Is India missing out on a big trend?

Stakeholders in India are still looking at cross-border e-commerce as a fringe export business. This needs to change so that SMEs, too, can access its benefits.

In recent years, cross-border e-commerce has risen to become a major force in B2C and B2B segments. Amazon Global is the only company that is active in sourcing from India and its efforts have shown good results, with projection of US$ 20 billion in exports by 2025.

Export stakeholders in India are still looking at CBEC as a fringe export business, unlike China, which has been pushing CBEC exports for over a decade now. There had been no concerted efforts to enter this sector in any meaningful way.

A recent growth trend has been the rise of CBEC, especially in the US and China. This has been possible due to the high De Minimis duty threshold, that is imports are duty-free if they fall below a certain threshold, for example, US$ 800 in the US, US$ 177.30 in the EU, and US$ 3,782 (annual ) in China.

The value of cross-border e-commerce has been predicted to grow by 25% a year – almost twice as fast as domestic e-commerce. In 2020, 1 in every 5 e-commerce dollars was generated via crossborder trade – and it’s not only the big companies; SMEs too can access the benefits that international e-commerce brings.

According to Zion Research, total value of global cross-border e-commerce hit US$ 562.1 billion in 2018 and is expected to reach over US$ 4 trillion by 2027, at a CAGR of 27.4%. A recent study of apparel shoppers across 11 countries revealed that over two-thirds (67%) of them had purchased something from abroad in the last 12 months. Even 1% market share comes to US$ 40 billion in exports for India.

Growing at 30%, China is the largest CBEC market in the world. The Chinese government looks at CBEC as one of the pillars of its import and export growth engine. Premier Li Keqiang reiterated the government’s support for accelerating growth of CBEC and enhancing China’s international shipping capacity in the 2020 Government Work Report.

Over the last several years, the government has been rolling out policies, including adding new CBEC pilot zones and pilot cities for CBEC retail importation, extending the CBEC retail import list, and lowering tax and tariffs to boost CBEC. In January 2020, 50 cities were added to the existing 36 pilot cities for CBEC retail importation. In May 2020, the State Council unveiled 46 new comprehensive pilot zones for CBEC, bringing the total number of CBEC pilot zones in China to 105.

In the last six years, the proportion of China’s CBEC exports in the country’s total foreign trade jumped from 2.2% to 11.25%. It has already started putting a proactive policy framework in place to promote CBEC in the RCEP region before the deal entered into force. Guangzhou is the first city to issue special policies to help the local business community benefit from RCEP, addressing the following aspects:

• Optimize the business environment for CBEC • Foster main market players • Strengthen innovation capacity • Expand international marketing network • Enhance training of professionals

Mega platforms such as Alibaba’s TMall encourage large brands to come to China and have created warehouses and consolidation centres in strategically located sites in Europe and US. To sell Indian products from SMEs, these should be introduced through increasingly popular social media selling platforms like Wechat.

China presents the most exciting CBEC opportunity today. CBEC is largely free from non-tariff export barriers, which are very common in China. Not only are imports duty-free for <US$ 727 single purchase and <US$ 3,782 annually per head for over 1,300 products, but VAT is also reduced by 30%. India can sell a large number of items on the Chinese positive list. Even OTC medicines were added to the approved retail import CBEC list (positive list) in January 2020.

Among other examples, Shopee, the major platform in ASEAN countries, is embarking on an expansion program to enter Latin America. Jumia and its rival DHL are expanding operations in Africa, which today represents a US$ 25 billion market.

However, to gain a share of the burgeoning CBEC market, the government needs to create an ecosystem where CBEC exports can flourish. Through its agencies, it must come up with end-to-end logistics and fulfillment policies.

Amazon Global’s success lies in total control over back-room fulfillment services, from collecting the consignments from India to final delivery to customers. A comprehensive strategy on leveraging CBEC markets can not only give a boost to SME export firms but also international logistics, cross-border payment mechanisms, and supplychain finance.

Suhayl Abidi is Research Advisor, GOG-AMA Centre for International Trade & Consultant, Centre for VUCA Studies, Amity University.