Transforming India’s E-Commerce Sector

• 30 Jan 2026

This editorial is based on “E-commerce promise for a Viksit Bharat” which was published in The Financial Express on 24/01/2026. The editorial examines how India’s rapidly expanding e-commerce sector can become a cornerstone of Viksit Bharat by balancing innovation, competition, and inclusion. It argues for calibrated regulation that protects fair play and consumer trust while empowering MSMEs, boosting exports, and sustaining digital-led growth. 

For Prelims: ONDC,DPDP Act 2023,Quick Commerce ,CCI,UPI,e-Commerce,Trade Enablement and Marketing (TEAM) scheme,"Womaniya" initiative,"E-Commerce Export Hubs" (ECEH) 

For Mains: Key drivers of e-commerce in India, Measures taken to strengthen e-commerce, key issues and measures to strengthen e-commerce. 

India’s e-commerce sector has emerged as a key driver of India’s digital and consumption-led growth, expanding far beyond urban markets into tier-II and III cities. Valued at about $125 billion in 2024, it is projected to reach $345 billion by 2030, supported by rising internet penetration, smartphone adoption, and seamless digital payments. UPI’s massive transaction volumes have embedded online commerce into everyday economic life, empowering MSMEs and small sellers. Together, e-commerce now anchors jobs, exports, logistics, and innovation, making it central to India’s vision of a Viksit Bharat. 

What are the Key Drivers of E-Commerce in India? 

• Digital Payments And UPI As The Transactional Backbone: Rapid, low-cost, real-time payments have fundamentally lowered friction for online transactions and enabled seamless person-to-merchant flows transforming consumer behaviour, seller onboarding and working capital cycles.  
  • UPI’s ubiquity compresses settlement times, reduces dependency on cash, and enables micro-transactions that make low-value digital commerce viable in smaller towns. 
  • For instance, UPI processed over 20 billion transactions in August 2025 worth ₹24.85 lakh crore in that month, underlining its scale as payments infrastructure. 
• Internet And Smartphone Penetration Driving Demand: Growing internet users and falling device costs have expanded the addressable market from metros to rural India, changing both demand composition and preferred formats (short video, vernacular, mobile first).  
  • This democratisation raises average order frequency and brings new cohorts (rural, older, lower-ARPU) into digital retail, forcing platforms to localise UX, logistics and payments.  
    • Strong network upgrades (4G, 5G & 6G push) further enable richer experiences (video commerce, livestreaming). 
  • India has over 800 million internet users entering 2025 and 85.5% households are with at least one smartphone as per "Comprehensive Modular Survey: Telecom, 2025" . 
• Logistics, Last-Mile Networks And Cold-Chain Maturation: Efficient logistics and hyperlocal fulfilment convert digital demand into reliable consumer experience.  
  • Investments in warehousing, route optimisation and dark stores reduce lead times and returns. Logistics scale enables category expansion (fresh groceries, pharmaceuticals) and lowers repeat purchase friction. 
  • For instance, Quick Commerce captured nearly two-thirds of e-grocery orders in 2024 and grew over $6 billion market, demonstrating rapid fulfillment-led adoption. 
• MSME Integration, ONDC And Platform Democratization: E-commerce platforms lower market access costs for micro and small sellers (eg, About 70% of e-commerce sales in India are attributed to MSMEs), spurring product diversity and geographic reach.  
  • Public digital infrastructure (ONDC) and interoperable networks aim to decentralise discovery and reduce winner-takes-most dynamics, potentially lowering entry barriers and enabling more local sellers to compete. 
  • For instance, ONDC reported 1.16 lakh+ retail sellers live across 630+ cities/towns as of December 2025, indicating real adoption of an open-network approach. 
• Exports And Cross-Border E-Commerce Potential: Digital platforms convert local MSME capabilities (textiles, handicrafts, specialty foods) into global demand channels.  
  • Successful aggregator models increase seller discoverability overseas. FTA developments and platform export programs create large multipliers for value-added exports. 
  • For instance,Since 2015, Amazon has enabled $20 billion in cumulative ecommerce exports from India, including through the Amazon Global Selling program. Further Amazon targets $80 billion export by 2030. 
• Generative AI, Analytics And Productivity Gains: AI/ML improves discovery, dynamic pricing, demand forecasting and inventory optimisation raising gross merchandising productivity and reducing working capital strain for sellers.  
  • Personalisation, conversational commerce and automated customer support lower service costs and increase conversion. 
    • Adoption supports smaller merchants by automating catalogue creation, translations and targeted marketing. 
  • Industry reports estimate GenAI is transforming India's retail, consumer, and e-commerce sectors, driving 35%–37% productivity gains by 2030 through AI-powered growth & engagement, highlighting large efficiency upside. 
• Evolving Business Models: Diverse models like pure marketplaces, inventory-led vertically integrated retail, and quick commerce coexist, each with trade-offs between Customer Acquisition Cost (CAC), margins and control over customer experience. Marketplaces scale assortment with lower capital intensity.   
  • Inventory models capture higher margin but require heavy capex and inventory risk. Quick commerce trades margin for time advantage. 
  • For instance, Flipkart’s re-domiciliation and IPO plans reflect maturation of inventory plus marketplace hybrids, while quick commerce captured nearly 10% of e-retail spending. 
• Competition And Regulatory Environment:Competition enforcement by CCI and judicial review are shaping platform conduct, addressing preferential treatment, parity clauses and data advantages while preserving innovation incentives.  
  • For instance, in April 2025, the CCI approved its first-of-its-kind settlement proposal from Google in the Android TV case.  
    • Google agreed to a settlement fee of ₹20.24 crore and committed to removing bundling requirements and allowing manufacturers to develop alternative Android-based devices. 

