Maharashtra National Law University Mumbai

The E-commerce boom in India in 2010

Economics-II

Submitted By

Triya Ghosh

ROLL NO: 2022 105

First Year, B.A. LL. B (Hons.)

Section B

Submitted To

Asst. Prof. Rohit B Jadhav

Submitted on 14/04/2023
Table of Contents

Table of Contents ....................................................................................................................... 1

Introduction: The Indian Economy till 2010.............................................................................. 2

Research Problem ...................................................................................................................... 3

Aims and Objectives .................................................................................................................. 4

Chapterization ............................................................................................................................ 4

1. E-Commerce ................................................................................................................... 4

1.1. What is Ecommerce: Definition and Types ............................................................. 4

1.2. Factors that led to the Ecommerce Boom ................................................................ 5

1.3. Impact of Ecommerce in the Indian Economy ........................................................ 7

1.4. Economic growth indicators in 2010 ....................................................................... 8

2. Sectoral Analysis .......................................................................................................... 10

3. Social and Demographic Impact of the boom............................................................... 12

Conclusion ............................................................................................................................... 13

References ................................................................................................................................ 14

1
Introduction: The Indian Economy till 2010

The Indian economy is one of the fastest growing and largest in the world. It has a mix of
agriculture, manufacturing and services, with a large workforce and a growing middle class.
India’s economic history is characterized by periods of growth and decline, with significant
changes in economic policies and structures over time. Historically, India was predominantly
an agricultural economy with subsistence farming as the mainstay of the population. However,
the economy began to change in the middle of the 20th century with the advent of planned
economic development and industrialization efforts by the Indian government after gaining
independence from British rule in 1947.1 The period between 1950s and 1980s,. it was a mixed
economy of fashion and aggressive government intervention, import substitution, and socialist
policies. 2

In the 1990s, India embarked on economic liberalization reforms aimed at opening up the
economy and encouraging foreign investment. This led to significant changes in the structure
of the Indian economy, with the services sector, including IT services and business process
outsourcing (BPO), emerging as a key driver of growth. Since then, India has experienced rapid
economic growth, averaging around 7% per annum, making it one of the fastest-growing major
economies in the world.3

The manufacturing, agricultural, and service industries are the three main pillars of the Indian
economy. A sizeable share of the work population is employed in agriculture, but it has been
losing ground in terms of GDP over time. A substantial part of the Indian economy is played
by the manufacturing sector, which includes businesses like those in the pharmaceutical,
automotive, and textile industries. India's economy has benefited greatly from the services
industry, which includes IT services, BPO, tourism, and financial services. The sector accounts
for a sizeable amount of India's GDP. The health of the Indian economy is measured using a
variety of economic indicators. One of the most popular metrics for determining the overall
cost of goods and services generated in a nation is the gross domestic product (GDP).

In the framework of India's economic progress, the 2010 economic boom was noteworthy.
India's economy grew rapidly during this time, at a rate of about 10%, thanks to a mix of

1
Arun Banerii. (1984). British Rule and the Indian Economy: Agenda for Fresh Searches. Economic and
Political Weekly, 19(31/33), 1273–1284. http://www.jstor.org/stable/4373481
2
Roy, T. (2020). The Indian Economy After Independence.
3
Basu, K. (2004). India's Emerging Economy: Performance and Prospects in the 1990s and Beyond.

2
domestic demand, a favourable demographic outlook, and more international investment.
India's economic progress was significantly impacted by this economic boom in a number of
ways. It caused the middle class to grow, urbanisation to increase, and consumer expenditure
to soar. Additionally, it led to improvements in infrastructure, such roads, airports, and ports,
which enabled trade and commerce and boosted connectivity. The economic boom in 2010
helped India emerge as a major economic force and solidified its place as one of the world's
fastest-growing countries.

It's important to keep in mind, though, that despite India's economic progress, it hasn't been
without its share of problems, such as unemployment, poverty, and income inequality. To solve
these issues and maintain inclusive and sustainable economic growth, the Indian government
is enacting numerous economic policies and reforms.

