1. Implementation of Goods & Services Tax and Tax Benefits
With states currently having different tax rates for different categories, it becomes difficult for e-commerce players to do business in India. It is not unheard of among e-commerce players, that they get Income Tax notices from state municipalities for non-compliance, especially for Cash on Delivery shipments. Hence, quick implementation of GST is a much needed improvement.
IT services companies like TCS and Infosys were able to generate huge employment at their time because of the tax holiday which they enjoyed. Now, it is e-commerce which will be the key employment generator for the next 10 years. Re-investment of profits into businesses will enable that and hence, this sector is one of the front runners in deserving a tax holiday.
2. Allowing Foreign Direct Investment in B2C
Small e-commerce players in B2C space face difficulty in raising funds at the initial stages as the depth of angel and VC investors is not like the foreign markets. The first institutional round generally comes from HNIs and there is no clarity on foreign HNIs investing in Indian startups. Getting risk capital from Indian banks is out of the question. For debt, startups have to wait for 3 years to be eligible in the current environment. Hence, many B2C e-commerce players face the challenge of scaling up with lack of intelligent capital backing them. The government can easily allow FDI with a maximum capital limit so that only early stage startups can benefit. Having more number of e-commerce players will lead to more choice for retail customers.
3. Investment in Infrastructural backbone
No courier company in India covers even 25% of the total pin codes in India. Coupled with the fact that there is an acute shortage of warehousing space, except in Tier 1 cities, it pushes up delivery costs of the packages shipped to customers drastically. Government needs to come out with a clear policy, coupled with a single window clearance, to create warehousing and logistical infrastructure. This will attract private players, both domestic and foreign, to invest in this sector, where investment is much needed.
In addition to this, faster implementation of broadband rollout and dedicated terminals for railways and air shipments, will also give a fillip to the e-commerce sector.
4. More investment required in skilling youth
Currently most of the e-commerce players, specially the smaller ones, train their workforce themselves as there is a shortage of skilled manpower. This leads to a gestation period before the new employees become productive. 'Skill India' should be implemented at a quick pace to ensure that this bottleneck is removed at the earliest. E-commerce players will be more than happy to partner with the government to train youth in the different skills required to work in this emerging industry.
5. Entrepreneurship support for Tech ecosystem
The government should encourage more tech startups to come into their own. Setting up a National Tech Entrepreneurship program and providing funds, incubation and mentorship to such startups, especially in colleges of India will ensure that innovation happens, here in India. Benefits of such a program for e-commerce players will be huge as they are always in need of new technology ideas to improve their systems and ensure better service, both to their vendors and customers.
Positive movement on the above five will provide a huge fillip to the sector and create growth opportunities for small and medium e-commerce players and greatly benefit consumers.
Economic Times, 18th February, 2015
(The author is the co-Founder of Shopatplaces, a private label e-retail venture, where he leads the Business Development and Finance divisions. He has worked with firms like JP Morgan and Casa Capital. He is an MBA graduate from FMS Delhi, and an Electronics engineer from Jamia, Delhi)
With states currently having different tax rates for different categories, it becomes difficult for e-commerce players to do business in India. It is not unheard of among e-commerce players, that they get Income Tax notices from state municipalities for non-compliance, especially for Cash on Delivery shipments. Hence, quick implementation of GST is a much needed improvement.
IT services companies like TCS and Infosys were able to generate huge employment at their time because of the tax holiday which they enjoyed. Now, it is e-commerce which will be the key employment generator for the next 10 years. Re-investment of profits into businesses will enable that and hence, this sector is one of the front runners in deserving a tax holiday.
2. Allowing Foreign Direct Investment in B2C
Small e-commerce players in B2C space face difficulty in raising funds at the initial stages as the depth of angel and VC investors is not like the foreign markets. The first institutional round generally comes from HNIs and there is no clarity on foreign HNIs investing in Indian startups. Getting risk capital from Indian banks is out of the question. For debt, startups have to wait for 3 years to be eligible in the current environment. Hence, many B2C e-commerce players face the challenge of scaling up with lack of intelligent capital backing them. The government can easily allow FDI with a maximum capital limit so that only early stage startups can benefit. Having more number of e-commerce players will lead to more choice for retail customers.
3. Investment in Infrastructural backbone
No courier company in India covers even 25% of the total pin codes in India. Coupled with the fact that there is an acute shortage of warehousing space, except in Tier 1 cities, it pushes up delivery costs of the packages shipped to customers drastically. Government needs to come out with a clear policy, coupled with a single window clearance, to create warehousing and logistical infrastructure. This will attract private players, both domestic and foreign, to invest in this sector, where investment is much needed.
In addition to this, faster implementation of broadband rollout and dedicated terminals for railways and air shipments, will also give a fillip to the e-commerce sector.
4. More investment required in skilling youth
Currently most of the e-commerce players, specially the smaller ones, train their workforce themselves as there is a shortage of skilled manpower. This leads to a gestation period before the new employees become productive. 'Skill India' should be implemented at a quick pace to ensure that this bottleneck is removed at the earliest. E-commerce players will be more than happy to partner with the government to train youth in the different skills required to work in this emerging industry.
5. Entrepreneurship support for Tech ecosystem
The government should encourage more tech startups to come into their own. Setting up a National Tech Entrepreneurship program and providing funds, incubation and mentorship to such startups, especially in colleges of India will ensure that innovation happens, here in India. Benefits of such a program for e-commerce players will be huge as they are always in need of new technology ideas to improve their systems and ensure better service, both to their vendors and customers.
Positive movement on the above five will provide a huge fillip to the sector and create growth opportunities for small and medium e-commerce players and greatly benefit consumers.
Economic Times, 18th February, 2015
(The author is the co-Founder of Shopatplaces, a private label e-retail venture, where he leads the Business Development and Finance divisions. He has worked with firms like JP Morgan and Casa Capital. He is an MBA graduate from FMS Delhi, and an Electronics engineer from Jamia, Delhi)
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