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Barriers holding up e-biz explosion in India

Fakir Chand in Bangalore

Even as the Indian software industry grapples to buck the tech slow down trend, the India Inc, is groaning under the weight of infrastructure bottlenecks that are bedeviling its plans to capitalize on the enormous wealth of talent and resources available across the country.

Though the IT industry has managed to create for the first time an Indian brand the world over with its low-cost high quality enterprise, changing the very facet of business practices of global companies, including Fortune 500 giants, it is severely constrained on its home turf to repeat the magic for the benefit of its own industry, the government, as well as the people.

A blow-by-blow account of the kind of barriers that are holding up the virtual explosion of the Internet and its use as the engine of socio-economic growth in the country has been vividly captured by a joint study conducted by Nasscom and the Boston Consulting Group during the first of half of this year.

The situation is so alarming that the study report has ranked India as having the highest barriers to e-commerce adoption among the Asian countries. Listing the multiple external factors impeding the growth of e-commerce, the report laments the limited Internet access among customers and small and medium enterprises, besides lack of reliable payment gateways.

"Current level of Internet usage in India is low among both businesses and individuals. The number of Internet users has barely crossed the 5-million mark across the country. Current penetration of PCs and other devices to access the net for individuals is less than 1 per cent. Telephone line penetration is limited to less than 3 per cent of the Indian population of over 1 billion."

Similarly, poor telecom and communications infrastructure for reliable connectivity is thwarting the Indian corporate, the IT industry, and the government from facilitating extensive e-commerce adoption. The report also points out that the existing telecom infrastructure is still unreliable.

Internet connectivity is very slow and access costs are still very high.

Explaining that external factors are those which a business cannot influence and may need intervention from the government, the study also points out that multiple gaps in the current legal and regulatory framework have been inordinately delaying decision-making at various levels.

For instance, the Indian Contract Law is not covered under the IT Act because of which legal enforceability of electronic contracts is open to challenge.

The legal jurisdiction of contracts involving international parties is not defined. What's more, the IT Act does not clarify all the issues regarding taxation of electronic transactions, and is silent on the issue of protection of intellectual property rights such as patents, trademarks, and copyrights in the Internet space.

"Similarly, safeguards to protect privacy of personal and business data collected over the Internet are not in place, and industry incumbents are concerned about the security and confidentiality of their data. Transactions cannot be completed online due to a lack of convenient online payment solutions as information flow between banks is still not completely online."

In order to reverse the trend and catch up with the global movement towards e-commerce, the study says the government needs to address these external factors on top priority for a quick adoption of e-business by India Inc.

"Delay in e-commerce adoption in trade intensive industries could cause them to lose their competitiveness. The government urgently needs to address the key factors that can turn around the situation for better. It has to first resolve legal and regulatory issues for e-commerce transactions, and accelerate development of communication infrastructure."

Highlighting the benefits and advantages of introducing e-governance in the country, the report says e-governance offers a unique opportunity for central and state governments to improve the delivery of services to its citizens and its own internal functioning.

"Though multiple initiatives have been announced, there is a significant unfinished agenda in e-governance. For instance, the government should evolve common e-governance architecture for governments at all levels to maximise benefits from delivery of services.

The government should also prepare a plan to progressively offer more sophisticated services on line; improve citizens' access and awareness about these services; explore private sector participation in e-governance to share financial risk and ensure sustainability of initiatives, and prepare plans to harness benefits from G2B and G2G for transparency."

In summary, the government has to initiate action on:

• Regulatory and legislative barriers to clear loopholes in the IT Act pertaining to contract laws, clarify tax regime for e-commerce transactions;
• For creating the state-of-the-art infrastructure, it has to encourage more players to set up communications infrastructure, especially to promote the last mile access, and finally;
• Establish guidelines for protection of IPRs online, initiate measures to control cyber crime, and ensure privacy of data collected online, train law enforcement agencies to tackle cyber crimes.

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