Research Problem

The emergence of e-commerce has transformed the global retail market, and India has seen
substantial growth in the e-commerce sector, notably in 2010. However, there is a lack of
thorough understanding of the variables that contributed to India's e-commerce boom at the
time, as well as the following effects on many players. As a result, the research objective for
this project is to explore and analyse the causes that contributed to India's e-commerce boom
in 2010 and the consequences for the Indian economy, consumers, enterprises, and traditional
retail.

1. What were the primary drivers of India's e-commerce boom in 2010? Was it primarily
the result of technical developments, shifting consumer behavior, regulatory reforms,
or a mix of factors?
2. How did India's e-commerce growth in 2010 affect the Indian economy? Did it help to
boost economic growth, job creation, and foreign investment?

Addressing these research issues can provide useful insights into the inner workings of India's
2010 e-commerce boom, its effects on diverse stakeholders, and the ramifications for
policymakers, firms, and consumers. The findings of this study could add to the existing e-
commerce literature, assist strategic decision-making for enterprises and policymakers, and aid
in forecasting potential developments in the Indian e-commerce market.

3
Aims and Objectives

Aim: To explore the drivers of India's e-commerce boom in 2010 and its consequences for the
economy, consumers, enterprises, and traditional retail.

Objectives:

1. Identify the primary drivers of India's e-commerce growth in 2010.

2. Analyse the impact of e-commerce growth on the Indian economy, consumers,
enterprises, and traditional retail.
3. Provide insights for policymakers, firms, and consumers to aid strategic decision-
making and future forecasting in the Indian e-commerce market.
4. Investigate the impact of India's e-commerce boom in 2010 on the overall economy,
including its contribution to economic growth, job creation, and foreign investment
inflows.
5. Analyse the effects of e-commerce growth on consumers, including changes in
shopping behavior, preferences, and access to goods and services.

Chapterization

1. E-Commerce

1.1. What is Ecommerce: Definition and Types

Ecommerce, which stands for electronic commerce, is the purchasing and selling of products
and services over the internet. It entails transacting business electronically, such as via online
markets, online storefronts, or other digital channels.

There are various sorts of ecommerce4, such as:

Business-to-Consumer (B2C) ecommerce is the most frequent type, in which businesses offer
items or services primarily to individual consumers. Online retail storefronts, services that are
subscription-based, and digital downloads are examples of B2C ecommerce.

Businesses sell items or services to other organizations through business-to-business (B2B)

ecommerce. Larger operations, long-term contracts, and complex supplier networks are

4
Nemat, R. (2012). Taking a look at different types of e-commerce - TI Journals. World Applied Programming.

4
common in this sort of ecommerce. Business-to-Business ecommerce can take place on e-
commerce sites or through specialised B2B transaction platforms.

Consumer-to-Consumer (C2C) ecommerce occurs when individuals sell goods or services to

other people. Online platforms that connect individual vendors with individual consumers,
such as online ads, collaborative marketplaces, and auction websites, facilitate this type of
ecommerce.

Individual consumers sell items or services to businesses through consumer-to-business

(C2B) ecommerce. This can include freelancing or independent contractors providing services
to businesses, as well as individuals selling intellectual property to businesses, such as images
or movies, for commercial usage.

M-commerce (mobile commerce): M-commerce encompasses ecommerce transactions that

take place on mobile devices such as smartphones and tablets. With the increased usage of
smartphones and mobile apps, permitting people to buy and make purchases on the go, this sort
of ecommerce has grown in popularity.

Social commerce entails purchasing and selling products or services online through social
media networks. This can include services like shoppable posts, which tag products and link
them to an online store, as well as in-app shopping possibilities on social media sites.

Omni-channel commerce is the seamless integration of numerous channels, such as online

stores, physical stores, mobile apps, and social networking platforms, to provide consumers
with a consistent and uniform buying experience.

