How can India navigate the challenges of e-commerce?

The Central government has recently introduced draft guidelines for e-commerce platforms.

The Central government has recently introduced draft guidelines for e-commerce platforms, requiring them to adopt self-regulatory measures to safeguard consumers against fraudulent activities in India's rapidly expanding digital shopping sector. This is a welcome move. However, it is time to go beyond that and have a revamped comprehensive ‘E-Commerce Policy’ that takes into account the global trends.

The Indian e-commerce industry is projected to reach $325 billion by 2030, experiencing significant growth. In 2024, it stood at around $123 billion. According to an IBEF report, “India has the opportunity to significantly increase its share in the global B2C e-commerce market, which is projected to reach $8 trillion by 2030. With current e-commerce exports at $2 billion, there is substantial room for growth, particularly in high-demand products.”

However, to capture a larger global share of the e-commerce market, Indian e-commerce businesses will need to operate across borders. This implies they must comply with complex customs regulations and tax laws that vary from country to country.

The World Customs Organisation (WCO) has outlined some of the challenges that India needs to look at in the context of the cross-border operations of E-Commerce businesses. The WCO has highlighted that the rapid expansion of cross-border e-commerce has, in some cases, surpassed the pace of developing and implementing appropriate laws to regulate this trade effectively.

Many existing national or regional legal frameworks may not align with the new business models emerging in this rapidly growing sector. This lack of uniform and systematic legislation has exposed significant vulnerabilities in the cross-border e-commerce supply chain. To address these issues, Customs authorities must collaborate with other government agencies and e-commerce stakeholders, using thorough diagnostics to identify and bridge regulatory gaps. The legal framework should uphold principles of good governance, fairness, and transparency, while also accommodating new and evolving needs and balancing the varied interests of all parties involved in cross-border e-commerce.

The WCO has developed a Framework of Standards(FOS) “to provide global baseline standards to assist Customs and other relevant government agencies in developing E-Commerce strategic and operational frameworks supplemented by action plans and timelines.” Indian policymakers and other stakeholders in the e-commerce market can make a start by kicking off a debate on some of the WCO’s recommendations.

These recommendations raise valid issues that e-commerce-related legal and regulatory frameworks (across countries) should address. Among them are how to enhance facilitation, safety and security, and control of physical (tangible) goods through the provision of advance data across various business models; how to define the legal status and respective roles and responsibilities of the economic stakeholders involved in cross-border e-commerce; how to observe privacy and antitrust laws and protect the personal information of consumers; how to protect the interests of e-vendors, e-platforms, intermediaries, and customers; and how to facilitate safe and secure cross-border e-commerce in a fair and non-discriminatory manner.

When establishing or adapting legislative frameworks for cross-border e-commerce, India can potentially leverage, among others, existing WCO conventions, instruments, and tools, along with all relevant WTO agreements, in particular the Trade Facilitation Agreement (TFA), and other international conventions, standards, and tools.

One of the apex global bodies, the UN Commission for Trade and Development (UNCTAD), has developed a global cyberlaw tracker that reveals the complexity of variances in laws related to various aspects of e-commerce, such as e-transactions, data protection, cybercrime, and consumer protection.

According to the UNCTAD cyberlaw tracker, “A prerequisite for conducting commercial transactions online is to have e-transaction laws that recognize the legal equivalence between paper-based and electronic forms of exchange. Such laws have been adopted by 158 countries (81 per cent), of which 79 are developing countries and 29 are Least Developing Countries. While almost all European countries (44 out of 45 countries) have in place e-transaction laws, and 89% in the Americas, the share in Africa is only 61%.”

There is also significant variation in ‘data protection and privacy’ laws. According to the UNCTAD cyberlaw tracker, 137 out of 194 countries have put in place legislation to secure the protection of data and privacy. Africa and Asia show different levels of adoption, with 61% and 57% of countries having adopted such legislation, respectively. The share in least developed countries is only 48%.

Cybercrime is a growing concern for countries at all levels of development, affecting both buyers and sellers, says UNCTAD, adding that while 156 countries (80 per cent) have enacted cybercrime legislation, the pattern varies by region. Europe has the highest adoption rate (91 per cent), while Africa has the lowest (72 per cent). The evolving cybercrime landscape and resulting skills gaps are a significant challenge for law enforcement agencies and prosecutors, especially for cross-border enforcement.

The evolving cybercrime landscape and resulting skills gaps are a significant challenge for law enforcement agencies and prosecutors, especially for cross-border enforcement.

As far as online protection of consumers is concerned, UNCTAD has not able to obtain even data in as many as 52 countries suggesting that online consumer protection is not being fully addressed. Out of 142 countries for which data are available, 115 have adopted legislation on consumer protection related to e-commerce. That share varies from 78% in Europe to 52% in Africa and 71% in the Americas.

Conclusion

There are multiple challenges in the complex field of e-commerce. The global trend is clear: e-commerce is rapidly expanding, influencing the fundamental business practices and consumer behaviour that have governed industries until now. With rapid technological innovations and its cross-border reach, there are numerous challenges ranging from safety and security for businesses and consumers to developing comprehensive legal and regulatory frameworks at both the domestic and global levels. India needs a robust institutional mechanism and a dynamic policymaking apparatus to deal with this challenge. This task cannot be left solely to government authorities. Other stakeholders, such as corporates, think tanks, civil societies, legal experts, and technical specialists, must work together to address these issues holistically, rather than in a piecemeal fashion.

Earlier Sanghnomics columns can be read here.