Union Budget 2022-23 has given a great push to e-commerce by giving Data Centres (DCs) and Energy Storage Systems (ESSs), including dense charging and grid scale battery systems, infrastructure status. And it is not a coincidence that this was preceded by vast changes in the retail landscape, which gathered momentum in 2021, with e-commerce players like Amazon, Flipkart, and Cars24 pushing for market integration in terms of content, and online and offline commerce through mergers, acquisitions and investments.
To be sure, the government has been driving digitisation of the retail sector since 2014, aiming to create a vibrant e-commerce ecosystem in the country. Prior to granting infrastructure status to DCs, it had created a legal framework for enabling e-commerce in India. This included rationalising the licence process, integrally administering offline retail and e-commerce, notifying the Consumer Protection (e-commerce) Rules-2020, providing an array of cashless and paperless services through a tie-up between the Union Bank and the government e-Marketplace (GeM) portal, and amending the equalisation levy rules. It had also increased the FDI limit in B2B e-commerce to 100%, opening doors for foreign investment in the sector.
The growth of the e-commerce ecosystem is also being driven by start-ups which received a whopping `5.5 lakh crore of investment last year, as Finance Minister Nirmala Sitharaman told Parliament recently. It is this churn the sector has seen that prompted the government to grant DCs infrastructure status. For, making cheaper and easier credit available to DCs will help sustain the growth of e-commerce.
Data centres have a vital role to play in business continuity and disaster recovery as far as e-commerce is concerned. A data centre’s flexible network and compute infrastructure can seamlessly scale up a company’s processing strength to handle transitional demand from increased web traffic and engagement. It can also adjust bandwidth and interconnect on demand for a hassle-free shopping experience.
The government’s plan to roll out a 5G network from FY23 is likely to further boost e-commerce’s growth, making it worth $188 bn by 2025, a Grant Thornton report has said. Growth in Internet penetration, which stood at 784.59 mn in July, 2021, has been a huge factor driving e-commerce’s growth. According to an IAMAI and Kantar research report, the number of Internet users is expected to reach 900 million by 2025. Though 61% of the present connections are in urban areas, with 97% of them being wireless, it is growth in rural penetration that e-commerce players are eyeing. To this end, the department for promotion of industry and internal trade (DPIT) is setting up protocols for cataloguing, vendor discovery and price discovery by utilising the open network for digital commerce.
Dipankar Chakraborti, executive director, PriceWaterhouseCoopers, points out that India had added 15 million e-commerce users in the last one month, with 50% of Internet users having started online shopping, mostly on account of the pandemic. Technology enabled innovations like digital payments, hyper-local logistics, analytics-driven customer engagement and digital advertisements are supporting the growth of the sector, which a NASSCOM study has said is expanding at a CAGR of 5%, with sales crossing $56.6 billion in 2021.