What is Open Network Digital Commerce (ONDC)?

• ONDC is a tech-driven digital commerce infrastructure that’s popularly defined as a marketplace of e-commerce markets.

• ONDC is a network based on open protocol and will enable local commerce across segments, such as mobility, grocery, food order and delivery, hotel booking and travel, among others, to be discovered and engaged through a single platform.
• It is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry.

What is the concept behind ONDC?

• The ONDC model is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments.
  • UPI allows people to send or receive money irrespective of the payment platforms they are registered on. 
• The open network concept also extends beyond the retail sector, to any digital commerce domains including wholesale, mobility, food delivery, logistics, travel, urban services, etc.

• The ONDC aims to enable buying of products from all participating e-commerce platforms by consumers through a single platform.
• Currently, a buyer needs to go to Amazon website/app, for example, to buy a product from a seller on Amazon. Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).
• It is neither an aggregator application nor a hosting platform, and all existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network.

Significance of ONDC

1. Curb digital monopolies 

• The government believes that ONDC will put an end to the domination of the e-commerce market by a few large platforms. Amazon and Flipkart, for instance, have been accused of discriminating among sellers on their platforms and promoting certain seller entities in which they hold indirect stakes.

1. Creates a level playing field

• With an open network like ONDC that connects buyers and sellers across platforms, the government hopes to level the playing field and make platforms redundant.
• It is said that buyers will also be able to access sellers across platforms without having to switch between multiple platforms.

1. Supports Micro, Small and Medium enterprises and small traders 

• The ONDC will standardise operations like cataloguing, inventory management, order management and order fulfilment, hence making it simpler and easier for small businesses to be discoverable over network and conduct business.

1. Ensures low seller onboarding costs, translating into lower prices for consumers by bringing together players such as banks and telcos with an existing customer base.
2. As more players come together to form a competitive market, buyers benefit from gains in quality, lower prices and greater choice. 
3. Designed with high-security standards that meet the requirements of both governments and financial institutions locally and globally which will solve
   1. Issue of privacy and security of all network users
   2. Providing credit to small enterprises, artisans, and gig workers.
4. ONDC will allow small finance companies to provide real-time lending in the form of formats like “buy now, pay later” for sellers’ working capital needs and other financial requirements.
5. ONDC can take e-commerce’s share to 25 percent of all commerce by 2024.

What are the issues associated with the current state of ONDC?

• MSMEs are being driven by government initiatives effectively acting as an intermediary, which goes against the spirit of aggregation.
• De-aggregation would mean stifling innovation and restricting significant investments by reducing the return on investments in the long run.
• Customer experience may get affected owing to the large pool of inexperienced first-time sellers who will enter e-commerce.

Conclusion

• ONDC will revolutionise how people transact, and empower MSMEs with better funding and negotiation options and is bound to enhance GDP growth expected to contribute $48 billion by 2027.