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1 Jun 2022

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India wants to democratize its digital economy through ONDC

How can you develop a digital economy while at the same time making sure local e-commerce flourishes? Many countries face a dilemma as they watch big tech companies buy their way into new and promising markets. India may have found an innovative way to prevent this.

Open Network for Digital Commerce

The country has launched the Open Network for Digital Commerce, or ONDC. With the help of this technical infrastructure, a user can shop on any app that has been registered with the network and see products from multiple sellers. These may include e-commerce apps, listed local stores, and small merchants. Users can then decide from whom they wish to purchase. An ONDC-registered e-commerce app shows users results from the catalog of the app they are using, but it will also show results from its rivals, as well as small neighborhood sellers. The shopper will then have the option of where to buy. ONDC comes with a protocol for unbundling individual services. Users can not only choose where to buy the product, but also which payment services to use and which delivery company to use.

Open protocols

In an official statement is says: 'The foundations of ONDC are open protocols for all aspects in the entire chain of activities in exchange of goods and services, similar to hypertext transfer protocol for information exchange over internet, simple mail transfer protocol for exchange of emails and unified payments interface for payments. These open protocols would be used for establishing public digital infrastructure in the form of open registries and open network gateways to enable exchange of information between providers and consumers. Providers and consumers would be able to use any compatible application of their choice for exchange of information and carrying out transactions over ONDC'.

100 cities

In April, ONDC soft-launched in a few cities. By August, the Indian government plans to expand the infrastructure to 30 million sellers, 10 million merchants, and 100 cities. The Indian e-commerce market is estimated to be worth $55 billion in gross merchandise value in 2021 and to reach $350 billion by the end of this decade.

ONDC is seen by India's government as a way to break the dominance of large e-commerce firms. In India, this would be, for example, Flipkart, which is owned by Walmart in the US, as well as Amazon and others.

Potential participants

Interestingly, these large e-commerce companies are now trying to join ONDC. Flipkart's logistics and supply chain company Ekart and Reliance's Dunzo are already members of ONDC. Paytm and PhonePe are also part of the growing network. According to reports, Google is also in talks to become part of the network. As opposed to other e-commerce companies, Google's existing shopping business acts as an aggregator of listings.

Photo credit: Lewis J Goetz

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