ONDC aims at 5-fold rise in India's digital consumption to $340 billion: McKinsey

ONDC will also help push up the number of digital transacting consumers by 3-4X from 165-190 million in FY22 to 450-500 million users in FY30

The government’s e-commerce project, the Open Network for Digital Commerce (ONDC), has the potential to increase India’s digital consumption by 5X to around $340 billion by 2030, consulting firm McKinsey said in a report.

Along with propelling the digital products and services consumption from $60-$70 billion in FY22 to $320-$340 billion by FY30, the ONDC will also help push up the number of digital transacting consumers by 3-4X from 165-190 million to 450-500 million users during the same period.

“India could exceed expectations for the growth and possibilities of digital commerce with ONDC. The network could evolve into a nerve centre of new connections, sparking continuous innovation and advances. However, there are multiple challenges to address to allow ONDC to scale and achieve greater momentum for success,” McKinsey’s report said.

The challenges include, the lack of digital ease, for both customers and sellers. The low trust factor, when compared with traditional shopping channels, was also a deterrent. Even fears of unsafe online commerce and unfavourable unit economics on platforms like these keep people away from transacting online, the report said.

Read: We want main platforms to come to ONDC, don't come with new e-commerce app: Piyush Goyal

That was the main reason why only about six percent of all micro, small and medium enterprises (MSMEs), actively sell on e-commerce platforms, which translates to about 5-6 million of them.

But, thanks to the propositions of the ONDC that base is likely to shoot up 6-7X to 30-40 million by FY30, according to the American consulting giant.

Small businesses from across sectors such as grocery, mobility, fashion and lifestyle, hospitality and others were likely to leverage the reach of the ONDC, which aims to increase the penetration of e-commerce to 25 percent, from about 4-5 percent currently, in the next two years by reaching 900 million buyers and having 1.2 million sellers.

Over the short, medium and long term, the government-backed ONDC could also be seen expanding to areas such as peer-to-peer (P2P) homestay, P2P home chefs, and even direct-to-farmer sales. The ONDC could also be seen selling building materials marketplace, completing hyperlocal grocery, and pharmaceutical deliveries, as per the McKinsey report.

This comes at a time when several apps that have integrated with the ONDC, like PhonePe’s Pincode, claim to be growing 100 percent day-on-day, albeit from a low base, according to the company. PhonePe, however, has not revealed specific numbers.

Meanwhile, the Commerce and Industry Minister Piyush Goyal said that companies should integrate with the ONDC only with the main app, rather than building a separate app to join the open network.