Edukemy Gazette

Open Network for Digital Commerce (ONDC)
Log In & Download Newsletter

Open Network for Digital Commerce (ONDC)

In News

The central government is moving fast on its promise of creating an open network for digital commerce (ONDC), which aims to democratise digital commerce.

About the News

  • With a first-of-its-kind initiative globally, the government wants ONDC to serve the same purpose for e-commerce as UPI does for the digital payment domain.
  • The government has clarified that it shall not mandate sharing of any transaction-level data by participants with ONDC and work with them to publish anonymised aggregate metrics on network performance without compromising on confidentiality and privacy.
  • ONDC will be compliant with the information technology act, 2000 and designed for compliance with the emerging personal data protection bill.
  • The government plans to establish an independent regulatory authority for e-commerce like Sebi.
  • This is an extension of the e-commerce rules drafted for consumer protection by the Ministry of Consumer Affairs after several small retailers complained about the misuse of arduous power by giants Amazon and Flipkart.



What is ONDC?

  • ONDC is an initiative aimed to promote open networks for all aspects of the exchange of goods and services over digital or electronic networks.
  • ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform.
  • The whole procedure of implementing the changes across the e-commerce chain has been delineated to the Quality Council of India.
  • ONDC shall initially give special attention help on-board small and medium players and will also plan for an information, education and communication campaign to educate and encourage users and address apprehensions of the network participants.

How will ONDC work?

  • The foundations of ONDC are to be open protocols for all aspects in the entire chain of activities in exchange of goods and services, similar to hypertext transfer protocol for information exchange over internet.
  • These open protocols would be used for establishing public digital infrastructure in the form of open registries and open network gateways to enable the exchange of information between providers and consumers.
  • Providers and consumers would be able to use any compatible application of their choice for the exchange of information and carrying out transactions over ONDC.
  • The ONDC will also be connected to payment gateways and offer delivery and logistics solutions for specific requirements.

Why do we need to develop ONDC?

  • Standardization of Processes: ONDC protocols would standardize operations like cataloguing, inventory management, order management and order fulfilment in e-commerce.
  • Empowerment and Innovation: ONDC will empower merchants and consumers by breaking silos to form a single network to drive innovation and scale, transforming all businesses from retail goods, food to mobility.
  • Democratize e-commerce: The ONDC will democratise digital commerce, moving it from a platform-centric model to an open-network.
    • This will enable, buyers and sellers to be digitally visible and transact through an open network, no matter what platform/application they use.
  • Breaking Monopolies: This domination by dominant players like Amazon and Flipkart restrains the interests of smaller and financially afflicted retailers. ONDC will break this monopoly.
  • Level Playing Field: The regulator for the ONDC, to be formed soon, will ensure level playing field and healthy competition through dispute settlement and penalties.
    • This regulator will hear complaints from both consumers, brick and mortar traders and e-commerce players, acting as centralised authority for all non-personal data exchanges.



What can be the possible challenges in implementation of ONDC?

  • Risky Intervention: Governments, generally, intervene in markets only when there is a clearly identifiable market failure or massive societal benefits from creating shared infrastructure.
    • As there is no such visible market failure, the ONDC may be face resistance and governance issues.
  • Not enough to end Monopolies: An infrastructure-led approach may not be sufficient, as it may again lead to creating market dominant players.
    • For example, although UPI was set up to provide a level playing field, the top two service providers today process over 80 per cent of transactions.
  • Adoption Hiccups: The methodology to drive the adoption of an open e-commerce platform or standards in a sector with entrenched incumbents is a difficult task.
    • In principle, compelling either suppliers or consumers to use it is inadvisable.

Way Forward

  • Regulatory framework: Any deployment of standards or tech should be accompanied by law or regulation that lays out the scope of the project. If collection of any personal data is envisaged, passing the data protection bill and creating an independent regulator should be a precondition.
  • Adoption Method: Adoption of the ONDC can be enabled and accelerated by creating non-mandatory “reference applications”, and financial or non-financial incentives.
    • Useful learnings can be drawn from the adoption of UPI: The government supported the rollout of BHIM as a reference app, and offered financial rewards through a lottery scheme to drive early adoption.
  • Addressing Privacy: The platform should be built on “privacy by design” It should collect minimal amounts of data (especially personal data) and store it in a decentralised manner to save it from Hackers.
    • Data exchange protocols should be designed to minimise friction and protect the consumer interest. Tools like blockchain could be used to build technical safeguards.
  • Ensuring Inclusivity: A truly inclusive and participatory process can be achieved by making civil society and the public active contributors by, making relevant decisions and information public, and seeking wide feedback on drafts of the proposal.
    • Also, ensuring quick and time-bound redressal of grievances will help build trust in the system.


Question: What is Open Network for Digital Commerce (ONDC)? Explain the need for creation of the ONDC platform and the possible challenges in its implementation.



Choose Newsletter

Have questions about a course or test series?

unread messages    ?   
Ask an Expert


Help us make sure you are you through an OTP:

Please enter correct Name

Please authenticate via OTP

Please enter correct mobile number
Please enter OTP

Please enter correct Name
Please enter correct mobile number

OTP has been sent.

Please enter OTP