India’s e-commerce exports have the potential to grow at a faster pace than the IT exports in early 2000s. With global Business to Consumer (B2C) e-commerce exports estimated to grow from $800 billion to $8 trillion by 2030, India’s strengths in high-demand customised products, expanding seller base, and higher profit margins per unit of export place it in a prime position to benefit from this trend.
Despite its potential, India’s current e-commerce exports remain far below their potential. Currently, they account for only $2 billion, less than 0.5 per cent of India’s total goods export basket. The country must plan to export $350 billion, or about one-third of its total goods, through e-commerce by 2030.
This will require focus on developing the ecosystem for e-commerce exports as India’s current e-commerce export provisions are a patchwork of rules framed for regular B2B exporters. This creates an enormous compliance burden on small firms, and India needs to address all such issues in one place. To address such needs, the government may issue a separate E-commerce Export Policy. E-commerce policies in China, Korea, Japan, Vietnam, etc., have helped many firms sell globally.
As the needs of the e-commerce export sector are vastly different from the regular export sector, the E-Commerce Export Policy should be an independent document addressing all pain points faced by exporters.
This policy should be jointly issued by the RBI, Customs, and DGFT after making necessary changes to their regulations.
Action points
Twenty-one recommendations have been identified to increase e-commerce exports from India. These cover five broad categories:
Redefine the responsibilities of sellers. Small and medium-sized firms rely on e-commerce platforms for global exposure and value-added services, such as timely payment assurance. However, this conflicts with FEMA regulations as the platform is responsible for receiving payment, while the ownership of goods remains with the seller.
China has solved this issue by separating the responsibilities of the seller and the compliance process entity. The seller is only responsible for creating an e-commerce marketplace account, obtaining product-specific licences, and creating commercial invoices and packing lists. This separation has been a major contributor to China’s e-commerce export industry and should be adopted by India.
Simplify payment reconciliation. Payment reconciliation is a major roadblock for third-party e-commerce exporters. The RBI guidelines for B2B exports need changes to accommodate B2C exports. The changes needed to simplify payment reconciliation are:
Sellers must receive forex within nine months of shipment, which is challenging for shipments sold over 12-18 months. More time is needed to reconcile payments.
Lower restrictions on receipt of export proceeds: Forex received must not vary more than 25 per cent of the value stated in the export document. A 25 per cent reduction cap is too restrictive for e-commerce sales that involve discounts and returns.
E-commerce exports have a high number of small shipments and invoices per large shipment, which increases the payment reconciliation burden. An expensive consignment-wise EDPMS (Export Data Processing and Monitoring System) closure process must be eliminated.
Read More at https://www.thehindubusinessline.com/opinion/how-to-boost-e-commerce-exports/article66642775.ece
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