Challenges for eCommerce Growth in India

eCommerce in India is estimated to be around $1.9 billion by the year end of 2008, according to eMarketer with 66% growth from 2007. Though these figures look good on paper, but when compared with some of the Asian counterparts, they are not encouraging. The eCommerce growth in India is being hindered by various drawbacks and bottlenecks.

Computer Illiteracy:
Only 65 million people are computer literates in India as of September, 2007, according to eMarketer. Here, computer literates mean people who can operate or use a computer without any aid. The number is too small for a country with a population of over 1.1 billion and out of those 64.5% are literate as on 2007. That means the percent of people who can operate computer are just above 10% of the total literates.

Poor PC Penetration:
India has only 36 PCs for every 1000 people as of 2007 according to Gartner. This is one of the lowest in the Asia-Pacific region where India stood at 49th position after the countries like China with 122 PCs, Philippines with 89, Vietnam with 78 and Indonesia with 37. Affordability and lack of awareness among the common people are the main reasons for these discouraging figures.

Low Internet Penetration:
Internet penetration is only 5.3% as of 2007, according to InternetWorldStats, which is again one of the lowest among the other Asian countries. When it comes to the number of Internet subscriptions, India has 11.09 million subscriptions as on March, 2008, according to TRAI. It is also noted that the growth rate of the Internet subscriptions is decreased by 0.56% when it is compared to the previous quarter.

Poor Broadband Connectivity:
According to the latest TRAI’s report, there are nearly 4.15 million broadband subscriptions in India as of May, 2008. The broadband penetration rate is a mere 2.65%, which is far less than the comparable China which has 14.35% of penetration. In 2007, the broadband policy released by GOI has set a target to achieve 20 million broadband users by 2010. India has a lot of catching to do even to reach at least 75% of this target.

Expensive Broadband:
Broadband rates in India are relatively high when compared to US and UK. The Indian ISPs charge from 47% to 56% of the per capita income for a broadband connection of 512KB speed, which is 6 times slower and 25 to 50 percent costlier than in US. ISPs in India are irresponsible and are indulged in high profiteering rather than providing better broadband connectivity to the last mile.

According to IAMAI and IMRB International, the total online transactions in India stood at Rs. 7080 crores (approx $1.75 billion) for 2006/2007. The number looks good individually, but when it is compared to the GDP (PPP) of $2.989 trillion, it looks meager. The growth of the eCommerce in India is very much depended on how and when the above mentioned drawbacks are addressed by the Government and the Industry.

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