India’s Retail Sales of ECommerce: An Econometric Analysis

IJSRP, Volume 7, Issue 2, February 2017 Edition [ISSN 2250-3153] India’s Retail Sales of ECommerce: An Econometric Analysis       Dr.Debesh Bhowmik Abstract: The paper studied the behavior of total retail sales of ecommerce in India during 2005-2020 with the help of semilog and exponential trend model and Bai-Perron(2003) test for structural shift and Hodrick-Prescott Filter (1989) model for smooth trend and ARIMA(1,1,1) model for stationary and we relates its relationship with internet users,credit and debit card users and GDP growth rate during 2005-2015 with the help of double log multivariable regression model although Johansen cointegration test(1988) and VEC model(1996)were applied to relate growth with retail sales of ecommerce. ............... [VIEW FULL PAPER]      [DOWNLOAD]    link for download http://www.ijsrp.org/research-php-0217.php?rp=p626175         India’s Retail Sales of ECommerce: An Econometric Analysis Dr.Debesh Bhowmik (Retired Principal,Associate Editor-Arthabeekshan-Journal of Bengal Economic Association) Abstract The paper studied the behavior of total retail sales of ecommerce in India during 2005-2020 with the help of semilog and exponential trend model and Bai-Perron(2003) test for structural shift and Hodrick-Prescott Filter (1989) model for smooth trend and ARIMA(1,1,1) model for stationary and we relates its relationship with internet users,credit and debit card users and GDP growth rate during 2005-2015 with the help of double log multivariable regression model although  Johansen cointegration test(1988) and VEC model(1996)were applied to relate growth with retail sales of ecommerce. The paper found out those retail sales of ecommerce in India during 2005-2020 has been increasing at the rate 41.93% per year which is significant and it is exponentially increases at the rate of 0.728% per year which is more acceptable and significant whose residual test confirmed that exponential series has heteroscedasticity , autocorrelation ,partial autocorrelation  and serial correlation problems. The retail sales of ecommerce in India during 2005-2020 do not follow random walk and random walk with drift which is strengthened by variance ratio test but it consists of three upward structural breaks in 2007,2010 and in 2013.Yet it is turned into smooth trend line from cyclical path by H.P.Filter model. But its ARIMA(1,1,1) model showed the series is unstable and nonstationary. The paper also showed that one percent hike in percent of population of internet users led to 1.931% increase in retail sales in ecommerce during 2005-2015 in India which is significant at 1% level. Besides, one percent increase in debit card users and GDP growth rate led to 1.267% increase and 1.768% decrease in retail sales in ecommerce significantly but it has insignificant positive relation with credit card users. When growth is dependent variable ,then growth and debit card users are significantly positively associated but when retail sales is dependent variable then internet users and retail sales are positively associated significantly. Granger Causality test confirmed that total retail sales in ecommerce(x1) ,percent of population using internet(x2), number of credit (x3)and debit cards(x4),GDP growth rate of India (y) during 2005-2020 showed bidirectional causality except X2 does not Granger Cause X1and  x2 and x4 have no causality. Johansen cointegration test assures that GDP growth rate and retail sales in ecommerce are cointegrated in the order CI(1) in which VEC model is unstable, diverging  and error correction is speedy and significant in the equation Δyt. The paper states that Ecommerce in India grew so fast that it ranks second preceded by China and it may constitute 4% of GDP within 2020 where India needs improved infrastructure,control fraud e payment and  e security, develop e-Customs and e-taxation,minimize regulatory gap,and many others policies recommended by several institutions. Key words- retail sales of ecommerce, internet users, credit and debit card users, GDP growth rate, structural break, Granger-Causality, cointegration , VECM JEL-C32,M21,M31,M48 I.Introduction E-commerce ─ broadly defined as the use of the Internet as a platform for sales, sourcing, and exchange of market information ─ is playing an important role in supporting global economic growth. Latest market research data predicts that the share of e-commerce of total sales will reach 12.4% in 2019.  Industry surveys suggest that e-commerce industry is expected to contribute around 4 percent to the GDP by 2020. In comparison, according to a NASSCOM report, by 2020, the IT-BPO industry is expected to account for 10% of India’s GDP, while the share of telecommunication services in India’s GDP is expected to increase to 15 percent by 2015. With enabling support, the e-commerce industry too can contribute much more to the GDP.  