Indian e-commerce take off slow

E-commerce in India has not yet taken off in as big a way as it expected, but the industry hopes the government's commitment to the creation of 'back-haul' broadband infrastructure would give a fillip to online shopping in the country, according to Web portal Rediff, reports The Economic Times.

The reasons for online shopping not catching on in the country are low credit card penetration and the high failure rate of 50% in the case of debit card transactions, Rediff founder and CEO Ajit Balakrishnan said.

“Debit card-based e-commerce is possible, though there are challenges. Broadband connectivity between banks is just building in India. Unless the banks' telecoms infrastructure is super, it can't be pulled off. There are 120 million Indians with debit-plus-ATM cards,” he added.

The Business Standard reports that with e-commerce, the challenge is margins, and so there has to be a payment system where it is no more than 3%. "If the operator keeps 50%, it is not worth business," Balakrishnan said.

He rued that telecoms companies did not make timely investments in broadband, as returns only started to accrue after 20 years, unlike cellular phones, where valuation was based on the number of subscribers.

"In every country, you find when broadband picks up, that's when e-commerce picks up. When e-commerce picks up, then advertisement picks up... This is not happening in India," he said, reports the Hindustan Times.

Nevertheless, expressing confidence that e-commerce would pick up momentum in the near future, Balakrishnan said he was certain the government would make the necessary investments to create back-hall infrastructure for broadband.