There is need for ONDC to redefine its role and relevance in the Indian context. To become relevant, Government needs to set up a regulator like RBI to regulate all the e-commerce players in India. Similar to UPI, all the e-commerce players need to be mandated by such regulator to join the ONDC
ONDC (Open Network for Digital Commerce) was started by the Government of India in April 2022 after the success of UPI — a digital payment app. UPI’s success excited many government and private institutions to start similar initiatives for other sectors — digital infrastructure for public good. E-commerce during that period was showing phenomenal growth in India and many players, both foreign and domestic, were doing unprecedented business. The government thought it appropriate to create a level playing field mainly for SMEs by containing the monopoly of a few entities and decided to set up an interoperable, transparent, easily accessible digital platform on the pattern of UPI. ONDC became an integral part of the initiative for building digital infrastructure for public good and was promoted as the “UPI for e-commerce”. This is the right time to evaluate the efficacy of ONDC and assess how far it has been able to fulfil the objective for which it was set up. The main objectives for setting up this initiative and their status are discussed to take corrective steps, if any.
ONDC was established as a not-for-profit private company (Section 8), promoted by DPIIT, Government of India. One of the objectives was to address the concern about the dominance of big e-commerce players like Amazon, Flipkart, BigBasket, Blinkit etc. Has this been achieved to the extent envisaged? The seller and service provider number registered on ONDC is about 7.4 lakhs as on March 2025. Amazon has more than 1.4 million business sellers and about a crore (10 million) users, and a similar number is on Flipkart, which has 40 per cent of the market share. The seller count on both these platforms has shown consistent growth year on year. The weekly user base of Blinkit is around 30 million, with a similar number on other quick e-commerce players like Zomato. The story of Nykaa, Tata CliQ, Meesho, IndiaMart, FirstCry and other e-commerce players in India is one of consistent growth over the years. There seems to be no impact of the existence of ONDC on these players in India.
It is also true that ONDC per se will not be able to influence in future the monopolistic nature or dominance of some of the big players in India. The dominance, if any, is to be dealt with by regulatory intervention and not by designing and developing a digital platform promoted by the government.
So far, the number of SMEs reported to have been registered on ONDC is 3.5 lakhs only. In India, the SME number is close to 60 million and therefore the number of SMEs registered with ONDC is very insignificant. Is the process of registration of SMEs with the ONDC platform simple and easy? It does not appear to be so. SMEs still need to get the support of intermediary organisations to get registered on ONDC. In fact, there are other platforms such as Shopify where the registration process and support for SMEs to build their own e-commerce site are more comprehensive. They provide all the desired support required such as building a website, integrating with payment gateways, logistics companies, marketing support and product design and display, including hosting and compliance. SMEs need such intervention, which ONDC is unable to provide, and therefore SME listing on ONDC will continue to be limited. The very purpose of providing support to all the 60 million SMEs will remain a challenge for ONDC, keeping in view the unique requirements of SMEs in India.
It is true that there is no on-boarding fee charged by ONDC; however, to sell on the ONDC platform, SMEs need to use a seller application. The individual seller apps charge their own fee to enable the integration, which may be transaction-based or a subscription fee. Thus, there is a cost SMEs have to pay in case they decide to sell through the ONDC network in the form of integration charges to intermediaries who act as seller apps or platform providers. In addition, ONDC has also announced it will levy a network fee for every successful transaction. Are SMEs looking for the low-cost or zero-cost model for selling their products and services online? SMEs are actually looking for an efficient platform for enabling display, marketing of their products and support with regard to compliance such as GST. ONDC has not been able to build that confidence and trust of SMEs despite its claim of no on-boarding fee or less commission. All the e-commerce players are not on the ONDC platform and thus the issue of interoperability is only for limited players. In the case of UPI, all the banks and other service providers such as payment banks, small finance banks etc are integrated and thus interoperability is genuine and commendable. ONDC does not seem to possess the necessary bandwidth as in the case of NPCI (which manages and operates UPI). In the case of NPCI, the shareholders are banks and other financial institutions, which are the stakeholders in the payment settlement framework, while in the case of ONDC the primary promoters are not the e-commerce players but the Quality Council of India, Protean, SIDBI and some banks. The acceptance of a platform which is not owned by the key stakeholders will continue to be a challenge to enable it to establish its desirability and relevance.
Has ONDC been able to fulfil its role of providing a choice to the customers of the e-commerce market? There are now both domestic as well as international players operating in India — some large, others small, and some even dealing with specific categories of products and services. The government does not obstruct or discourage the entry of new players in this space. Today, the Indian consumer definitely has a choice, especially in the segment that transacts on these platforms. Consumers have no loyalty and are driven purely by the quality of service and price competitiveness. One does not really need a government-supported platform like ONDC for e-commerce in view of the diversity and complexity of the products and services to enable the provision of choice to consumers.
Future of ONDC
ONDC is unable to meet the basic objective for which it was set up and promoted by the government. The mere branding of ONDC as the UPI for e-commerce seems to be inappropriate. It cannot be considered a digital platform for public good mainly when compared to other such platforms, namely UPI, CoWIN, Aadhaar, Digital Locker etc. A digital public good platform is one which is open source, free and designed to meet the expectations of the public at large. Most of the digital infrastructure for the public in India is designed to cater to specific products and is generally under a regulator to ensure compliance. ONDC in its present format is unable to excite all the e-commerce players to join, and there is no regulator to provide the desired confidence and trust to the end consumer. In fact, ONDC has included other services which initially were not part of the original mandate, such as loan application services, a ride-hailing app from Odisha and other financial products like mutual funds. This seems to be largely because ONDC wants to prove its existence by showing the number of transactions on the platform. The main focus of on-boarding SMEs and integrating with all the e-commerce players seems to have been lost sight of due to inherent constraints in the design of the ONDC framework.
There is a need for ONDC to redefine its role and relevance in the Indian context. It can never become the UPI of e-commerce in its present format. UPI for financial transactions has been successful as there is a regulator and all those who participate in the UPI framework, the service providers, are licensed and regulated by the RBI. There is no regulatory body for e-commerce like the RBI. In case of a dispute, ONDC does not take any responsibility and it is left to be resolved by the service provider. However, in the case of individual e-commerce players, there is a mechanism to resolve the issue. Consumers do not find it comfortable or advantageous to undertake transactions through the ONDC platform.
What should ONDC do? To become relevant, the government needs to set up a regulator like the RBI to regulate all the e-commerce players in India. Similar to UPI, all the e-commerce players need to be mandated by such a regulator to join ONDC. In case that is not possible, ONDC needs to focus on support to MSMEs — to become a platform exclusively for SMEs, meeting almost all their requirements: designing and developing websites with all the features of product display, payment gateways, settlement, dispute resolution, hosting facilities and regulatory compliance mainly GST and income tax. ONDC should promote hyper-local e-commerce where each SME has its own buyer-seller app. It is like each SME becomes a “Digital Kirana shop” enabled and supported by ONDC. Once all the 60 million SMEs join the platform, it can really establish its relevance for all the stakeholders. Otherwise, its future looks very bleak.
The writer is a retired IAS officer