Central Idea

• The Open Network for Digital Commerce (ONDC) is a government-backed modular network for e-commerce, food and grocery delivery, and cabs in India.
• ONDC has witnessed significant growth, with a rising number of orders and participants.
• India Post, one of the world’s largest logistics systems, is expected to join ONDC, strengthening the network.

About ONDC

• The ONDC is a private non-profit Section 8 company established by the Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India.
• It aims to develop open e-commerce by creating a set of specifications designed to foster open interchange and connections between shoppers, technology platforms, and retailers.
• It was incorporated on December 31, 2021, with an initial investment from Quality Council of India and Protean eGov Technologies Limited (formerly NSDL e-Governance Infrastructure Limited).

What does one mean by ‘Open-sourcing’?

• Free for all: An open-source project means that anybody is free to use, study, modify and distribute the project for any purpose.
• Open licensing: These permissions are enforced through an open-source licence easing adoption and facilitating collaboration.

What processes are expecting to be open-sourced with this project?

• Several operational aspects including onboarding of sellers, vendor discovery, price discovery and product cataloguing could be made open source on the lines of Unified Payments Interface (UPI).
• If mandated, this could be problematic for larger e-commerce companies, which have proprietary processes and technology deployed for these segments of operations.

What does the DPIIT intend from the project?

• ONDC is expected to-

1. Digitize the entire value chain,
2. Standardize operations,
3. Promote inclusion of suppliers,
4. Derive efficiencies in logistics and
5. Enhance value for stakeholders and consumers

Processes in the ONDC

• Seller Onboarding: Sellers can register and onboard their businesses onto the ONDC platform.
• Vendor Discovery: Buyers can discover relevant vendors and sellers on the ONDC network.
• Price Discovery: Transparent marketplace for comparing prices across sellers.
• Product Cataloguing: Sellers can create and manage catalogues of their products on the platform.
• Transaction Processing: Secure and seamless payment infrastructure for completing purchases.
• Order Fulfillment: Coordinating delivery or provision of purchased products or services.
• Customer Support: Assistance for addressing queries and concerns of buyers and sellers.
• Data Management and Security: Robust practices to protect user data and ensure security.

Why such a move by the govt?

• Digital boom: This COVID pandemic has made every business to go digital. India is a country with 700 million internet users of whom large crunch of population are active buyers on e-coms.
• Promoting competition: ONDC aims to foster a more competitive marketplace by providing opportunities for small retailers and businesses.
• Fostering inclusivity: It seeks to enable small retailers to access a wider customer base, promoting inclusivity in the digital commerce ecosystem.
• Curbing monopolistic practices: ONDC addresses potential monopolistic behavior and rent-seeking tendencies by certain e-commerce platforms.
• Enhancing efficiency: By streamlining operations and standardizing processes, ONDC aims to drive efficiencies in the digital commerce ecosystem.
• Digital Public Infrastructure: ONDC is part of the government’s efforts to build and support essential digital services and infrastructure.
• Government support: The government’s involvement in ONDC demonstrates its commitment to supporting small businesses and advancing digital transformation.

Scope for ONDCs success

• Government backing: ONDC is a government-backed initiative, indicating strong support and resources from the government to drive its success.
• Inclusive approach: ONDC aims to create a level playing field for small retailers and businesses, empowering them to compete with larger e-commerce platforms.
• Industry expertise: The drafting panel of ONDC includes experienced individuals from various sectors, bringing diverse perspectives and expertise to the table.
• Successful track record: India has previously executed successful public digital platforms like UPI and Aadhaar-linked projects, demonstrating the country’s capability in implementing digital initiatives.
• Open-Sourcing approach: The open-sourcing of processes within ONDC can foster innovation, collaboration, and widespread adoption, similar to the success of UPI.
• Growing digital market: India has a large population of internet users, making it a thriving market for digital commerce. ONDC can tap into this market and capitalize on the increasing adoption of online services.
• Potential for disruption: ONDC’s entry into the digital commerce ecosystem can disrupt existing players and bring about positive changes, offering more choices and opportunities for businesses and consumers.

Issues that can be raised

• EODB concerns: They may raise hues over operability and ease of doing business.
• Compliance burden: MSMEs have already raised the growing compliance burden for e-commerce.

Other challenges

• Every platform has its own challenges so would the ONDC may have.
• While UPI was ruled out (BHIM being the first) people were reluctant in using it due to transaction failures.
• With subsequent improvements and openness people and businesses are using it in every walks of life. So it would work with ONDC.

Conclusion

• While challenges may exist, the combination of government support, industry expertise, and the aim to create a more inclusive and competitive digital commerce landscape provides a strong foundation for the success of ONDC.

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