This retail outlet sells a lot of products from all sorts of producers. The shopkeeper also buys stuff in a wholesale market and packages it neatly into smaller quantities, making it easier for buyers to shop. It sells its own-label goods a bit cheaper than the branded substitutes on offer. It also showcases its own brand’s products prominently to attract customer attention.
Should we make it illegal for the shopkeeper to showcase her own products over the other brands and compel her to ensure a level-playing field for all brands in her shop? If she has invested heavily in her retail business, taking substantial risks in the process, doesn’t she have a right to strategically display products that make more profit for her? And even worse, if she wants to sell her own-label products, then should we ask her to open another shop exclusively for that purpose?
What seem like untenable rules for a traditional commerce format are what our proposed regulations expect e-commerce companies to abide by. If enacted into law, India’s e-commerce regulations would shift the burden of liability for the products sold on these platforms onto e-commerce companies, instead of sellers, and would come down heavily on promoting their own brands, among several other restrictions.
*This would in effect amount to, say, the Tata group not being able to sell or promote Tata salt, Tata tea or Croma products on its e-commerce platform when it enters the sector, even as it sells all other brands of salt, tea and electronic items through its website.
What if e-commerce majors tomorrow declare that instead of following such stringent regulations, they would rather sell only their own brands? Who would win—buyers, other sellers, or the e-commerce giants?
Yes, the scale and reach of a traditional high street shop or retail chain is much smaller than a large e-commerce company. No doubt, there need to be checks and balances on their power, so that their search engines are not manipulated and a customer has a fair way to complain.
But we must remember that the same firms also offer discounted prices to small sellers for their raw material and lower their cost of production. These platforms have increased the reach of small businesses nationwide and even helped them address export markets.
For customers, they have made product returns hassle-free and improved product quality and variety. They have revolutionized the country’s logistics industry and supply chains. Their contribution to employment generation is now significant. And, all in all, the lower prices that e-commerce companies offer is an indirect real income increase, especially for our relatively low-income households.
From Duopoly to Oligopoly
India’s e-commerce sector is set to expand into an oligopoly with the entry of Reliance, Tata and a revamped Snapdeal from a near-duopoly of Amazon and Walmart-owned Flipkart at present.
An oligopolistic market can indeed see its players join hands to form a cartel and act against consumer interests. There are oligopolies that exist in other industries; for example, cement, where producers have been punished by the Competition Commission for operating illegal cartels. But, at present, there is no evidence of such anti-competitive practices in the e-commerce sector.
What is the best way to ensure that e-commerce platforms work to the benefit of smaller sellers across India? Encourage market entry and ensure that there is no excessive regulation. More e-commerce companies entering the market should result in more choice for small sellers in terms of the platforms they want to list on, depending on the listing fees, commission and so on.
The e-commerce industry, however, would remain driven by economies of scale and the sector can never be expected to turn into a perfectly competitive market. It will remain a differentiated oligopoly.
A large number of businesses—small, medium or large—go bankrupt daily, and at the same time, new businesses emerge. At one time, the retail business used to be conducted only in a traditional format, and there was no way of knowing how many businesses were going bankrupt.
It had little visibility. Now, with e-commerce, it is the same process; not every business that lists itself online is successful, but failures are more visible and vocal now. The truth is that many of India’s small-business owners should be gainfully employed elsewhere; large numbers are into subsistence entrepreneurship because of a lack of jobs.
Coming back to our shopkeeper, she often has customers who ask for discounts on marked retail prices and bargain hard, while she also gets customers who reach straight for their choice, pick it up, pay the price, and leave without uttering a single word.
Effectively, different consumers pay her different prices for the same products based on their willingness and ability to pay. Nearly every traditional retail transaction involves bargaining and price negotiations, but e-commerce platforms cannot engage in such price discrimination.
Instead, they offer discounts for limited periods on specific goods for customers whose willingness and ability to buy is less, which works to the benefit of many budget-bound shoppers.
Way Foward
In sum, we should not place excessively stringent regulations on e-commerce companies, which would lower consumer welfare as well as the ability of small sellers to expand their market reach, and also stifle innovation by lowering the ability of newer e-commerce companies to take risks.
Recent Posts
- In the Large States category (overall), Chhattisgarh ranks 1st, followed by Odisha and Telangana, whereas, towards the bottom are Maharashtra at 16th, Assam at 17th and Gujarat at 18th. Gujarat is one State that has seen startling performance ranking 5th in the PAI 2021 Index outperforming traditionally good performing States like Andhra Pradesh and Karnataka, but ranks last in terms of Delta
- In the Small States category (overall), Nagaland tops, followed by Mizoram and Tripura. Towards the tail end of the overall Delta ranking is Uttarakhand (9th), Arunachal Pradesh (10th) and Meghalaya (11th). Nagaland despite being a poor performer in the PAI 2021 Index has come out to be the top performer in Delta, similarly, Mizoram’s performance in Delta is also reflected in it’s ranking in the PAI 2021 Index
- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
- In the 90:10 division States, the top three performers were Himachal Pradesh, Sikkim and Mizoram; and, the bottom three performers are Manipur, Assam and Meghalaya.
- Among the 60:40 division States, Orissa, Chhattisgarh and Madhya Pradesh are the top three performers and Tamil Nadu, Telangana and Delhi appear as the bottom three performers.
- Among the 90:10 division States, the top three performers are Manipur, Arunachal Pradesh and Nagaland; and, the bottom three performers are Jammu and Kashmir, Uttarakhand and Himachal Pradesh
- Among the 60:40 division States, Goa, West Bengal and Delhi appear as the top three performers and Andhra Pradesh, Telangana and Bihar appear as the bottom three performers.
- Among the 90:10 division States, Mizoram, Himachal Pradesh and Tripura were the top three performers and Jammu & Kashmir, Nagaland and Arunachal Pradesh were the bottom three performers
- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
- Among the 60:40 division States, the top three performers are Kerala, Andhra Pradesh and Orissa and the bottom three performers are Madhya Pradesh, Jharkhand and Goa
- In the 90:10 division States, the top three performers are Mizoram, Sikkim and Nagaland and the bottom three performers are Manipur and Assam
In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)