The Open Network for Digital Commerce (ONDC) Initiative

Introduction
India is one of the world's fastest-growing major economy and third-largest consumer market. The rapid growth in the economy has led to rising incomes and an increase in Internet penetration. Internet users in India are expected to grow to 900 million by 2030 from has 622 million in 2020. These factors has led to a significant rise in digital payments. The rise in Digital payments was further supported by digital payment reforms such as the United Payment Interface (UPI) and Ru-pay. As of October 2022, India's UPI processed 7.3 billion transactions valued at Rs. 12.11 trillion (US$ 146.51 billion), a record-high transaction value. Increasing Internet penetration, rising incomes, and a rise in India's digital payments ecosystem have given rise to India's e-commerce sector. In recent years, India's e-commerce sector has grown significantly. Only a few major e-commerce companies have dominated India's e-commerce sector. Thus to democratize India's e-commerce sector and assist India's seller ecosystem India has launched the Open Network for Digital Commerce (ONDC) Initiative.  

Open Network for Digital Commerce (ONDC)
India's ONDC is considered the UPI for the Indian e-commerce ecosystem. The main aim of ONDC is to democratize and promote an open network for all aspects of the exchange of goods and services. ONDC is based on an open-sourced approach, with open standards and open network protocols that are platform-independent. ONDC's foundations are open protocols for all aspects of the entire chain of activities in the exchange of goods and services; it is similar to a hypertext transfer protocol for information exchange over the internet, a simple mail transfer protocol for email exchange, and a unified payment interface for payments.

These open protocols would be used to build public digital infrastructures such as open registries and open network gateways to enable information exchange between buyers and sellers. Businesses could communicate information and conduct transactions over ONDC. Thus, ONDC expands on the present platform-centric digital commerce model, in which the buyer and seller must utilize the same platform or application to be digitally visible and conduct a commercial transaction. ONDC would expand the network for buyers and sellers.

Major Components of ONDC  
ONDC would help reimagine India's e-commerce industry and help it adopt a more open and inclusive model. ONDC is a network that facilitates the establishment of location-aware, local digital commerce businesses across industries. Any network-enabled program can discover and engage with it. It is a platform for hosting all existing digital commerce apps and platforms that may adopt it and become a member of the ONDC network. Several components will help build ONDC. These components include:

• Network of Buyers and Sellers:
  ONDC will include several network participants, which will help build the network and further push more participants to join the network. ONDC network would include a broad spectrum of industries ranging from retail, logistics service providers, restaurants, hotels, etc. These industries can be broadly classified into two categories. This will include the buy side categories and the sell side categories. ONDC will help a large bundle of digital commerce platforms, small and medium startups, and enterprises by making their products available in the network. This will include them either as an aggregator of products or as a white-labelled seller application available for the network. This will push India's e-commerce industry further. In the next five years, ONDC is expected to include a network of 12 lakh sellers, and 90 crores buyers, with 730 crores of additional annual purchases due to the network. ONDC will also be able to generate an additional gross merchandising value of Rs. 3.75 lakh crore (US$ 45.42 billion) for the e-commerce industry. This will propel the growth of India's e-commerce.
• Integration of Technology:
  ONDC will include several network components such as registry, gateway, buyer and seller apps, and other building blocks such as adapter interfaces that will be utilized to help India's e-commerce industry. A few of these components include:
  • Gateway:
    ONDC will ensure the discoverability of all sellers in the network. It will increase the seller's visibility by multicasting the search request received from the buyer and broadcasting it to all seller applications based on parameters such as location, availability, and other consumer preferences. This would be cross-sectional, thus increasing the visibility of MSMEs on the platform.
  • Buyer and Seller Side Applications:
    ONDC will have its own buyer and seller applications and have its own user interference. This would help attract more buyers and sellers to the platforms and help the network rise.
  • Adaptor Interfaces:
    Adaptor Interfaces are Open APIs. These APIs will facilitate the exchange of information for transaction execution, allowing all network parties to engage and integrate utilizing standardized ONDC-approved interfaces.
  • Network Policies
    ONDC will implement a simple and non-restrictive policy framework to support transparent, inclusive, and sustainable behaviors across the network. These policies would increase the trust among buyers and sellers and further boost India's E-commerce industry.

Private Sector Initiatives
As ONDC gains pace, major private companies and startups have joined the network. A few of these companies include:

Conclusion
Like UPI, ONDC will propel the growth of the Indian e-commerce sector and democratize it, transforming it from platform-centric to an open network for buyers and sellers. This would completely revolutionize India's e-commerce and help it grow faster. ONDC would help small and medium businesses become more discoverable throughout India and push Indigenous industries to a digital market. ONDC complied with India's digital payment reform UPI would help push India's digital sector forward. According to Prime Minister Mr. Narendra Modi, India's Digital sector will reach US$ 1 trillion by 2025. ONDC would bring a paradigm shift and completely revolutionize India's digital commerce.