Encouraging healthy growth through regulation
Like a well-protected nursery, we expect India’s ecommerce market to develop in a relatively well-ordered fashion. The government seeks to protect against fraud and tech-induced unemployment while encouraging healthy growth through regulation. In addition, the central bank, Reserve Bank of India (RBI), wants to cultivate fintech to complement rather than disrupt banks. As a late bloomer, India can learn from developed markets and avoid thorns such as policy volatility. Among our coverage, we believe ICICI Bank is ideally placed to benefit from RBI’s plans.
Slow but stead
We believe understanding the guiding philosophy behind India’s regulations will help investors anticipate the future of ecommerce. As we have seen in the USA, Europe and China, regulatory shifts can have significant repercussions for internet stocks. The country’s laws are broadly in step with ecommerce legislation worldwide. The UNCTAD Global Cyberlaw Tracker estimates that 81% of countries have enacted online transaction laws, 59% have done so for online consumer protection, 71% for eprivacy and 80% for cybercrime. Delhi has existing legislation in all four categories except consumer protection, which is still in the draft stage.
Why India is different
Ecommerce regulations in India are likely to differ from the global experience in three main ways. First, we believe India will experience lower policy volatility. As a late mover, it can pick and choose laws based on what worked best in China and the developed markets. Second, we expect RBI to enact fintech rules (including cryptocurrencies) that complement rather than disrupt the banking system. Finally, India’s government will aim to limit social costs from the shift to ecommerce. While its development will add jobs, those working in unregulated mom-and-pop shops are unlikely to benefit. They will need handholding by the government, given the lack of a meaningful social security net.