The Federation of Indian Micro and Small and Medium Enterprises (FISME) held a “National Workshop on Growth of Retail & E-commerce in India” to address the policy barriers that impede small businesses and retailers from venturing into digital retail and e-commerce.
Over 40 delegates, comprising representatives from MSMEs, payment service providers, think tanks, e-commerce and last-mile delivery platforms, and industry organizations such as Amazon, Meesho, Zomato, BlinkIt, PayU, Shiprocket, and others, attended the consultation. The objective was to offer productive suggestions to the government on how online and offline channels can collaborate to usher in the new era of retail 4.0.
During the consultation, the focus was on the reforms necessary to integrate offline and online retail channels. Over the past two years, there has been a significant shift in consumer purchasing patterns, particularly in tier 2 and tier 3 cities, where e-commerce has gained popularity. Consumers now have the flexibility to purchase and compare products online, pay digitally when shopping from offline stores, and return products from the comfort of their homes. Despite this, only approximately 10% of India’s small businesses sell their products online.
The existence of multiple regulations for online platforms creates overlapping rules and a sense of uncertainty within the entire ecosystem. Additionally, there is an imbalance in regulatory requirements between online and offline sellers, resulting in online sellers having to bear the burden of additional compliance obligations. These obligations include disclosing the country of origin for their goods and services, ensuring the authenticity of imported products, and providing a detailed breakdown of product charges.
Furthermore, small sellers often lack digital literacy on how to expand their businesses through online platforms like Amazon and ONDC. However, MSMEs can benefit from the expertise of online platforms, which offer easy access to exports, last-mile delivery solutions, warehousing and logistics support, and training and skill development programs.
Rajneesh, Additional Secretary & DC, MSME, Ministry of MSME said in a statement, “India is an aspirational country – we are on our way to becoming a $5 trillion economy and will soon also be $10 trillion economy. This won’t be possible by only relying on traditional ways of businesses. E-commerce is a disruptive force for unleashing the potential of MSMEs in India. We, at the government, realise the relevance and importance of e-commerce. We are in line with the recommendations shared by FISME and the MSME representatives present today. We are committed to digitise businesses so that they can recognise the true value of e-commerce in growing their business and contributing to the the economy at large.”
Anil Bhardwaj, Secretary General, FISME, said, “There is an urgent need to educate MSMEs on the benefits of online selling, such as access to a wider audience and nuanced market intelligence. We need to establish a level-playing field between online and offline businesses, and limit the additional compliance burden imposed on online sellers.”
Several important recommendations were proposed during the consultation, including:
GST parity: Low digital adoption can be attributed, in part, to the intricate compliance requirements for Goods and Services Tax (GST) that hinder the transition from offline to online selling platforms. Currently, online businesses are obligated to register under GST regardless of their turnover. In contrast, offline sellers are only required to register if their turnover exceeds INR 40 lakhs. This creates an uneven playing field between offline and online retail, thereby contributing to low digital penetration.
MSME empowerment: Small and Medium Enterprises (SMEs) are a vital component of India’s economy, contributing nearly 30% to the country’s GDP and playing a crucial role in achieving the goal of a $5 trillion economy. To facilitate and empower SMEs, policies must include provisions such as exemption from import duties on returns, assistance with inventory and order management for new businesses, simpler funding options, and subsidies. Additionally, efforts should be made to increase awareness around digital marketing for new SMEs.
Enabling e-commerce policy: As India experiences rapid digitization, it becomes increasingly critical for SMEs to embrace e-commerce to ensure the sustainability and resilience of their business. To facilitate this, the government must implement simpler and more accommodating policies for online businesses. Regulatory requirements for online and offline sellers must also be made consistent, and online sellers should be exempted from additional compliance obligations.
Driving awareness: Many SMEs lack awareness about the advantages of e-commerce platforms and the regulatory obligations involved in selling online. To assist small sellers, policies must be put in place to increase women entrepreneurs’ participation, introduce a standardized e-commerce logistics policy that simplifies the onboarding process for new SMEs, and provide information about the process. Additionally, an informational portal that serves as a one-stop-shop for regulatory policies can help educate SMEs about their obligations.
