What are the key issues in the Indian ecommerce sector? How is it impacting growth?
The biggest threat for the industry right now, is the sales tax that is being imposed by select states on ecommerce deliveries. As a result of this tax, delivery of products have suffered in states like Kerala which is impacting the business in a big way. The state of Punjab is also adopting the same policy and will soon be levying similar taxes. These states do not allow ecommerce companies to deliver products without paying sales tax, which in turn affects our consumer base coming from these areas.
What policy initiatives can the government introduce to correct this scenario. How will it help change the overall business environment?
Friction-free and efficient trade across the country is extremely necessary for the growth of the economy. It not only ensures access to the best product at the best price to the consumers, but also provides opportunities for small businesses to grow. Going forward goods and services tax (GST) seems to be a good solution to boost overall growth. The implementation of GST will lead to the abolition of indirect taxes such as octroi, central sales tax, state-level sales tax, entry tax, etc., thus avoiding multiple layers of taxation that currently exists only in India. This will benefit consumers as prices are likely to come down. Lower prices will lead to more consumption, thereby helping us in the bargain as well.
Logistics has been another key area concern for ecommerce firms in India.
It is necessary that the government invest in postal service to cater to the need of ecommerce companies. India is witnessing rapid growth in the ecommerce industry, therefore we need to make sure that the development of logistics in India can support the surging development of the market. For example, recently ecommerce giant Alibaba tied up with China Post and are likely to collaborate for logistics, ecommerce and information security in order to jointly develop new business and markets and enhance their presence in lower-tier cities. The reach of the Indian postal service is vast, and if right investments are made in this direction the Indian postal service will gain immensely out of this.
Will the marketplace model be the key driver of growth for India's ecommerce companies?
The marketplace model is here to stay and it is changing the lives of both buyers and sellers in a significant manner. The sellers are being able to sell their products across different states in the country. Not only this, in the coming years the manufacturing industry will also witness massive growth, satisfying the different aspirations of the consumers. A lot of job opportunities, both direct and indirect, will also be created, with the logistic-supporting companies employing people at lower levels.