How is the E-Commerce Sector Being Regulated in India? 

• Consumer Protection (E-Commerce) Rules, 2020: Framed under the Consumer Protection Act, 2019, these rules are the primary shield for online shoppers. Key mandates include: 
  • Grievance Redressal: Platforms must appoint a Grievance Officer and acknowledge complaints within 48 hours. 
  • Transparency: E-commerce entities must clearly display the "Country of Origin," total price (including delivery and taxes), and refund/exchange policies. 
  • Prevention of Unfair Trade Practices: The rules also prohibit unfair trade practices. E-commerce entities cannot publish misleading advertisements, offer fake discounts, or display false reviews. 
  • Consumer Data Protection & Fair Cancellation Norms: Any data collection must be done with explicit consumer consent, pre-ticked checkboxes are not allowed.  
    • Furthermore, cancellation charges cannot be imposed on consumers unless the platform itself incurs similar costs in case of a cancellation. 
• FDI Policy & FEMA (Foreign Investment): The Department for Promotion of Industry and Internal Trade (DPIIT) regulates how foreign-funded giants like Amazon and Flipkart operate: 
  • Marketplace vs. Inventory Model: 100% FDI is allowed only in the Marketplace model (acting as a bridge between buyers and sellers). FDI is strictly prohibited in the Inventory-based model (where the platform owns the goods). 
  • Ownership Restrictions: An e-commerce entity cannot sell products from a vendor in which it has an equity stake. 
• Data Privacy: With the Digital Personal Data Protection (DPDP) Act, 2023 now in effect, e-commerce companies face strict data handling rules: 
  • Explicit Consent: Platforms must obtain clear, informed consent before collecting user data. 
  • Right to Deletion: Users have the right to ask platforms to delete their personal data once the "purpose" (like a delivery) is fulfilled. 
  • Heavy Penalties: Non-compliance can lead to fines of up to ₹250 crore per instance. 
• Competition Commission of India (CCI): The CCI acts as the "market watchdog" to prevent monopolies. It specifically monitors: 
  • Self-Preferencing: Ensuring platforms don't give their own "private labels" better search visibility over third-party sellers. 
  • Exclusive Launches: Preventing platforms from signing exclusive deals with brands (like specific smartphone launches) that shut out other competitors. 

What Measures have been Taken by the Government to Boost e-Commerce in India?

