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Open Network For Digital Commerce

Context:

US firm Microsoft has become the first big tech company to join the Open Network for Digital Commerce (ONDC), a government-backed project which is aimed at enabling small merchants and mom-and-pop stores in parts of the country to access processes and technologies that are typically deployed by large e-commerce platforms such as Amazon and Flipkart.

Relevance:

GS III- Indian Economy

Dimensions of the Article:

  1. What is ONDC?
  2. What led to formation of ONDC?
  3. What is the current status?
  4. What are the likely benefits of ONDC?

What is ONDC?

  • It is a not-for-profit organisation that will offer a network to enable local digital commerce stores across industries to be discovered and engaged by any network-enabled applications.
  • It is neither an aggregator application nor a hosting platform, and all existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network.
  • The ONDC model is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments.
  • UPI allows people to send or receive money irrespective of the payment platforms they are registered on.
  • The open network concept also extends beyond the retail sector, to any digital commerce domains including wholesale, mobility, food delivery, logistics, travel, urban services, etc.

The main aims of ONDC are to:

  • Promote open-source methodology, using open specifications and
  • Promote open network protocols independent of any specific platform
  • Digitise value chains,
  • Promote inclusion of suppliers,
  • Standardize operations,
  • Derive efficiencies in logistics
  • Enhance value for consumers.

Example:

  • Currently, a buyer needs to go to Amazon, for example, to buy a product from a seller on Amazon.
  • Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).

What led to formation of ONDC?

  • The Department for Promotion of Industry and Internal Trade (DPIIT), under Ministry of Commerce and Industries, conducted an outreach during the outbreak of the COVID-19 pandemic to understand its impact on small sellers and hyperlocal supply chain functioning.
  • Post which, it found that there is a huge disconnect between the scale of online demand and the ability of the local retail ecosystem to participate.
  • Following this, consultations were held with multiple ministries and industry experts and “ONDC was envisioned to revolutionise digital commerce in India,” as per the strategy paper.

What is the current status?

  • Presently, ONDC is in its pilot stage in five cities — Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore — with a target of onboarding around 150 retailers.
  • The government has also constituted an advisory council to analyse the potential of ONDC as a concept and to advise the government on measures needed to accelerate its adoption.
  • Over the next five years, the ONDC expects to bring on board 90 crore users and 12 lakh sellers on the network, enabling 730 crore additional purchases and an additional gross merchandising value (GMV) of ₹3.75 crore.
  • The GMV for the digital commerce retail market in India was ₹2.85 lakh crore ($38 billion) in 2020, which is only 4.3% of the total retail GMV in India.

What are the likely benefits of ONDC?

  • The ONDC will standardise operations like cataloguing, inventory management, order management and order fulfilment, hence making it simpler and easier for small businesses to be discoverable over network and conduct business.
  • However, experts have pointed out some likely potential issues such as getting enough number of e-commerce platforms to sign up, along with issues related to customer service and payment integration.

-Source: The Indian Express


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October 2022
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