1.2. Factors that led to the Ecommerce Boom

There are several factors that led to the ecommerce boom in 2010, and most of them were inter-
related with the dynamic nature of the Indian Economy.5

Increasing Internet Penetration: India's tremendous growth in internet penetration has been
a primary driver of the ecommerce boom. The market for electronic goods has expanded
dramatically as more people acquire access to cheaper internet via phones and inexpensive data
plans, offering a broader client base for ecommerce enterprises.

5
Tech in Asia—Connecting Asia’s startup ecosystem. (n.d.). Retrieved April 14, 2023, from
https://www.techinasia.com/e-commerce-in-india-to-hit-10-billion-this-
year#:~:text=A%20report%20by%20the%20Internet,year%202007%20at%20%241.75%20billion.

5
India's middle class is continuously expanding, resulting in increased spending power and
shifting consumer preferences. Because of the convenience, availability of a large selection of
products, and excellent bargains given by ecommerce platforms, the middle class has exhibited
a strong preference for online shopping.

Rise of Digital Transactions: The 2016 demonetization effort in India, followed by a push
towards digital payments, has aided the growth of ecommerce. Mobile wallets, UPI (Unified
Payments Interface), and other electronic means of payment have made it easier for consumers
to transact online, resulting in improved trust and confidence in online shopping.

Changes in Lifestyles and Urbanization: Consumer preferences in India have shifted towards
internet buying as a result of urbanisation and changing lifestyles. With their hectic urban
lifestyles, consumers seek convenient and time-saving solutions, which ecommerce platforms
provide with door-to-door delivery and simple return procedures.

Access to items and Labels: Ecommerce has given Indian consumers greater access to a wide
range of items and brands that were previously unavailable in their nearby brick-and-mortar
establishments. This has proven especially appealing to consumers in tier 2 and tier 3 cities,
where access to a varied choice of products may be limited.

Discounts and aggressive competition: The Indian ecommerce business is very competitive,
with big firms offering enticing discounts, offers, and promotions to entice clients. This has
resulted in an era of online deal seeking and impulse purchases, which has fueled the rise of
ecommerce.

Government Support: India's government has launched a number of measures to encourage

the digital economy and ecommerce, including the "Digital India" initiative, which aims to
enhance digital infrastructure and boost internet penetration. Furthermore, the government has
implemented favourable laws and regulations to encourage the expansion of ecommerce in the
country.

Changing Demographics: India's population is young, with a significant proportion of tech-

savvy millennials who are familiar with online purchasing. This demographic change has
contributed to the country's growth in e-commerce.

6
 1.3. Impact of Ecommerce in the Indian Economy

E-commerce has had a substantial impact on the Indian economy, affecting enterprises,
customers, and import/export flows in a variety of ways.6

Impact on Businesses:

1. Increased Market Accessibility: E-commerce has enabled Indian businesses to reach a

larger client base outside of their conventional geographic limitations. The improved
market access has benefited small and medium-sized organisations (SMEs) in
particular, helping them to extend their clientele and grow their companies.
2. Cost Savings: By minimizing the requirement for physical shop space, cutting
inventory costs, and optimizing supply chain processes, e-commerce has helped
businesses to save money. This has assisted start-ups and SMEs in particular, as they
are able to join the market with lesser expenditures on capital and operational costs than
traditional brick-and-mortar retail.
3. Increased Competitiveness: E-commerce has increased business competitiveness,
encouraging them to develop novel products and offer competitive prices, higher-
quality items, and better customer service. This has enhanced market competition,
providing consumers with more options and better services.
4. Employment Creation: E-commerce has provided new job opportunities in industries
such as shipping, warehousing, packaging, online advertising, and customer support,
adding to economic growth.

Impact on Consumers:

1. Convenience: When compared to traditional buying techniques, e-commerce has made

it simpler for people to shop online within from the convenience of their homes or
offices, saving time and effort.
2. E-commerce has given consumers access to a broader selection of items and services
from a variety of merchants, allowing consumers to compare prices, read reviews, and
make educated buying choices.