Around 90% of the global e-commerce transactions are stated to be in the nature of B2B, leaving meagre 10% as B2C e-commerce. Case of India is no different where most of such transactions are in the nature of B2B. Moreover Indian e-commerce industry is characterized by “Market Place” model. McKinsey Global Institute estimated that the Internet contributes an average 3.4 percent in developed countries and 1.9 percent of GDP in aspiring countries. In some aspiring countries, such as Taiwan and Malaysia, the Internet contributes to GDP at levels similar to those in developed countries. This is due to their strong net exports of ICT goods and services. In line with other aspiring countries, the Internet’s contribution to India’s GDP — what we call its iGDP — is moderate today, at 1.6 percent, or $30 billion in GDP. At 1.6 percent of GDP, India’s iGDP is comparable in size to key service sectors, such as hotels and restaurants, and utilities.India’s share of Internet-linked GDP at about 3.2 percent.Even in 2015, when aggregate Internet penetration is projected to reach 28 percent, the penetration of India’s rural population is likely to remain at a low 9 percent, compared with urban penetration of 64 percent. India’s likely Internet penetration of 28 percent in 2015 will be far less than the projected global average of 43 percent. To achieve a penetration of nearly 40 percent by 2015, which would be similar to China’s Internet penetration at that date, India would need to have notched up more than 500 million Internet users. Institute’s projections indicate that by 2015 India is likely to have a base of more than 100 million Internet-enabled smart devices and more than 150 million consumers with low cost, high speed Internet access. By 2015, India’s 330 million to 370 million projected Internet users will constitute an estimated 12 to 13 percent of the global Internet user base, the second-largest national group of Internet users worldwide behind only China. If India puts itself on an accelerated trajectory towards higher penetration to reach 500 million Internet users by 2015, the iGDP could be as high as 3.3 percent. Global Retail Development Index-2016 showed that China ranks one in this index followed by India. China scored 72.5 where as India scored 71.0.Chinese national retail sale stood 3.46 billion US dollar followed by 1009 billion US dollar of India. A.T. Kearney’s 2016 FDI Confidence Index ranks China second-a signal of its continued attractions to foreign investors.GDP growth improved case of doing business and better clarity regarding FDI regulations puts India in second place. India is now the world’s fastest growing major economy overtaking China. Retail demand is increasing driven by urbanization, an expanding middle class and more women entering the workforce. India’s strong ranking reflects foreign retailer increased optimum in the 1 trillion US Dollar retail market and its vast potential. In ecommerce, government now permits 100% FDI for on line market places, with some caveats to create a level playing field. In this paper, we endeavour to show the behavior of total retail sales of ecommerce during 2005-2020 and its nexus with internet users,credit and debit card users and GDP growth rate of India during 2005-2015 ....................   The paper concludes that retail sales of ecommerce in India during 2005-2020 has been increasing at the rate 41.93% per year which is significant and it is exponentially increases at the rate of 0.728% per year which is more acceptable and significant whose residual test confirmed that exponential series has heteroscedasticity ,autocorrelation ,partial autocorrelation  and serial correlation problems. The retail sales of ecommerce in India during 2005-2020 do not follow random walk and random walk with drift which is strengthened by variance ratio test but it consists of three upward structural breaks in 2007,2010 and 2013.Yet it is turned into smooth trend line from cyclical path by H.P.Filter model. But its ARIMA(1,1,1) model showed the series is unstable and nonstationary. The paper also concludes that one percent hike in percent of population in internet users led to 1.931% increase in retail sales in ecommerce during 2005-2015 in India which is significant at 1% level. Besides, one percent increase in debit card users and GDP growth rate led to 1.267% increase and 1.768% decrease in retail sales in ecommerce significantly but it has insignificant positive relation with credit card users. When growth is dependent variable ,then growth and debit card users are significantly positively associated but when retail sales is dependent variable then internet users and retail sales are positively associated significantly. Granger Causality test confirmed that total retail sales in ecommerce(x1) ,percent of population using internet(x2), number of credit (x3)and debit cards(x4),GDP growth rate of India (y) during 2005-2020 showed bidirectional causality except X2 does not Granger Cause X1and  x2 and x4 have no causality. Johansen cointegration test assures that GDP growth rate and retail sales in ecommerce are cointegrated in the order CI(1) in which VEC model is unstable, diverging  and error correction is speedy and significant in the equation Δyt. The paper states that Ecommerce in India grew so fast that it ranks second preceded by China and it may constitute 4% of GDP within 2020 where India needs improved infrastructure, control fraud e payment and  e security, develop e-customs and e-taxation, minimize regulatory gap, and many others policies recommended by several institutions.    References APEC Business Advisory Council,2015, Driving Economic Growth Through Cross-Border E-Commerce in APEC: Empowering MSMEs and Eliminating Barriers, University of Southern California, Marshall School of Business, November Bai,Jushan and Pierre Perron.,2003,Critical values for multiple structural change tests, Econometrics Journal,Volume-6,72-78 Elseoud, Mohamed Sayed.,2014, Electronic Commerce And Economic Growth In Saudi Arabia, International Journal of Economics, Commerce and Management ,United Kingdom Vol. II, Issue 5, Enders,Walter.,2011,Applied Econometric Time Series. Wiley Student Edition. Global Express Association,2016, Cross-border E-commerce – Engine for Growth Suggestions for Enabling Growth, Position paper, January. read from www.ijsrp.org

