India taking steps to boost digital commerce

Khaleej Times columnist answers questions relating to NRI issues

ONDC aims to increase e-commerce penetration in India by 25 per cent over the next three years. Picture for illustrative purposes only. - File photo
ONDC aims to increase e-commerce penetration in India by 25 per cent over the next three years. Picture for illustrative purposes only. - File photo

By H. P. Ranina

Published: Sat 3 Dec 2022, 4:12 PM

Question: Digital commerce is gaining strength in India. However, a large number of small businessmen are still not involved in this process and prefer to continue with cash-based transactions. Are any steps being taken to meet this challenge?

ANSWER: It is globally recognised that India is well positioned to emerge as a pioneer in reforming the digital commerce landscape. The Indian Government has launched the Open Network for Digital Commerce (ONDC) project which will democratise e-commerce and provide a level playing field for small and medium businesses. ONDC’s open source network will enable buyers and sellers to move away from the present cash based system to an inter-operable decentralised network. The pilot project is currently live in 15 cities including Delhi, Coimbatore, Bengaluru and Lucknow. ONDC aims to increase e-commerce penetration in India by 25 per cent over the next three years from the current level of 8 per cent . Its object is to reach sellers in the remotest parts of the country and to create a protocol which every citizen could take advantage of. The idea of an open network for digital commerce is to give equal opportunity to every business entity so that it becomes part of an ecosystem. However, it is expected that this transformative process will take some time as it will require training and setting up of platforms tailor made for different products and services.

Question: I read in the press that the India-Australia Economic Co-operation and Trade Agreement has been cleared by the Australian Parliament. What advantages will flow from this agreement? Many NRIs based in the Gulf want to know the prospects and benefits which will be available to them.

ANSWER: This agreement will be operationalised by early 2023 after all procedural formalities are completed. This agreement will specially benefit Indian students as they will be able to obtain a work visa of 18 months to 4 years after they complete their studies in Australia. Indian professionals will be provided with work visas on a priority basis. The double tax avoidance agreement has also been finalised which will help Indian IT companies. Nasscom has estimated that this will result in a saving of around $ 200 million for companies providing information technology services. Bilateral trade is likely to touch $ 50 billion in the next six years from the current level of around $ 31 billion. The agreement will benefit several labour intensive sectors as they will be subjected to just 5 per cent import duty. Customs duty has been eliminated by Australia on a large number of goods imported from India. Pharmaceutical products which are approved in other developed countries will get faster registration in Australia as a result of this agreement.

Question: With interest rates rising in India as well as globally, will it be possible to finance infrastructure projects which are sorely needed to push the rate of economic growth?

ANSWER: It is expected that infrastructure projects in India will need an investment of $110 trillion. Banks, capital markets and financial centres like GIFT City will have to play a crucial role to raise the necessary resources. Bankers believe that so long as the risk is underwritten and priced correctly, there would be no impediment in meeting the challenge of raising the necessary resources. Having learnt from the lessons of the past, Indian banks are now smarter in pricing risks. This has forced many companies and business entities to bring in more equity from promoters and investors. The effectiveness of the Goods & Services Tax and other data available from official websites has helped banks to assess the risks and take a scientific decision. The public-private partnership model for infrastructure development has evolved over a period of time and risks are shared by the partners, thereby making the projects viable.

H. P. Ranina is a practising lawyer, specializing in tax and exchange management laws of India.

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