• ONDC – Democratizing E-commerce: ONDC shifts e-commerce from closed platforms to an open network, enabling kirana stores and MSMEs to access buyers across apps while reducing high commissions and algorithmic dependence. 
  • For instance, ONDC recorded over 20.4 Crore transactions as of March 2025 and onboarded 7.6 lakh sellers, 
• GeM– Transforming Public Procurement: GeM has revolutionised government procurement by enhancing transparency and inclusivity. 
  • As on 23rd January, 2025, GeM has clocked a GMV of ₹4.09 Lakh Crore, which marks a growth of nearly 50% over the corresponding period last FY. It has onboarded 1.8 lakh women-led MSEs through  "Womaniya" initiative. 
• E-Commerce Export Hubs under FTP 2023: ECEHs near ports and airports provide fast-track customs and warehousing, easing compliance for small exporters and enabling single-item global shipments, export consignment cap raised to ₹10 lakh. 
• Last-Mile Logistics via India Post–ONDC Integration: Integration of India Post with ONDC leverages 1.6 lakh post offices to reduce rural delivery costs, expanding digital commerce. 
  • India Post delivered its first official ONDC order in January 2026. 
• Regulatory Trust through Dark Pattern Guidelines: The Guidelines for Prevention and Regulation of Dark Patterns, 2023, notified on 30 November 2023, identify and prohibit 13 dark patterns including: False Urgency, Basket Sneaking and Confirm Shaming. 
  • Further, the proposed Digital India Act aims to replace the outdated IT Act of 2000, establishing a future-ready, comprehensive legal framework to regulate India's evolving digital space. 
• Credit Line on UPI – Financial Inclusion: Embedded pre-sanctioned credit lines in UPI enable instant credit at checkout, improving working capital for small sellers and boosting consumption in Tier-2 and Tier-3 cities. 
• Bhashini – Linguistic Inclusion in E-commerce: Bhashini integration enables voice-based, multilingual e-commerce in 22 Indian languages, empowering rural and vernacular users through conversational payments. 
  • For instance, the Bhashini-enabled "Sahayak" bot on ONDC supports 5 languages (Hindi, English, Marathi, Bangla, and Tamil). 
• TEAM Scheme – MSME Digital Onboarding: TThe TEAM scheme, a sub-scheme of the centrally sponsored RAMP programme leverages Digital Public Infrastructure to digitally empower MSMEs, aiming to onboard 5 lakh MSMEs onto ONDC by 2026, with 50% women beneficiaries. 

What are the Key Issues Associated with the e-Commerce Sector in India?  

• Antitrust & "Preferred Seller" Nexus: The core structural issue is the platform-neutrality paradox, where giants like Amazon and Flipkart allegedly prioritize their own inventory-holding "alpha sellers" over third-party merchants.  
  • This creates an uneven playing field where ordinary sellers are reduced to "database entries," unable to compete against platform-backed entities that enjoy subsidized logistics and rigged search visibility. 
  • A CCI Investigation Report (2024) confirmed that Amazon and Flipkart favored select sellers to control inventory. 
    • The Digital Competition Bill is still pending which proposes penalties up to 10% of global turnover for such "self-preferencing" violations. 
• The "Quick Commerce" Safety & Labor Crisis: The explosive rise of "10-minute delivery" models (Blinkit, Zepto) has triggered a humanitarian and civic crisis, prioritizing speed over human safety.  
  • This "pressure-cooker" model forces gig workers to violate traffic rules to meet algorithmic deadlines, leading to a surge in road accidents and labor strikes, as platforms externalize the cost of "instant gratification" onto the worker's life and public safety. 
  • For instance, Traffic violations by delivery agents in Bangalore have doubled from 2023-2025,with 1.46 lakh cases registered.  
    • In response to these issues Gig Workers' Unions launched nationwide strikes in Jan 2026, a key demand was a ban on the "under-10-minute" delivery promise due to rising fatalities. 
• "Dark Patterns" & Algorithmic Manipulation: E-commerce interfaces are increasingly weaponizing behavioral psychology through "Dark Patterns" like false urgency ("Only 2 left!") and basket sneaking to trap consumers into impulse buying.  
  • These deceptive UX designs subvert consumer autonomy, turning digital consent into a manipulated outcome, which has forced the regulator to move from issuing "guidelines" to mandating strict "self-audits (CCPA June 2025 Advisory)." 