International Journal of Scientific and Research Publications

CARBON TRADING AND INDIA'S ROAD MAP

CARBON TRADING AND INDIA'S ROAD MAP

              ---Dr.Debesh Bhowmik

INTERNATIONAL JOURNAL OF ENVIRONMENT,AGRICULTURE AND BIO-TECHNOLOGY

             ----VOL-2,ISSUE-1,JANUARY-FEBRUARY ,2017,118-126

             -----www.ijeab.com

CARBON TRADING AND  INDIA’S ROAD MAP

Dr.Debesh Bhowmik(Retired principal and Former Associate Editor-Arthabeekshan-the journal of Bengal Economic Association)

Abstract

In this article, the author describes the concept of carbon trading , its global market ,mechanism of global trading, international organization, EUETS, relationship between  REDD and carbon market in relation with agreements of Paris convention. The 10 myths of REDD+ and carbon market are additional features which can explore future research. The paper highlighted India’s roadmap for carbon market potentiality in 2020.

Key words – carbon trading, global carbon market, REDD, India’s road map

JEL-F18,O44,Q56

I.What is Carbon Trading

Carbon trading is the buying and selling of a new, artificially-created commodity – the right to emit carbon dioxide. Unlike trading in other commodities like crude oil or bananas, carbon trading is not a voluntary exchange between producers and those who want to consume or sell on the goods. Instead, it results from action by governments to create this new commodity – the right to emit carbon – and then to limit the availability of this right in order to create scarcity and therefore a market for it.

Carbon trading is one of a number of different approaches that have been developed and adopted by governments as a means of controlling the amount of carbon dioxide that is emitted into the atmosphere and reducing this amount over time. It is based on the broader approach, purportedly to control the emission of pollutants, known as ‘cap and trade’.

Cap and trade is often referred to as a market-based mechanism and contrasted with a different set of tools available to governments to influence behaviours, those which come under the umbrella of direct regulation or standard setting. However, this contrasting of market-based and non-market-based approach is sometimes unhelpful. It ignores the fact that market mechanisms do not operate in a vacuum. Instead, they always take place in a social and economic environment underpinned by various government laws and regulations and often require these laws in order to be effective. Carbon trading is a case in point. Carbon markets are directly created by government regulation.

Perhaps a more useful distinction for the purposes of this report is that between direct and indirect mechanisms. Carbon trading can be classed as an indirect tool as it is supposed to achieve its purpose of reducing emissions indirectly by affecting the price of those emissions. This in turn affects the behaviour of ‘actors’ in the market, i.e. those responsible for producing the emissions, by creating an incentive for them to save money by reducing their emissions and hence change their behaviour. In contrast, government regulation and standard setting are direct interventions to change behaviour, not reliant on intermediate mechanisms such as prices. Taxation is an indirect mechanism as it aims to change behaviour through affecting the price of a good, service or activity. However, it is arguably less indirect than trading as governments fix the price with a tax whereas with trading the price is determined by the market.

The carbon trade is an idea that came about in response to the Kyoto Protocol. The Kyoto Protocol is an agreement under which industrialized countries will reduce their greenhouse gas emissions between the years 2008 to 2012 to levels that are 5.2% lower than those of 1990.

The idea behind carbon trading is quite similar to the trading of securities or commodities in a market place. Carbon would be given an economic value, allowing people, companies or nations to trade it. If a nation bought carbon, it would be buying the rights to burn it, and a nation selling carbon would be giving up its rights to burn it. The value of the carbon would be based on the ability of the country owning the carbon to store it or to prevent it from being released into the atmosphere. A market would be created to facilitate the buying and selling of the rights to emit greenhouse gases. The industrialized nations for which reducing emissions is a daunting task could buy the emission rights from another nation whose industries do not produce as much of these gases. The market for carbon is possible because the goal of the Kyoto Protocol is to reduce emissions as a collective.

