Indian e-commerce to be boosted by new draft policy, but questions remain

The untapped potential of India’s nascent e-commerce market is fast gaining momentum, as the country outlines a new draft policy aimed at protecting domestic e-commerce players while further restricting the operations of foreign companies within the country.

The idea is to monetize the country’s data for its own development.  

This new draft seems to be following the footsteps of China where local tech giants like Baidu, Alibaba and Tencent are being nurtured with foreign tech companies having restricted operational mobility within the country.

To create a similar market for the India e-commerce sector, the 41 page draft encourages setting up of data centers and server farms within the country, a move that will not only create more local jobs but also push foreign e-commerce companies for full compliance with the newly drafted regulations. For example, foreign e-commerce players would now have to become registered business entities in India to be able to sell in the country.

This move to boost local e-commerce market is timely as this sector is predicted to reach $200 billion by 2026 mostly due to rising incomes as well as the rising use of internet, especially with the growing penetration of smartphones. This makes the country a target for global tech giants like Amazon (AMZN) and Walmart (WMT) to gather and analyze demographic data on online behavior and spending habits. The draft mentions that unless policymakers make use of these locally generated data, Indian e-commerce will not be able to create value-added digital products. Instead, it will have to continue outsourcing them into foreign hands.

The draft has been supported by some of the richest names of the country, for example Mukesh Ambani, the chairman and managing director of Reliance Industries.