6
The impact of ecommerce on society and business: An ultimate guide. (2021, August 23). Webandcrafts Blog.
https://webandcrafts.com/blog/impact-of-ecommerce/

7
 3. Access to Rural Markets: In India, e-commerce has enabled bridge the gap among urban
and rural markets, allowing consumers in remote locations to access a broader selection
of items and services that would not be available locally.
4. Cost Savings: E-commerce platforms often offer competitive prices and discounts,
providing cost savings to consumers. Additionally, e-commerce has facilitated the
emergence of group buying and discount platforms, offering consumers further cost-
saving opportunities.

Impact on Trade

1. Increased Exports: E-commerce has provided Indian firms with possibilities to export
their products and services to global markets, expanding their customer base beyond
domestic borders. This has benefited small and medium-sized firms (SMEs) in
particular, which may not have had the financial backing to engage in traditional export
routes.
2. Imports of Goods and Services: Online shopping has made it easier to bring goods and
services into India, giving consumers access to a diverse range of overseas goods and
services.
3. Customs and Regulatory Issues: E-commerce has additionally addressed customs,
tariff, and regulatory compliance issues, notably in the field of cross-border e-
commerce. Indian lawmakers and regulatory authorities have been developed
attempting to address these issues and streamline e-commerce import/export processes.

1.4. Economic growth indicators in 2010

The impact of the ecommerce boom can be further evidenced in the economic growth
indicators of that year7, which have been outlined below;

1. GDP Growth Rate: India's GDP growth rate during the economic boom in 2010 was
significant. According to data from the World Bank, India's GDP growth rate was 10.3%
in 2010, making it one of the fastest-growing major economies in the world. This high
GDP growth rate was driven by strong performances in sectors such as services,
manufacturing, and agriculture.

7
How the Indian economy fared in the 2010s. (2019, December 30). https://www.timesnownews.com/business-
economy/economy/article/how-indian-economy-has-fared-in-the-this-decade/533295

8
2. Employment Generation: The economic boom in India also led to substantial
employment generation. The growth of sectors such as IT, manufacturing, and services
created job opportunities, contributing to reduced unemployment and poverty.
According to data from the Indian government's Periodic Labour Force Survey, the
unemployment rate in India declined from 9.3% in 2009-10 to 3.4% in 2017-18,
indicating positive trends in employment generation during the economic boom.
3. Inflation: Inflation, or the rate of increase in prices of goods and services, is an
important macroeconomic indicator. During the economic boom in India in 2010,
inflation was a concern. The average inflation rate, as measured by the Consumer Price
Index (CPI), was around 9.5% in 2010, which was relatively high compared to the target
inflation rate set by the Reserve Bank of India (RBI).
4. Trade and Investment: During the economic boom, India witnessed significant growth
in trade and investment. Exports of goods and services grew rapidly, driven by sectors
such as IT, textiles, and pharmaceuticals, which contributed to a favourable balance of
payments position. Foreign direct investment (FDI) inflows also increased during this
period, reflecting growing investor confidence in the Indian economy. According to
data from the Ministry of Commerce and Industry, India received FDI inflows of USD
29.4 billion in 2010, a significant increase from USD 25.9 billion in 2009.
5. Other Macroeconomic Indicators: Other macroeconomic indicators also showed
positive trends during the economic boom in India in 2010. For instance, fiscal deficit,
which is the difference between government expenditure and revenue, improved from
6.5% of GDP in 2009-10 to 4.8% of GDP in 2010-11, indicating better fiscal
management. Foreign exchange reserves, which are a crucial indicator of a country's
external strength, also increased during this period, providing a cushion against external
shocks.

The positive trends in various macroeconomic indicators during this period reflected the
robust economic performance of India and its emergence as a rapidly growing economy on
the global stage. There were however several concerns about inflation during the economic
boom of that time.

