sector’s investments are low in social enterprises and seek more profit-making ventures.
   • Lack of Trust: Many sections in India are still skeptical of online products and prefer traditional methods.

Way Forward

• Skill Development: There is an immediate need to upskill the country’s workforce to accommodate the anticipated increase in jobs in the sector.
• Government Support: With the government providing basic infrastructure and human capital development, the sector can benefit significantly.
• Innovation: The industry has already started redesigning services by incorporating AI, RPA, and machine learning to meet the newer demands of organizations.
• Social Investments: The sector can leverage its strength to address many of India’s social issues.
• Rural Focus: There must be more focus on rural development, making the IT industry’s outreach to rural parts of India more equitable.
• Telecom: The 5G revolution should take place soon in India to maximize the country’s IT strength.
• Brain Gain: India can incentivize NRI professionals to return as government advisors and professors, similar to the system in China.
• Regulation of Disruptive Technologies: Given the pervasive nature of technology in business, there is a need to manage risks and controls at every step of AI.
• Tax Benefits: Income tax exemptions for software and services exports can also help increase outreach.

National Policy on Software Products 2019

• Promoting Software Products Business Ecosystem
• Promoting Entrepreneurship & Innovation for Employment
• Skilling and Human Resource Development
• Improving Access to Domestic Market and Cross-Border Trade Promotion

Government Initiatives

• National Policy: Aims to develop India as a global software product hub, driven by innovation and improved commercialization.
• Simplified Other ‘Service Provider’: Guidelines to improve the ease of doing business in the IT Industry, Business Process Outsourcing (BPO), and IT-enabled Services.
• BharatNet: Provides broadband connections to over 150,000 villages in India.
• 5G: TRAI is set to release a vision and consultation papers on adopting 5G in India.
• Digital India: Complements the software industry’s strengths and boosts interest in software development.
• Smart Hackathons: Attracts young talent and fosters innovation across various sectors.

FINTECH INDUSTRY

The term “FinTech” is a contraction of the words “finance” and “technology.” It is an umbrella term for technological innovation in financial services.

Significance of Fintech Sector

1. Economic
   • Boost to MSME Sector: Invoice trading assists MSMEs that often struggle with working capital and cash flows due to delayed payments.
     • Example: TReDS facilitates financing of MSMEs through multiple financiers.
   • Increasing Digitalisation: India is witnessing increased digitization, with people gaining greater and easier access to financial services.
   • Insurance and Advisory Services: Fintech firms provide platforms for consumers to save, invest, manage wealth, and choose from a spectrum of financial products.
     • Example: Personal loans, home loans, credit cards, saving accounts, and mutual funds.
   • Account Aggregator Services: Aggregates a customer’s financial data from various providers, using analytics to help consumers manage financial commitments and goals.
     • Example: In 2016, RBI released guidelines for NBFCs intending to function as account aggregators.
   • Payment Services: Fintech enables fund transfers for various use cases like P2P (Person-to-Person), P2M (Person-to-Merchant), and G2P (Government-to-Person).
     • Example: The introduction of UPI has boosted the payments sector in India.
2. Social
   • More Equitable: The expansion of digital payments promotes a more equitable, prosperous, and financially inclusive India.
   • Pension Services: Fintech enhances the efficiency of pension schemes through risk management applications and regulatory compliance.
     • Example: Fintech-enabled technologies such as robo-advisors make financial planning more accessible.
   • Provide Better Security: The shift from cash to e-wallets and UPI has resolved issues associated with cash transactions, enabling better security and access to capital.
   • Credit Services: Fintech supports consumers and businesses by facilitating faster and easier access to credit, directly connecting lenders with borrowers.
     • Examples: Crowd Funding and Peer-to-Peer Lending.
   • Accelerated Financial Inclusion: The Fintech industry plays a critical role in facilitating financial inclusion across the country.

Challenges in transforming the cash economy to a cashless economy

1. Rapidly Changing Regulations: Regulatory compliance comes with a cost, and frequent changes do not help to foster business confidence.
   • Example: Regulations for investment exits, cryptocurrency, payment regulations, data, infrastructure security, and consumer protection are still evolving.
2. Data Security and Privacy Risk: Data leaks, platform downtimes, and information theft have become quite rampant in the financial services space.
3. Varied Adoption: Adoption is complicated in an economy like India’s, dominated by MSMEs that are often hesitant about digital adoption.
4. Rural-Urban Divide: About 70% of India’s population lives in villages, while FinTech platform usage is largely concentrated in urban areas.
5. Rising NPAs: Since there is no direct connection with customers (as applications are processed entirely online), there is a higher risk of non-performing assets (NPAs).

