By Dr A. Didar Singh, Senior Fellow, Delhi Policy Group
There is little doubt that the growing Indian market requires long-term players and long-term capital. A glimpse into the history of Indian e-commerce companies shows that despite being in the game for some time now, they are still moving from one funding round to the next.
Private equity funds have often come to their rescue, but one can discern a pattern here. A company’s expenditure and hiring patterns change from one month to the next if there is doubt about where the next funding round will come from. This paradigm needs to change.
It is in this regard that the recent interest seen in Flipkart is unique and one hopes that more players, both global and domestic, collaborate to build a model for a long-term vision. In order to stir interest in the retail and e-retail sector, the Indian Government took two major steps. In 2016, it allowed 100% FDI in the marketplace model of e-commerce and in 2017 it permitted 100% in food retailing. Both are major steps, and their potential impact cannot be overstated.
Unlike non-food products, agri-products have a more unstructured and less transparent value chain. The brunt of this is felt at the two extreme ends – the consumers and the farmers. The revolution that has taken place as a result of the marketplace model of e-commerce, where the platform acts as an intermediary between the consumer and the seller, can be replicated for agriculture-based products and processed foods.
Wastage of food is one of the major culprits in India’s sticky inflation. Around 25-30% of the total produce gets wasted annually due to lack of a robust cold-chain storage and logistics infrastructure. Additionally, infrastructure bottlenecks, poor quality perception, high-transport charges and limited market linkages hamper the growth of India’s exports in agriculture.
E-commerce players can link Indian farmers and non-food producers to their national network strengthening both exports and manufacturing. Along with direct market linkages to farmers and MSMEs, the right sort of investment could modernise the supply chain ensuring the right price for the produce and minimal wastage.
The rising global consciousness on ‘farm-to-fork’ traceability of food is soon going to dictate global and domestic trade. As India is still gearing up to implement traceability in its food chain, advent of global expertise in the e-commerce sector is a boon in disguise. It will stimulate the Indian food sector to invest in the relevant tracing systems required to ensure food safety at every step of the supply chain.
Strengthening of the e-commerce sector will further help MSMEs in transcending barriers to their expansion and link them with buyers/end consumers. A robust e-commerce system quickly forges strong linkages between farmers and consumers thereby facilitating direct purchases, access to new markets, and ensuring an efficient and organised supply chain with minimum wastage. It ensures farmers and MSMEs are integrated seamlessly into the value chain and the market. A robust e-commerce platform will support MSMEs through funding, training and adoption of technology encouraging them to engage with customers on a real-time basis.
There has been a concern that e-commerce companies might adversely impact local business by offering huge discounts. This is a phenomenon of the past and may not hold for the future because it is not sustainable. With this opening up of the sector, responsible players will be incentivised to invest in back-end infrastructure which is not just limited to logistics but also involves building capacity of others in the ecosystem including farmers and manufacturers.
India’s growth story is intrinsically embedded in the development of its agricultural and allied sectors. Growth of India’s e-commerce sector, therefore, is in line with the government’s commitment to increasing farmers’ income. In his budget speech for the current fiscal, Finance Minister Arun Jaitley said that the government wants to help farmers produce more from the same land parcel at lesser cost and simultaneously realise higher prices for their produce.
A robust e-commerce sector will significantly accelerate the achievement of this vision. By creating a unified market base for fresh produce and processed food, it will strengthen farmers’ profitability, reduce wastage, and create favourable economic impact across the agricultural value chain.
[The writer is a former IAS officer and served as Secretary General of FICCI between 2012-17. He also has a PhD in e-Commerce.]
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
