ONDC initiative boosts four key sectors: Deloitte report

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ONDC initiative boosts four key sectors: Deloitte report

ONDC initiative boosts four key sectors: Deloitte report

Industry News
Sep 04,23

Open Network for Digital Commerce (ONDC) is an initiative spearheaded by the Ministry of Commerce and Industry with the aim of establishing a supportive framework to empower small retailers in leveraging digital commerce.

ONDC initiative boosts four key sectors: Deloitte report

According to a Deloitte report, the government's ONDC initiative is poised to serve as a significant platform for the growth of four crucial sectors: financial services, agriculture, manufacturing, and e-commerce retail.

The Open Network for Digital Commerce (ONDC) is an initiative spearheaded by the Ministry of Commerce and Industry with the aim of establishing a supportive framework to empower small retailers in leveraging digital commerce. It's important to note that ONDC is not an application, platform, intermediary, or software in itself; rather, it comprises a set of specifications designed to promote open, unbundled, and interoperable networks. The primary objective is to assist micro, small, and medium-sized enterprises (MSMEs) in the retail sector to harness the rapidly expanding e-commerce landscape in the country.

The Deloitte report highlights that ONDC presents an opportunity for financial institutions to engage with the MSME segment, which primarily relies on government schemes and non-banking financial companies (NBFCs) for credit due to their perceived lack of creditworthiness in the eyes of mainstream financial institutions. The relatively small size of lending for this sector and the scarcity of data on MSMEs often result in credit applications being rejected using traditional decision-making models.

The report explains that the ONDC ecosystem is anticipated to digitise SME data using transactional information, with the assistance of financial technology service providers. This digitised data will enable financial institutions to gain a deeper understanding of this client segment, tailoring their products and services accordingly.

Furthermore, the increased adoption of ONDC in smaller cities and rural areas is expected to open up new opportunities for banks and facilitate the development of customised products and services to meet the specific needs of this segment.

Regarding the manufacturing sector, the report notes that the post-Covid environment has introduced various challenges, including geopolitical tensions, disruptions in supply chains, component shortages, and volatile commodity prices. ONDC is positioned to help the manufacturing community capitalise on opportunities and address challenges along the value chain. The network's inclusion of a large pool of logistics service providers allows organisations to optimise logistics costs and better manage increasing demand.

ONDC can also help manage supply chain disruptions in manufacturing by enabling original equipment manufacturers to quickly identify alternative suppliers at competitive prices, ensuring smooth manufacturing operations.

The report emphasises that the retail ecosystem, including brands, retailers, distributors, and suppliers, can use ONDC to connect within their network and reach end consumers. Categories such as grocery, food delivery, home and decor, electronics, fashion, lifestyle, beauty, personal care, and pharmaceuticals have already begun leveraging the ONDC network with support from various stakeholders.

ONDC offers an opportunity for brands, retailers, and MSMEs to efficiently connect with their demand and supplier networks. It supports features such as 24x7 ordering, next-day delivery, auto ordering, and credit management for sales partners. Additionally, ONDC can expand brands' and retailers' supplier base while reducing the cost of procuring raw materials or manufacturing products.

In the agriculture sector, ONDC is expected to accelerate technology adoption throughout the country by integrating buyers and sellers across the farm value chain onto a single network. This can be particularly beneficial for agritech startups, addressing the challenge of discoverability. Farmer Producer Organisations (FPOs) will gain access to inputs, technology, equipment, and services from both companies and government bodies.

Sathish Gopalaiah, President of Consulting at Deloitte South Asia, commented that ONDC represents a significant opportunity for India's economy across diverse industries. ONDC's unique proposition, which focuses on agility, security, and profitability, streamlines value chains, bridges gaps, and encourages innovation, paving the way for the next generation to explore new avenues.