Government Interventions

1. Government Schemes
   • Jan Dhan Yojana: Enables new bank account enrollment for beneficiaries of direct benefits transfer, improving access to financial services for a large consumer base.
   • India Stack: A societal initiative aimed at building public digital infrastructure to support public and private digital initiatives, including technology adoption in finance.
   • Aadhar: Unique biometric identification system that facilitates bulk and recurring government benefits and subsidy payments via biometric authentication.
   • Central KYC: Developed to reduce the need for multiple KYC verifications across different financial institutions.
2. Infrastructural
   • Payments Banks: Expands financial inclusion by increasing access to payments and remittance services.
   • Bharat Bill Payment System: Enhances convenience for bill payments across utilities and other segments, including recurring billers.
   • Peer-to-Peer (P2P) Lending: Connects verified borrowers seeking unsecured personal loans with investors seeking higher returns.
   • GIFT City in Gandhinagar: A world-class Fintech hub developed at the International Financial Services Centre (IFSC) in GIFT City, Gandhinagar, Gujarat, to strengthen India’s vision as a global Fintech hub.

1. RBI’s Interventions
   • Regulatory Sandbox: Allows businesses to test innovative products, services, business models, and delivery mechanisms in real-market conditions with actual consumers.
   • FinTech Department: Established to promote innovation in the sector, identify challenges and opportunities, and address them in a time-bound manner.
2. Administrative
   • Inter-Ministerial Steering Committee on Fintech Applications: Monitors progress, explores, and suggests potential applications in government processes and applications.

Way Forward

1. Infrastructural
   • Upgrading Financial Systems: Maintain ongoing dialogue with the industry to identify emerging opportunities and risks, facilitating timely policy responses.
   • Strengthening Foundational Infrastructures: Enable efficient data collection, processing, and transmission, essential for fintech advances.
     • Example: Digital and financial infrastructures, such as broadband internet, mobile data services, data repositories, and payment and settlement services.
2. Administrative
   • Conducive Policy Framework: Policymakers should address market concentration risks and promote standardization, interoperability, and fair access to essential infrastructures.
   • Forging Global Alliances: The government can focus on partnerships through UPI network extensions or alliances with neighboring governments and regulators.
3. Awareness
   • Digital Literacy Programmes: Increase awareness of mobile payments through regional language advertisements and structured digital literacy programs to build trust.
   • Digital Literacy in School Curriculum: Incorporate basic digital payment literacy concepts into school curriculums to build understanding at a young age.

Conclusion

FinTech companies’ growing partnerships with traditional banking, insurance, and retail sectors, where they cater to evolving customer needs, will accelerate FinTech’s expansion in India. These factors indicate a positive shift towards FinTech, presenting huge growth potential as the country moves toward broad adoption.

E-COMMERCE IN INDIA

E-commerce involves any transaction online, ranging from ordering online to financial transactions like money transfers between bank accounts.

Importance of E-Commerce Industry

1. Economic

• Employment: Contributes to employment growth in both the formal sector and the gig economy.
• Market Expansion: Helps sellers reach new markets and allows buyers to access markets nationwide.
• Increase Consumption: A wide array of products and services are available online, reducing barriers to purchase.
• Competitive Pricing: E-commerce has removed middlemen, favoring merchants and consumers with better prices.
• Boost to Local: Localized vendors and sellers profit through a decentralized national market.
• 24/7 Business: Online businesses operate 24/7, allowing continuous consumer access and potential for rising profits.
• Boosts Globalisation: E-commerce is a fast-growing channel for cross-border trade in goods and services.
• Banking Sector: Growth is further driven by RBI’s issuance of 11 payment bank licenses.

2. Social

• Inclusivity: Pan-India access to online products and services integrates interior and underdeveloped areas into the digital fold.
• Benefits Traditional Workers: Online trading platforms support traditional artists and revive dying art forms.
• Local Jobs: Creates local employment in delivery, cargo handling, and distribution, reducing migration needs.
• Digital Literacy: The appeal of e-commerce promotes digital inclusion and literacy.
• Bridging Rural-Urban Gap: About 70% of online sellers come from smaller towns.
• Women Empowerment: E-commerce enables women to become independent entrepreneurs.
  • Example: Mahila E-Haats provides market access for thousands of women to display and sell products.
• Reduce Regional Disparities: E-commerce reaches remote areas, generating revenue and employment.
  • Example: 70% of sellers come from small towns.
• MSME Outreach: Assists sellers, merchants, and SMEs in accessing domestic and international markets.
• Disabled Friendly: Provides societal engagement opportunities for disabled people.
  • Example: A Mumbai courier company employs deaf people, who make up 99% of its staff.

3. Technology

• Boosts Technology Penetration: E-commerce requires digital technology, driving growth and innovation.
• Tech Startups: E-commerce supports a thriving startup culture, fostering entrepreneurship across the value chain.
• Boost to IT Sector: Offers opportunities for IT companies to develop e-commerce-centric products and services.
• Brain Gain: The growth of e-commerce is a key factor in the return of Indian expats and professionals.