9
 Quarterly Reports of the
Indian Economy show that
2010 was a prosperous
time with GDP at 8.6%

2. Sectoral Analysis 8

This section is to analyse the sectors of the Indian Economy with respect to the economic boom
of 2010:

1. Information Technology (IT): The IT sector was one of the key drivers of India's
economic boom in 2010. India's IT industry, known for its outsourcing services,
experienced robust growth during this period, fuelled by increasing demand from global
clients for software development, IT consulting, and business process outsourcing
services. Factors such as a large pool of skilled English-speaking workforce, cost
competitiveness, and supportive government policies contributed to the growth of the
IT sector. The IT sector not only contributed to economic growth but also led to the
development of technology hubs, such as Bengaluru and Hyderabad, which became
major employment centres and attracted significant foreign investment.
2. Manufacturing: The manufacturing sector also played a crucial role in the economic
boom in India. The government's focus on manufacturing through initiatives such as
"Make in India" and favourable policies to attract investment in manufacturing, coupled
with growing domestic demand, led to the expansion of the manufacturing sector.
Sectors such as automobile, textiles, and chemicals witnessed significant growth,
creating jobs and contributing to economic growth. However, challenges such as
inadequate infrastructure, complex regulations, and labour issues remained as hurdles
for the manufacturing sector to achieve its full potential.

8
Sabitha, G. (2020). A Study on Sectorial Contribution of GDP in India from 2010 to 2019.

10
3. Services: Services, including finance, tourism, and hospitality, also contributed
significantly to India's economic boom in 2010. The services sector, which has been a
key driver of India's economy for many years, continued to grow during this period.
Sub-sectors such as banking, financial services, insurance, real estate, and tourism
experienced significant growth, driven by rising domestic consumption, urbanization,
and increasing middle-class population. The services sector not only contributed to
GDP growth but also generated employment opportunities and attracted foreign
investment.
4. Agriculture: Agriculture, being a significant sector in the Indian economy, also played
a role in the economic boom in 2010. Despite the growth in other sectors, agriculture
remained an important source of livelihood for a large portion of the population.
Favourable monsoons, increased focus on irrigation, and government initiatives to
boost agricultural productivity contributed to growth in the agriculture sector, which
not only supported rural incomes but also contributed to overall economic growth.
5. Other Sectors: Several other sectors, such as construction, infrastructure, and retail,
also contributed to India's economic boom in 2010. The construction and infrastructure
sectors witnessed significant growth, driven by increased investment in infrastructure
projects, urbanization, and real estate development. The retail sector also experienced
growth, supported by changing consumption patterns and rising consumer demand.

Favourable government policies,

increasing domestic demand, skilled
workforce, and investment inflows
were some of the factors that
contributed to the growth of these
sectors, leading to economic growth,
job creation, and improved living
standards for many in India.

11
3. Social and Demographic Impact of the boom

The economic boom in India in 2010 had significant social and demographic impacts9. Let's
analyse some of these impacts:

1. Income distribution and poverty reduction: The economic boom in India led to changes
in income distribution, with a rise in income levels for many segments of the
population. The growth of sectors such as information technology, manufacturing, and
services created employment opportunities and contributed to poverty reduction.
However, income inequality remained a challenge, with disparities between urban and
rural areas, and among different income groups. While the economic boom lifted many
out of poverty, there were still marginalized and disadvantaged communities that did
not benefit equally, leading to social exclusion.
2. Employment opportunities: The economic boom in India created employment
opportunities across various sectors, contributing to reduced unemployment and
underemployment. The growth of sectors such as information technology,
manufacturing, services, and construction created jobs and contributed to urbanization
as people migrated to cities in search of better employment opportunities. However, the
quality of employment, especially in the informal sector, remained a concern with
issues such as low wages, poor working conditions, and lack of job security.
3. Urbanization and migration patterns: The economic boom in India led to increased
urbanization as people moved from rural areas to cities in search of better opportunities.
Urbanization brought about changes in lifestyles, consumption patterns, and
infrastructure development, but also led to challenges such as overcrowding, inadequate
housing, and increased pressure on resources and services in cities. Migration patterns
also had social impacts, with families being separated, changes in social structures, and
issues related to integration and social cohesion.
4. Inequality and social exclusion: While the economic boom in India contributed to
overall economic growth, it also widened the gap between the rich and the poor, leading
to increased income inequality. This inequality, along with other social factors such as
caste, gender, and religion, led to social exclusion of marginalized communities,
limiting their access to education, healthcare, and other social benefits. Addressing

9
Akman, I., & Rehan, M. (2010). The predictive impact of socio-demographic and behavioural factors on
professionals’e-commerce attitudes. Scientific Research and Essays, 5(14), 1890-1898.

