Context

The Department for Promotion of Industry and Internal Trade (DPIIT) recently issued orders appointing an advisory committee for its Open Network for Digital Commerce (ONDC) project.

About ONDC project

• The Open Network for Digital Commerce (ONDC) project aims to make e-commerce processes open-source.
• In simple terms, it aims at creating a platform that can be utilised by all online retailers.
• This is another effort by the government to facilitate the creation of shared digital infrastructure, as it has previously done for identity (Aadhaar) and payments (Unified Payments Interface).
• It will digitise e-commerce value chains, standardise operations, promote inclusion of suppliers, and derive efficiencies in logistics.

What are its advantages?

• Level playing field: When done well, this approach can level the playing field and create value for users. 
• Curb monopoly: The market is dominated by a few players who are facing investigations for unfair trade practices in many countries.
• Prevent market failure: The sector is characterised by many small players who individually do not have the muscle to have an equitable bargain with e-commerce companies.
• Economists call this a “market failure”, and it presents a legitimate case for intervention.

The three layers of an open digital ecosystem and their conceptual framework for adoption and safeguards

1) Tech layer

• The “tech layer” should be designed for minimalism and decentralisation.
• The government should restrict its role to facilitating standards and protocols that provide open access, and in getting them adopted organically.
• Building an entire tech platform should happen only if a standards-based approach doesn’t suffice.
• If built, the platform should be built on “privacy by design” principles.
• It should collect minimal amounts of data (especially personal data) and store it in a decentralised manner.
• Tools like blockchain could be used to build technical safeguards that cannot be overridden without active consent.

2) Governance layer

• Avoid excessive government intervention: The “governance layer” around this should allay business fears of excessive state intervention in e-commerce.
• Legal provision: Any deployment of standards or tech should be accompanied by law or regulation that lays out the scope of the project.
• Independent regulator for personal data: If collection of any personal data is required, passing the data protection bill and creating an independent regulator should be a precondition.
• Handling by independent society: To assure the industry of fairness, the government could hand over the stewardship of the standards or platform to an independent society or non-profit.

3) Community layer

• A community layer can foster a truly inclusive and participatory process.
• This may be achieved by making civil society and the public active contributors and seeking wide feedback on drafts of the proposal.
• Once the framework is implemented, ensuring quick and time-bound redressal of grievances will help build trust in the system.

Concerns with government creating shared digital infrastructure

• This approach also comes with risks and we should tread with caution.
• In general, governments should intervene in markets only when there is a clearly identifiable market failure or massive societal benefits from creating shared infrastructure.

Way forward

• The government’s championing of open-source technology for digital commerce is commendable.
• It should also push the envelope on the other principles of the open-source movement — transparency, collaboration, release early and often, inclusive meritocracy, and community.
• Even if we do all things right, an infrastructure-led approach may not be sufficient.
• Therefore, we need to supplement infrastructure with tightly-tailored regulation.
• We need to explore the concept of interoperability, that is, mandating that private digital platforms like e-commerce firms enable their users and suppliers to solicit business on other platforms.
• To drive the adoption of an open e-commerce platform in a sector with entrenched incumbents we need to create “reference applications”, and financial or non-financial incentives.
• Useful learnings can be drawn from the adoption of UPI: The government supported the rollout of BHIM as a reference app, and offered incentives.

Consider the question “How the Open Network for Digital Commerce project can help deal with the issues with the e-commerce sector? Suggest the approach the project should adopt to make it a success.”

Conclusion

It is timely that India is exploring innovative ways to bridge the gaps in e-commerce markets. But the boldness of this vision must be matched by the thoughtfulness of the approach.

Back2Basics: What is ‘Privacy by Design?

• Privacy by design is a concept that integrates privacy into the creation and operation of new devices, IT systems, networked infrastructure, and even corporate policies.
• Developing and integrating privacy solutions in the early phases of a project identifies any potential problems at an early stage to prevent them in the long run.

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