Issues/Challenges

1. Operational
   • Financial Crime: There is a risk of fraudulent transactions and loss of sensitive financial information.

• Poor Product Quality: Some products are inferior, and without physical inspection, it is easier to pass off defective goods.
• Lack of Legislation: The e-commerce policy is still in draft stages, with a lack of clarity in regulatory guidelines.
• Lack of Skilled Labour: Limited training on industry-centric operations and technologies hinders skill advancement.

1. Structural
   • Poor Infrastructure: Depends heavily on network connectivity and IT; mechanical failures can disrupt processes.
   • Deep Discounting: Leads to market price distortions and consumer bias.
   • Tax Structure: While tax rates are uniform in many countries, India’s tax structure varies across sectors.
   • Low Share in Total Transactions: World Bank reported online sales at only 1.6% of total retail sales in India.
   • Supply Chain Issues: Movement of goods is affected by poor logistics and other issues.
2. Employment-Related
   • Rationalisation of Hiring: Realigned business needs and cost management affect the previous growth in hiring.
   • Employee Retention: Retaining talent is increasingly challenging due to multiple job opportunities.
   • Process Automation: As processes mature and automate, the demand for a larger workforce decreases.
3. Socio-Economic
   • Replacing Traditional Shops/Sellers: E-commerce has made brick-and-mortar stores less relevant, leading to closures.
   • Replaces Traditional Mandis: Agricultural markets not integrated with the internet face significant losses.
   • Internet Penetration: India’s internet penetration is still low compared to many Western countries.
4. Technology
   • Data Privacy: E-commerce giants hold vast consumer data, risking breaches of personal privacy.
   • Payment Gateway Failures: Common issue that can result in delays or failed transactions.
   • Server Issues: Websites are prone to crashes, disrupting consumer experiences.

Way Forward

• Develop a Digitally Sound Workforce: Build highly skilled human capital through education and skill-focused curricula.
• Support SMEs: Increase awareness among SMEs and MSMEs and develop strategies for B2B e-commerce.
• Skill Development: Emphasize digital skills in curricula and integrate vocational training.
• Promote Entrepreneurship: Establish incubation centers to mentor entrepreneurs and support initial challenges.
• Boost Innovation: Adopt new technologies like facial recognition, interactive 3D product images, and virtual fitting rooms.
• Regulatory Body: Appoint a regulatory body to establish a clear framework for all ecosystem players.

• Tax Benefits: Provide tax benefits, such as exempting service tax for a couple of years, to support job creation.
• Access to Credit: Develop a robust financial system to offer funds at lower interest rates.
• Transition Fund: Set up funds for supporting offline sellers in adapting to and transitioning into digital frameworks.
• Policy Framework: The draft e-commerce policy includes positive recommendations to empower SMEs, and implementation is now essential.
• Financial Architecture: Financial security is crucial for e-commerce operations, with measures to protect against scams and frauds.
• Global Integration: Indian traders should tap more international markets, and policies should not limit cross-border trade.
• Data Protection: The government must focus on data centers and cloud infrastructure.

Government Initiatives

1. Draft E-Commerce Policy:
   • Ensure e-commerce algorithms are unbiased.
   • Safeguards to verify the authenticity of sellers’ products.
   • Platforms share liability for counterfeits in end-to-end fulfillment.
   • Guarantee availability of more service providers to prevent digital monopolies.
   • Marketplaces should remain impartial to sellers and not use data to gain an advantage.
2. Government eMarketplace (GeM): Hosts commonly used goods and services for government employees.
3. eNAM: A digital portal for agro traders to buy and sell agricultural products online.
4. Mahila E-Haat: An e-commerce marketplace enabling women to showcase their products without additional costs.
5. TRIFED: This portal gives 55,000 tribal artisans access to international markets.
6. Raising FDI Limit: The government increased the foreign direct investment (FDI) limit in the e-commerce marketplace model to 100%.
7. Consumer Protection (e-Commerce) Rules: Notified in 2020, requires e-commerce companies to display the country of origin alongside product listings.
8. Make in India: Supports India as a global manufacturing hub, aiding sellers in expanding access and supporting larger industries.
9. Digital India: Increases visibility for sellers in tier II, III, and rural areas as e-commerce penetration grows.
10. Startup India: Builds a strong ecosystem to nurture innovation and startup culture.
11. Skill India: Trains village-level entrepreneurs, assisting e-commerce players in rural areas.
12. Banking:
    • RBI mandates all KYC-compliant prepaid payment instruments (PPIs) like mobile wallets.
    • Payment banks facilitate online payments.
    • Initiatives like Umang, Startup India Portal, and Bharat Interface for Money (BHIM) support digitization.

This sector holds substantial growth potential and promotes development across major industries in the economy. While consumer demand, manufacturing, and job creation are expected to increase, the government must also regulate to prevent foreign monopolies and protect Indian data.