12
 issues of inequality and social exclusion remains a challenge for inclusive and
sustainable development in India.
5. Environmental sustainability: The economic boom in India also had environmental
impacts. The rapid industrialization, urbanization, and increased consumption patterns
led to environmental degradation, air and water pollution, deforestation, and other
environmental challenges. Ensuring environmental sustainability and addressing these
challenges is crucial for long-term economic and social well-being.

In conclusion, the economic boom in India in 2010 had significant social and demographic
impacts. While it created employment opportunities, reduced poverty, and contributed to
urbanization, it also led to issues of income inequality, social exclusion, and environmental
sustainability. Addressing these challenges and ensuring inclusive and sustainable development
remains a priority for India's economic growth and social progress.

Conclusion

To summarize, the ecommerce boom in India in 2010 was caused by a number of

interconnected causes that were inextricably linked to the dynamic nature of the Indian
economy. The rising middle class with higher purchasing power, the shift toward electronic
transactions, changing lifestyles and urbanization, access to a diverse range of products and
brands, fierce competition, assistance from the government, and changing demographics were
all key drivers of the country's ecommerce growth. Ecommerce has had a tremendous impact
on the Indian economy. It has improved business market accessibility, cost savings through
optimised supply chain procedures, and competitiveness. It has also resulted in fresh
employment possibilities and economic growth. Ecommerce has provided consumers with
ease, access to a greater range of products and services, reduced expenses, and has spanned the
divide among rural and urban markets. Ecommerce has facilitated Indian enterprises' exports,
boosted imports of products and services, and handled customs and regulatory concerns.

Indicators of economic growth in 2010, notably an elevated GDP growth rate, demonstrate the
favourable influence of the ecommerce development on the country's economy. With
continuing government support, rising internet penetration, and shifting consumer preferences,
India's ecommerce sector is likely to expand further in the future years, adding considerably to
the country's total economic growth.

13
References

1. Arun Banerii. (1984). British Rule and the Indian Economy: Agenda for Fresh
Searches. Economic and Political Weekly, 19(31/33), 1273–1284.
http://www.jstor.org/stable/4373481
2. Roy, T. (2020). The Indian Economy After Independence.
3. Basu, K. (2004). India's Emerging Economy: Performance and Prospects in the 1990s
and Beyond
4. Nemat, R. (2012). Taking a look at different types of e-commerce - TI Journals. World
Applied Programming.
5. Tech in Asia—Connecting Asia’s startup ecosystem. (n.d.). Retrieved April 14, 2023,
from https://www.techinasia.com/e-commerce-in-india-to-hit-10-billion-this-
year#:~:text=A%20report%20by%20the%20Internet,year%202007%20at%20%241.7
5%20billion.
6. How the Indian economy fared in the 2010s. (2019, December 30).
https://www.timesnownews.com/business-economy/economy/article/how-indian-
economy-has-fared-in-the-this-decade/533295
7. The impact of ecommerce on society and business: An ultimate guide. (2021, August
23). Webandcrafts Blog. https://webandcrafts.com/blog/impact-of-ecommerce/
8. Sabitha, G. (2020). A Study on Sectorial Contribution of GDP in India from 2010 to
2019.
9. Akman, I., & Rehan, M. (2010). The predictive impact of socio-demographic and
behavioural factors on professionals’e-commerce attitudes. Scientific Research and
Essays, 5(14), 1890-1898.

14