India - Country Commercial Guide
eCommerce

Describes how widely ecommerce is used, the primary sectors that sell through ecommerce, and how much product/service in each sector is sold through e-commerce

Last published date: 2021-10-23

Market Overview

According to Statista, India’s E-Commerce market is expected to reach $84 billion in 2021 on the back of healthy growth in the Indian organised retail sector.  In 2021, the Telecom Regulatory Authority of India reported 778 billion (755 million wireless and 22 million wired) broadband subscribers.

Assessment of Current Buyer Behavior in Market

E-Commerce has had a huge impact on consumer shopping behavior in recent years.  Consumers are ready to expand their online purchases due to challenges with in-person purchasing, excessive road traffic, limited product selection, lack of physical inventory, and inability to compare prices, in addition to increased internet access and usage.

COVID-19 Impact on Indian E-Commerce Sector 

E-Commerce has changed how Indian businesses operate and how consumers shop and pay for goods.  According to a report by Unicommerce, an E-Commerce supply chain service provider, the E-Commerce industry saw 31 percent growth in orders from July to September 2020, realizing extraordinary demand during the COVID-19 pandemic.

According to Euromonitor, the Indian beauty and personal care market, worth $14 billion in 2019, grew to $23 billion in 2020.  The online food and grocery market is expected to grow from $2 billion in 2019 to $20 billion in 2025.

The tourism industry, which benefited tremendously from online distribution prior to the pandemic, has been devastated by COVID-19.  From the start of 2020, flights were grounded, cities experienced multiple lockdowns, and hotels, cafes, bars, and restaurants closed.  Online airline and hotel bookings collapsed during this period.

According to Razorpay, an integrated payments provider, the following categories witnessed the most growth in online sales during the pandemic of 2020–21:

  • Beauty, Wellness & Personal Care:  295 percent
  • Electronics:  162 percent
  • Fashion & Lifestyle:  189 percent
  • Food & Grocery:  15.6 percent
  • Home Fashioning:  20.3 percent

Government Initiatives & Foreign Direct Investment (FDI)

The Reserve Bank of India (RBI) allows interoperability among prepaid payment instruments (PPIs) such as digital wallets, prepaid cash coupons, and prepaid telephone top-up cards.  RBI issued a circular mandating all licensed PPIs or mobile wallets, such as PhonePe, Paytm, Google Pay, and Mobikwik, be interconnected on or before March 2023.  This means that beginning in April 2022, a mobile wallet user, whose identity has been fully verified, will be able to send and receive money from different mobile wallets.

According to the India Brand Equity Foundation, the GOI has increased maximum FDI participation in the E-Commerce marketplace model (B2B model) by foreign companies to 100 percent.  Another important initiative is the GOI’s $1.24 billion allocation to provide 5G broadband services to Tier 1, 2 and 3 cities across India.

In 2018, the Department for the Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce, introduced additional guidelines that govern foreign direct investment in E-Commerce firms.

Equity ownership

According to Press Note No. 2 (2018 Series), online sellers are prohibited from selling products from companies in which they own stakes or control inventory.  Foreign companies must go through a distributor and may not sell directly on India’s E-Commerce platforms.  The guidelines also prohibit E-Commerce companies from accounting for more than 25 percent of a vendor’s sales.

Exclusivity

The government prohibits online marketplaces from selling products exclusively.  As a result, a new smart phone is likely to be available on a variety of platforms, giving customers more options.

Services Offered by the E-Commerce Entity

In the marketplace model, E-Commerce firms are forbidden from manipulating the sale price of goods or services.  The new rules also state that an E-Commerce marketplace, as well as any company in which the marketplace has an equity stake, must provide fair services (e.g., fulfillment, logistics, warehousing, call center service and payment collections) to all sellers on the platform.

Compliance Certificate

In the Press Note No. 2 (2018 Series), the Reserve Bank of India requires E-Commerce marketplace companies to provide an annual certificate to the Reserve Bank of India together with a statutory auditor’s report, certifying compliance with the rules.

Local E-Commerce Sales Rules & Regulations

As a Goods and Services Tax (GST) registration is required to do business in India, foreign companies are required to establish an Indian entity with GST registration, or to partner with an Indian distributor or importer.  The Ministry of Commerce and Industry regulates online sales in the Indian market.

In 2019, the Government of India (GOI) released a draft National E-Commerce policy to regulate increased levels of E-Commerce resulting from India’s rapid digitization.  The policy focuses on consumer data protection, data localization, intellectual property, and competition.  The GOI allows 100 percent foreign direct investment in B2B E-Commerce, and 100 percent FDI under the automatic route (which requires no prior approval from RBI or the GOI) under the marketplace model of B2C E-Commerce.  The E-Commerce policy cuts across other rules and regulations such as the draft Personal Data Protection Bill, draft Non-Personal Data Governance Framework, and National Cyber Security Strategy 2020.

E-Commerce companies are subject to various rules and regulations, including:

  • Income Tax Act, 1961
  • Consumer Protection Act, 1986
  • Information Technology Act, 2000
  • Foreign Exchange Management Act, 2000
  • Payments and Settlement Systems Act, 2007
  • Companies Act, 2013
  • Laws related to Goods and Services Tax

In July 2020, the Ministry of Consumer Affairs, Food, and Public Distribution published the Consumer Protection (E-Commerce) Rules, 2020.  The Rules contain a variety of requirements, including display of country of origin of products and services, the labeling of goods with expiration dates, and information about returns/refunds/exchanges/warranty/guarantee.  In June 2021, the Ministry proposed additional amendments to the Rules, including alteration of the definition of an E-Commerce entity, mandatory registration of E-Commerce entities, establishment of a grievance redressal mechanism, a ban on manipulation of search results, and a ban on flash sales.  U.S. sellers should consult legal experts to better understand the challenges of operating an E-Commerce business in India.

Local E-Commerce Business Service Provider Ecosystem

In India’s E-Commerce market, third party service providers can enable quicker access to online ecosystems by offering services such as imaging, cataloging, enhanced brand content, account management, advertising, international shipping, domestic transportation, and tax management.  One example is the Amazon Service Provider network, which allows sellers to obtain access to Amazon’s service provider ecosystem to facilitate sales, fulfillment, and after-care.

Popular Indian E-Commerce Sites

B2C:  Amazon.in; Flipkart.com; Myntra.com; Tatacliq.com; Pepperfry.com; Paytmmall.com; Nykaa.com; Firstcry.com; 1mg.com; AJIO.com; Bigbasket.com; Grofers.com; Shopclues; makemytrip.com; bookmyshow.com; Koovs.com; Lenskart.com; and Zomato.      

B2B:  Udaan; Tradeindia; Alibaba; Indiamart; ExportersIndia; eIndiabusiness; Dhgate; and eWorldTrade.

Major Buying Holidays

  • Diwali festival (October or November of the year)
  • Dussehra (October)
  • Rakhi festival (August)
  • Christmas

Trade Shows / Conferences

  • Meet Magento India:  eCommerce conference
  • India E-Commerce Expo

For more information about export opportunities in this sector contact U.S. Commercial E-Commerce industry specialist Smita Sherigar