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India’s ONDC to Democratise E-Commerce, Support Small Traders

Image credit: India Press Information Bureau

The Secretary Department for Promotion of Industry and Internal Trade (DPIIT), Anurag Jain, has inaugurated an Open Network for Digital Commerce (ONDC) office in New Delhi. According to the official, ONDC will democratise e-commerce, enabling millions of small traders to take advantage of opportunities created by the digital economy.

ONDC is an initiative of the DPIIT (under the Ministry of Commerce) to create a facilitative model that will revolutionise digital commerce, boosting retail e-commerce in India. The foundations of ONDC are open protocols for the entire chain of activities in the process of exchanging goods and services, like hypertext transfer protocol for information exchanges over the Internet.

In a press release, the government explained that these open protocols establish public digital infrastructure in the form of open registries and open network gateways to enable the exchange of information between providers and consumers. Providers and consumers can use any compatible application of their choice to exchange information and conduct transactions over ONDC.

ONDC goes beyond the current platform-centric digital commerce models where the buyer and seller must use the same platform or application to be digitally visible and do a business transaction. ONDC protocols standardise operations like cataloguing, inventory management, and order management and fulfilment. This allows small businesses to use any ONDC-compatible applications instead of being governed by specific-platform-centric policies. ONDC offers multiple options to small businesses to be discoverable over the network and conduct business. It also encourages the easy adoption of digital means by those currently not on digital commerce networks.

ONDC is expected to make e-commerce more inclusive and accessible for consumers. Consumers can potentially discover any seller, product, or service by using any compatible application or platform. It enables the consumers to match demand with the nearest available supply. Further, this gives consumers the liberty to choose their preferred local businesses. Essentially, ONDC standardises operations, promotes the inclusion of local suppliers, drives efficiencies in logistics, and leads to enhanced value for consumers.

Jain said that the government aims to build robust public digital infrastructure, and the Unified Payments Interface (UPI), Jan Dhan, Aadhar, CoWin and Unit Linked Insurance Plans (ULIP) are examples of this approach. ONDC is a similar initiative with significant potential, and India is the first country to carry out such a project, he claimed.

As part of the beta testing phase, the network went live to public users in Bengaluru in grocery and food and beverage categories in September this year. It was the first step in operationalising a network approach to e-commerce as an alternative to a platform-centric approach, the government has said.

ONDC was incorporated in December 2021. It was incubated at the Quality Council of India, an autonomous organisation with DPIIT, where the founding work for the project was initiated in a mission mode. So far, many public and private banks and financial institutions have contributed equity to ONDC. With an authorised capital of IN 5 billion (US$ 60.5 million), ONDC already has commitments of IN 2.3 billion (US$ 27.8 million) with a paid-up capital of IN 1.8 billion (US$ 21.7 million).

An Advisory Council was established in June last year, comprising officials from the government and industry. With the growth of ONDC, twelve board members have joined the company including three government nominees from the Ministries of Commerce and Industry (DPIIT), Micro, Small and Medium Enterprises, and Consumer Affairs.

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