Daily Answer Writing
23 June 2021

Q) The e-commerce industry has a great potential to bring greater efficiency in the market of agricultural products for the benefit of the farmers, and yet it is highly disruptive. Discuss (250 Words)

Source: <https://www.business-standard.com/article/economy-policy/new-rules-for-e-commerce-companies-likely-to-raise-compliance-burden-121062300032_1.html>

GS 3: Indian Economy, Employment

Approach Answer:

Introduction: Despite promoting the e-technologies in the aid of farmers, in the recent time, the government has tightened its norms regarding flash sales, FDI norms in inventory model and misleading advertisement by e-commerce companies. All of such practices are seen as anti-competitive, which hurt India's small traders which are already under pressure due to intense competition by e-commerce.

 

Potential of E-commerce for agriculture

  1. Increased investment in Agriculture: The Indian agriculture is in dire need of investment for new technologies. E-commerce can bring big money into agricultural marketing
  2. Price discovery easy: The prices through e-commerce can be displayed instantly all over the country. Here lies the advantages of the programs like e-NAM.
  3. Front end linkage: A new market would open for the farmers through mechanisms like contract farming which would create new supply chain networks.
  4. Middlemen would become redundant: The middlemen which take a big chunk of the money as commission, leading to price rise would be removed.
  5. Independence from subsidies: the farmers wouldn't have to rely on government subsidies for good prices.
  6. Addressing supply and demand mismatch: The farmers would be more closer to the market and thus would tend to grow those crops which the actual market values and demands.
  7. Increased Value addition: There food processing industry can benefit from the quality assurance by the  aggregator companies.

 

Impact on small traders/Venders/Hawkers:

  1. Increased competition: For small traders, hawkers and businessmen due to mechanisms like home delivery and quality assurance.
  2. Deep discounts predatory pricing: Such anticompetitive practices which offer unrealistic discounts to outplay the small traders are not uncommon.
  3. Economies of scale: These platforms can place bulk orders and avail greater margins on products which they sell.
  4. Controlling inventory and the prices: Big e-commerce aggregators can control the supply of key commodities. They can then decide prices.
  5. Breaking supply chains: The existing supply chains are thus being broken damaging small traders permanently.
  6. Unemployment: This can put a great proportion of population out of work.

 

Conclusion: The e-commerce and internet businesses are highly disruptive in nature which in order to bring efficiency cut across the supply chains to reach to the consumers. Thus in the longer run it is expected that these businesses would replace a large number of small traders. Thus it becomes important for the government to curb anti-competitive practices so that small traders find a chance to adjust with the situation.

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