Why India needs to support e-commerce exports and how

Some numbers put this into perspective. India has $4-5 billion in e-commerce exports, which is about 1% of its total merchandise exports. China’s e-commerce exports are 50 times larger than India’s, accounting for 6.4% of total merchandise exports. It is clear that India needs to leverage much of the growing e-commerce opportunities if it wants to increase its exports.

The government wants to increase e-commerce exports to $200-300 billion by 2030. In August, he presented a plan to establish e-commerce export centers. It recently extended some existing export incentives to e-commerce exports via courier. However, changes to the e-commerce regulatory framework are also needed if India is to achieve its ambitious goals of at least 50 times growth in e-commerce exports within six years.

A recent report by Assocham and Ernst & Young entitled Enabling e-commerce exports from Indiaexplores what these changes might be. Another report by Niti Aayog and the Economic Development Foundation, Increasing exports of small and medium-sized enterprisesalso provides useful suggestions for unlocking e-commerce exports. Most of these changes relate to the Reserve Bank of India (RBI) Master Order No. 16/2015-16 dated January 1, 2016 on export of goods and services issued to banks under the Foreign Exchange Management Act, 1999. Some indicative changes:

Remove the 25 percent payment variance limit: RBI requires that the foreign exchange received by sellers should not differ from the quoted value by more than 25%. However, exporters face gaps between declared and realized values ​​due to rebates, refunds and platform fees. China has no such limit. The 25% differentiation clause should be removed and sellers should be given the flexibility to decide on the commercial aspects of selling via e-commerce.

Please allow more time for payment processing and repatriation: The seller is entitled to receive the export proceeds within nine months of export shipment. This is not always feasible when exporting to e-commerce platforms, making it virtually impossible to follow the guidelines. China does not specify a specific deadline for payment and repatriation. India should follow suit or at least extend the deadline to 18 months.

Implement an aggregate reconciliation model: E-commerce exports require an individual shipping invoice and payment reconciliation, which increases reconciliation work. China allows you to reconcile payments in bulk on a monthly basis. A collective model for declaring the shipment of goods and reconciling payments should be adopted – whether this is done monthly, quarterly or annually.

Redefine the responsibility of the e-commerce seller and operator: China’s e-commerce law clearly defines the roles of platform and seller. It requires sellers to register on the marketplace and acquire appropriate licenses, which greatly reduces the burden on the e-commerce operator in terms of compliance and logistics. India does not designate these roles, requiring the seller to be involved in every step of the complex export and payment processes. It should only require the seller to obtain a license for the company and product, create an account on the marketplace and be listed in the product list, while other activities are the responsibility of the e-commerce operator. This may require a change to the definition of exporter in the FEMA Act/Regulations and other export-related Acts/Regulations.

Reduce the burden of payment reconciliation costs: Bank fees for arranging payment are as high as ₹1500-3000 for shipping. This places a significant burden on small sellers. These fees should be waived, refunded or charged as a small percentage of the shipment value.

Increase the shipment limit for courier mode: The shipment limit for exporting e-commerce goods via courier, as opposed to the much slower cargo mode, is currently $12,000, which is insufficient. To compete with China, this amount should be raised to $50,000.

Create custom surveillance codes for e-commerce exports: To improve data collection and operational efficiency, separate custom surveillance codes for e-commerce exports should be introduced along the lines of China along with guidelines for speedy customs clearance.

Reduce customs clearance times for e-commerce exports: Customs clearance after submitting details on the Express Cargo Clearance portal for export shipments takes approximately three to four hours. India should follow China’s practice of issuing approval within a minute of declaration due to having a special surveillance code for e-commerce exports.

Re-import made easy: Customs officials often mistakenly identify reimports of exported goods as new imports, forcing e-commerce sellers to pay import duties. There should be clear guidelines for reimport transactions. They could, for example, allow duty-free re-importation of up to $600, which is roughly the limit under baggage regulations. For higher value shipments, a protocol should be developed to recognize returns as reimports, as is the case with gems and jewelry.

Enable an international purchasing and sales model supported by orders: In China, sellers can cooperate with e-commerce platforms to export goods, even if the sellers are not registered exporters. Enable similar functionality here to help small and medium-sized enterprises test demand for their products abroad before becoming full-fledged exporters.

While quick results can be achieved through changes proposed in the RBI Core Guidelines for Banks and changes in the FEMA Act/Regulation and other laws, the real achievement can be achieved through the enactment of a comprehensive e-commerce law on the Chinese model.

Such collective measures should be enough to transform India into a truly global e-commerce hub, generating large-scale jobs and enabling small and medium-sized enterprises across the country to showcase Indian talent beyond just being a country of artisans and specialized products such as textiles and handlooms. but also advanced technology products.

Alok Chaturvedi is Director General Exports for EOU and SEZ and former IAS officer. Swagato Ganguly is a senior fellow at the Convergence Foundation. The views expressed are personal