An extensive survey to assess the current and likely impact of liberalisation of Ecommerce on both small retailers and manufacturers by Delhi-based think tank Pahle India Foundation has thrown up interesting facts that challenge commonly held views about Ecommerce with respect to small traders and manufacturers. The study titled ‘Computing the Socio Economic Value Addition of FDI in E-Commerce’ surveyed small traders and manufacturers across the country to assess the impact.
The scope of the report was to compute, both qualitatively and quantitatively, the socio economic impact that FDI in B2C inventory led e-commerce could create for India. The survey covered 1500 traders and 500 MSMEs across six major metros and eight sectors including footwear, apparel, furniture, electronics and lifestyle products. Apart from the primary survey, qualitative inputs were also collated using secondary data analysis and through detailed interviews with various stakeholders in the Ecommerce value chain.
Releasing the report, Dr. Rajiv Kumar, Founding Director of Pahle India Foundation said, “E-commerce has become one of the fastest growing sectors in the country today. It is important that the sector is nurtured and allowed to grow uninhibited. Currently the issue of liberalisation of Ecommerce is under constant debate for its likely impact on small traders, retailers and manufacturers. These stakeholders and their perceptions are critical to any debate on Ecommerce. We therefore felt that in order to take this debate on liberalisation of Ecommerce forward, it was essential to assess the impact of Ecommerce by conducting an extensive primary survey of these very stakeholders.” Making a case for liberalising the sector, Dr. Kumar added, “The report through its primary research has established that contrary to perception Ecommerce has actually spurred the growth of Medium and Small Manufacturing Enterprises (MSMEs) and further not disrupted the small retailers. It is our recommendation in the report that the government must review its current policy and allow foreign direct investment in B2C Ecommerce or online retail. Further small traders, large retailers, brand owners, and Ecommerce companies must also look at collaborative models to usher in the next retail evolution.”
A critical finding of the survey suggests that Ecommerce has had negligible negative impact on the turnover and profits of small traders and shopkeepers. Nirupama Soundarajan, Senior Fellow and lead author of the report added, “Contrary to popular belief, Ecommerce seems to have had a positive impact by way of increasing footfalls in small retail outlets and reducing traders’ costs of procurement, leading to an increase in profits. Most significantly, closure of trader business due to Ecommerce is almost nil. The report also indicates growing support amongst small and medium manufacturers for liberalization of the sector as advantages sink in. There is growing consensus that allowing FDI in the inventory led model will significantly increase domestic sourcing from the MSME sector, an outcome that is well in line with the Make in India campaign.”
The MSME sector certainly stands to gain because of e-commerce. This is also in line with the government’s Make in India initiative. For this sector to achieve its true potential, it is important for e-commerce to grow, and, for e-commerce to grow, FDI in the inventory led model should be allowed.