    • Studies found 13 distinct dark patterns (e.g., "drip pricing") prevalent across  top travel and retail apps in India. 
• The ONDC "Adoption-Viability" Gap: While the Open Network for Digital Commerce (ONDC) aims to break the duopoly by democratizing digital access, it faces a "cold start" problem regarding dispute resolution and service consistency.  
  • A LocalCircles survey revealed that only 15% of e-commerce users had used ONDC to place an order in FY 2024–25 (as of May 2025). 
    • Also a different survey states that, over half of users (54%) find the platform cumbersome, while 35% report weak customer support, undermining user trust and repeat usage.  
    • This indicates that usability and service gaps, not value, are the key constraints on ONDC’s effectiveness. 
• Regulatory Overreach vs. Innovation Stifling: The proposed shift from "ex-post" (punishing after the crime) to "ex-ante" (preventative) regulation via the Digital Competition Bill is creating a compliance nightmare for startups.  
  • Industry bodies argue that designating successful Indian platforms as "Systemically Significant Digital Enterprises" (SSDEs) based on user thresholds could punish growth, forcing domestic unicorns to slow down expansion to avoid being shackled by the same rules meant for global big tech. 
    • The Internet and Mobile Association of India (IAMAI) has also flagged concerns over the thresholds for the designation of SSDEs. 
• The "Inventory Masking" & FDI Norm Circumvention: A persistent structural issue is the alleged circumvention of "Press Note 3" (which tightened FDI scrutiny for e-commerce entities) through complex webs of "proxy sellers."  
  • By routing inventory through newly created shell entities, global giants continue to control pricing and engage in "predatory discounting," which effectively annihilates the independent offline retail sector that cannot compete with subsidized losses. 
  • For instance, the Confederation of All India Traders (CAIT) has alleged that quick-commerce platforms engage in regulatory violations, including restricted market access, lack of transparency, FEMA breaches, and anti-competitive practices under the Competition Act, 2002. 
    • The white paper ( by CAIT)  flags that these strategies create an unfair playing field, making it nearly impossible for the 30 million Kirana stores to compete. 
• The "Reverse Logistics" Carbon Footprint Crisis: The industry is grappling with a sustainability paradox where lenient "no-questions-asked" return policies create a "Reverse Logistics" carbon bomb.  
  • This cycle doubles the transportation emissions for a single item and often results in "open-box" goods being liquidated or landfilled rather than restocked, directly contradicting India's "LiFE" (Lifestyle for Environment) and Net-Zero commitments. 
  • For instance, in India, clothing return rates for online purchases are significantly higher, often ranging between 25% and 40%.  
    • Reverse logistics (returns) creates a "half-full truck" problem, significantly increasing the carbon footprint per successful sale. 
• AI-Driven "Astroturfing" (Fake Review Farms): Trust is eroding as Generative AI is now weaponized to run "Review Farms" that flood product pages with thousands of hyper-realistic, fake positive testimonials in minutes.  
  • For instance, the Central Consumer Protection Authority has issued over 450 class action notices and imposed penalties exceeding ₹2.13 crore, including action against misleading advertisements and dark patterns in digital markets. 
  • This "Astroturfing" destroys the credibility of the "5-star" system and misleads consumers into buying substandard goods, forcing regulators to move from "voluntary standards" to mandatory criminal liability for hosting bot-content. 
• The Crisis of Plastic Proliferation in E-Commerce: The excessive use of non-biodegradable, single-use plastics for multi-layered packaging and protective padding (bubble wrap/tapes) creates a massive environmental footprint that bypasses traditional waste management.  
  • While the Plastic Waste Management Rules mandate Extended Producer Responsibility (EPR), enforcement remains weak as platforms prioritize logistical safety and cost-efficiency over circular economy goals. 
    • India generates approximately 9.3 million tonnes of plastic waste annually, and the rapid growth of e-commerce is exacerbating this problem. 

