The World Bank, in its recent South Asia Development Updaterevised India’s GDP forecast marginally upward. This, they claim, is based on improvements in private consumption triggered by a lower-than-expected inflation rate due to the GST reforms. India’s economy, historically driven by private consumption, is, however, at a crossroads. Household spending, which accounts for over 60% of GDP, has slowed significantly in recent years, even as GDP growth recovers. This decoupling of consumption from income growth signals deeper structural challenges: rising unemployment, declining household savings, and muted investment. Amid these headwinds, e-commerce emerges as a transformative force, offering a pathway to stabilize demand, create jobs, and reshape economic participation.
E-commerce is more than just a digital marketplace; it is an enabling infrastructure that reduces transaction costs, expands market access, and fosters economic inclusion. For consumers, particularly in rural and peri-urban areas, e-commerce platforms simplify product discovery, standardize pricing, and ensure reliable delivery. These mechanisms lower barriers to consumption, allowing households to maintain essential spending even during income disruptions. For producers, e-commerce reduces entry costs, enabling small businesses, women entrepreneurs, and informal workers to participate in commercial activity without the constraints of traditional firm structures.
The numbers speak for themselves. In 2023, India had 250 million online shoppers, a figure projected to grow to 425 million by 2027. The sector’s gross merchandise value (GMV) exceeded 4.82 lakh crore in 2023, with related industries such as food delivery and mobility pushing the combined GMV to 6.95 lakh crore. These figures underscore the sector’s role in sustaining consumption and driving economic activity.
E-commerce is not just reshaping consumption; it is transforming employment. Unlike capital-intensive industries that often reduce labor absorption, e-commerce supports distributed growth models that accommodate diverse skill sets. Direct employment opportunities arise in logistics, digital marketing, warehousing, and customer support, while indirect jobs are created in supporting industries like fintech, supply chain analytics, and cybersecurity. Gig economy roles — such as delivery riders and warehouse workers — further expand participation, offering flexible work arrangements that attract women, migrants, and first-time entrants.
Estimates suggest that for every job lost in traditional retail, e-commerce generates up to 2.5 new jobs. In 2022–23, about 1.47 crore workers—2.55% of India’s workforce—were employed in the digital economy, with 4.5 million engaged in gig work and digital content creation. As the sector grows at over 20% annually, reaching a projected $300 billion by 2030, its potential to absorb labor remains strong. However, the inclusivity of this growth will depend on whether the gains from scale are shared through open and accessible participation.
Despite its promise, e-commerce faces significant structural and regulatory barriers that limit its scalability and inclusivity. Investment in enabling infrastructure — such as warehousing, last-mile logistics, and digital backends — has not kept pace with the sector’s growth. Funding for B2C businesses fell from $13 billion in 2021 to $2.6 billion in 2023, while investment in enabling sectors dropped to just over $1 billion. This underinvestment risks creating bottlenecks in delivery reliability, payment systems, and market depth, particularly for small sellers who rely on these systems. Competition in this sector will come from new investments. The lack of investment in a potentially fast-growing sector enables incumbents to entrench themselves and start to dominate these markets.
Regulatory constraints further exacerbate these challenges. The Goods and Services Tax (GST) regime, even after the recent reforms, still requires sellers to register in every state where they deliver goods, creating a compliance burden that discourages pan-India operations. Foreign direct investment (FDI) rules prohibit e-commerce entities with foreign equity from owning inventory, limiting their ability to ensure consistent service quality. These provisions skew activity toward established players and high-compliance regions, reducing the sector’s potential to decentralized economic participation.
New competition rules, such as restrictions on self-preference and predatory pricing, add another layer of complexity. While these measures aim to promote fair access, they may deter investment in infrastructure-intensive areas by increasing operational risks. For smaller businesses and informal producers, these constraints raise participation thresholds, weakening the sector’s ability to support inclusive growth.
To fully realize the potential of e-commerce, India must address these structural and regulatory bottlenecks. Investment in enabling infrastructure is critical — not just to expand domestic e-commerce, but to unlock the sector’s potential for exports. According to a 2024 EY and ASSOCHAM paper titled Enabling E-commerce Exports from IndiaIndia’s e-commerce exports were estimated at $4–5 billion, but they could grow to $200–300 billion by 2030, contributing around 30% of India’s merchandise export target. Strengthening logistics, fulfillment systems, and regulatory clarity will be essential to make Indian producers more competitive in global markets.
Policy reforms must also focus on reducing compliance burdens and fostering a more inclusive regulatory environment. Simplifying GST requirements, allowing greater backend control for e-commerce entities, and providing incentives for infrastructure investment can help lower entry barriers for smaller sellers. At the same time, competition rules should balance consumer protection with the need to support innovation and scale-building in underdeveloped markets.
E-commerce is not just a new way to shop; it is a structural shift in how India’s economy functions. By reducing transaction costs and expanding participation, it offers a lifeline to stabilize consumption, create jobs, and sustain growth in a period of economic uncertainty.
However, its long-term contribution will depend on how widely these benefits are distributed and how effectively the sector navigates its regulatory and investment challenges.
As private consumption continues to drive over 60% of India’s GDP, and employment remains a pressing concern, the development of e-commerce is not just an economic opportunity — it is a necessity. Policymakers, investors, and industry leaders must work together to ensure that this transformative sector fulfills its promise of inclusive and sustainable growth.
R Chandrashekhar is chairman, Center for The Digital Future (CDF), and former secretary, IT and telecom, GoI, and Shubhashis Gangopadhyay is vice-chairman, CDF and research director, India Development Foundation. The views expressed are personal