What Measures are Needed to Strengthen the e-Commerce Sector in India? 

• Deepening "Sovereign Interoperability" via ONDC 2.0: To dismantle the "walled gardens" of global platforms, the Open Network for Digital Commerce (ONDC) must evolve into a "full-stack" public utility.  
  • This involves integrating high-level AI-driven cataloguing automation and real-time grievance redressal bots directly into the protocol.  
    • By standardizing these back-end services, the government can lower the technical entry barrier for rural micro-enterprises, allowing them to compete on service quality rather than just price, thereby creating a truly decentralized and competitive "India-scale" marketplace. 
• Implementing "Ex-Ante" Regulatory Guardrails for Fair Play: Transitioning from reactive (ex-post) to proactive (ex-ante) competition regulation is vital to prevent algorithmic self-preferencing and predatory pricing by systemically significant platforms.  
  • This measure requires mandating "Platform Neutrality Audits" where companies must prove that their search rankings are meritocratic and not biased toward their own "alpha-sellers" or associated brands.  
  • Such transparency will safeguard the "Viksit Bharat" vision by ensuring that domestic startups and MSMEs are not structurally sidelined by deep-pocketed incumbents. 
• Operationalizing "Green Logistics" and Circularity Mandates: To counter the massive carbon footprint of rapid deliveries, the government should introduce "Circular Economy Credits" for platforms that adopt plastic-free packaging and electric vehicle (EV) fleets.  
  • Beyond simple subsidies, this involves mandating a "Right to Repair" disclosure and "Green Delivery" options at checkout, incentivizing consumers to choose consolidated, eco-friendly shipping over instant gratification.  
  • This aligns e-commerce growth with India’s Net-Zero 2070 commitments while reducing the long-term waste-management burden on urban infrastructure. 
• Establishing "Rural Digital Trade Hubs" (RDTH): To bridge the urban-rural divide, the government should designate district-level "Daksh" centers as physical-cum-digital hubs that provide shared warehousing, cold storage, and export-processing facilities.  
  • These hubs would act as the "first-mile" collection points integrated with the PM Gati Shakti masterplan, allowing rural producers to bypass middlemen and access national markets with lower logistics costs.  
  • This physical infrastructure layer is the necessary counterpart to digital connectivity, ensuring that "Digital India" results in tangible economic gain for the agrarian heartland. 
• Enhancing "Data Sovereignty" and Trust Capital: Strengthening consumer trust requires the strict enforcement of the Digital Personal Data Protection (DPDP) Act through "Privacy-by-Design" certifications for e-commerce apps.  
  • Measures must include banning "Dark Patterns" (deceptive UI) and mandating "Data Minimization" protocols, where platforms only collect the bare minimum information needed for a transaction.  
    • By manufacturing "Trust Capital," the ecosystem can bring the next 500 million conservative users online, transforming e-commerce from an urban convenience into a secure national habit. 
• Institutionalizing "Skill-Credentialing" for Gig Workers: The long-term stability of e-commerce depends on a formalized workforce; hence, the government should implement a "Universal Social Security Account" for delivery partners and warehouse staff.  
  • This involves creating a portable benefits system where every hour worked across different platforms contributes to a unified health and pension fund. By stabilizing the labor supply and providing dignity to the gig economy, the sector can reduce the high churn rates and labor strikes that currently threaten the reliability of the last-mile delivery chain. 
• Implementing a "Gig Worker Social Security Command": As the sector relies heavily on the "quick commerce" labor force, the state must transition from optional welfare to a mandatory, portable social security command.  
  • This involves a centralized digital ledger that tracks a delivery partner’s "service hours" across multiple platforms (Swiggy, Blinkit, Zepto) to provide a unified health insurance and pension scheme.  
  • By decoupling benefits from a single employer, the government can stabilize the volatile gig labor market, reducing the operational risks of strikes and high churn while ensuring the long-term human sustainability of the "10-minute delivery" economy. 
• Mainstreaming Green Packaging in E-Commerce: Enforce minimum thresholds for recyclable, biodegradable, and compostable materials under EPR norms for e-commerce platforms. 
  • Provide GST incentives and viability gap support for startups and MSMEs producing eco-friendly packaging. 
  • Require e-commerce firms to disclose packaging footprints and adopt “right-sized” packaging to reduce material intensity. 
  • Promote reusable packaging and deposit-refund models, leveraging Digital Public Infrastructure for traceability and compliance. 

Conclusion:

India’s e-commerce ecosystem stands at the crossroads of digital innovation, inclusive growth and market fairness, making it central to the vision of Viksit Bharat. By leveraging digital public infrastructure, AI-driven productivity and MSME integration, the sector can unlock jobs, exports and entrepreneurship at scale. However, sustaining this momentum requires competition neutrality, trust-based data governance and humane gig-economy safeguards. With calibrated regulation and innovation-friendly policy, e-commerce can evolve from a convenience economy into a nation-building growth engine for Viksit Bharat. 

Drishti Mains Question

“E-commerce has emerged as a critical pillar of India’s digital economy and the vision of Viksit Bharat.”Discuss the key drivers of e-commerce growth in India and examine the structural challenges that may hinder its long-term sustainability.

 

FAQs

1. What is the significance of e-commerce for Viksit Bharat? 
It drives digital inclusion, MSME growth, job creation, exports, and consumption-led economic expansion.

2. Why is UPI considered the backbone of India’s e-commerce growth? 
UPI enables low-cost, real-time payments, reducing transaction friction and expanding e-commerce to small towns and rural areas.

3. What is ONDC and why was it launched? 
ONDC is an open digital network aimed at democratising e-commerce by reducing platform monopolies and lowering entry barriers for small sellers.

4. What are the key regulatory concerns in India’s e-commerce sector? 
Platform dominance, algorithmic opacity, dark patterns, data misuse, and gig-worker exploitation.

5. How does the Digital Personal Data Protection Act support e-commerce? 
By ensuring consent-based data use, enhancing consumer trust, and enabling sustainable digital commerce growth. 

UPSC Civil Services Examination, Previous Year Question: 

Prelims:

Q. With reference to foreign-owned e-commerce firmsoperatingin India, which of the following statements is/are correct? (2022) 

1. They can sell their own goods in addition to offering their platforms asmarket-places.
2. The degree to which they can own big sellers on their platforms is limited.

Select the correct answer using the code given below:

(a) 1 only 

(b) 2 only 

(c) Both 1 and 2 

(d) Neither 1 nor 2 

Ans: (b)