On the one hand, the idea of carbon trade seems like a win-win situation: greenhouse gas emissions may be reduced while some countries reap economic benefit. On the other hand, critics of the idea suspect that some countries will exploit the trading system and the consequences will be negative. While the proposal of carbon trade does have its merits, debate over this type of market is inevitable since it involves finding a compromise between profit, equality and ecological concerns.

The carbon market is one of the most effective policies for tackling climate change. It inspires operational excellence and incentivizes business investments in low-carbon technologies. Not only is the market expected to save over 2 billion tones of CO₂ emissions by the end of 2012, but the development of the current global carbon market, now worth over US$140 billion, has catapulted climate change to the forefront of business decisions. But while it exhibits real environmental and economic impact, and helps achieve climate change goals, it remains vulnerable to external factors.

The Harnessing demand for Indian projects post-2012 are :

1.            Supporting projects through domestic emission trading scheme –

2.            Supporting projects through NCEF and CSR funds of large companies

3.            Developing standardized baselines

4.             Developing sustainable development impact reporting

5.Evaluating and highlighting the benefits of CDM projects focusing on sustainable development Impacts

6. Constituting a high level Multi Stakeholder Advisory Group for Climate Change issues

like Loss and Damage, Equity, Sustainable Development, Gender etc

7. Developing NAMAs

8. Developing the capacity for national emission reduction reporting and develop credible

and robust reporting frameworks for corporate carbon reporting–

But there are several causes of delays of maturing projects which are as follows:

[i] One of the major reasons for delays in registration of CDM projects is on account of lack of acceptable guidelines for setting benchmark, lack of institutional capacity, frequent revisions to CDM EB guidelines and lengthy validation cycle

[ii] The delay in registration of CDM projects was due to the increase in CDM projects from India and limited increase in the number of DOEs

[iii] The cement and energy efficiency project-types have higher rejection rate than hydro and wind project-types

[iv]Projects in reforestation, EE household, EE in SME, off-grid solar and agriculture project-types face MRV, organizational and financial barriers.

[v] HFC 23, N2O and landfill gas(where these is no energy generation) projects risk closure post the withdrawal of market support and fall in CER prices

[vi] Goa, Bihar, Jharkhand, Kerala, Jammu & Kashmir, Haryana and North Eastern states have very limited development of CDM projects

The promotion and development of the emission reduction projects will require a combination of the following measures:

[i] Demand-side measures: Given the weak demand for CERs and the uncertain time frame for new market mechanisms, all attempts should be made to revive demand in the existing regulatory framework, particularly for projects registered post 2012.

[ii] Improving sustainable development impacts: Improving the sustainable development impacts

as well as improving communication on the outcomes / impacts of CDM project activities is required for stimulating demand of quality CDM projects and addressing international concerns.

[iii] Efficiency of registration: Once there is a revival of demand, measures should be undertaken

to remove the barriers in CDM project registration while also improving sustainable development impacts.

[iv] Future regulatory mechanisms: Recognizing that CDM is likely to be transitory in nature

and new market mechanisms are likely to be more prominent particularly in the post 2020

carbon markets, measures should be undertaken to develop synergies between CDM, NAMAs

and other market mechanisms.

[v] Supply side measures: Once there is regulatory certainty and robust demand, supply side

measures should be undertaken that encourage larger participation of industry in emerging

global carbon / CDM market.

Therefore, the recommendations below are targeted towards:

A. Harnessing demand for Indian projects post 2012;

B. Achieving better sustainable development for CDM projects;

C. Developing synergies between CDM, NAMAs and other market mechanisms; and

D. Encouraging larger participation of industry in carbon market.

IX.Concluding Remarks

The international carbon market currently faces considerable uncertainties regarding its future architecture. There are a number of options for further development,including a global trading approach building on Kyoto, formal linkages of domestic ETS leading to a global CO2 market, and indirect linkages through credits if domestic ETS remain otherwise unconnected. Also, a mixed approach is conceivable. Regions should share a common understanding on the overall

climate policy goal (e.g., the 2°C target) as well as a burden-sharing rule translating into ETS caps. These two fundamental issues will crucially determine the level of ambition of an ETS as expressed in (a) the emission cap, which in combination with amount and costs of available abatement options of a region crucially determines the allowance price level; and (b) ETS design features also exerting influence on the allowance price level and environmental outcome. For a player with ambitious environmental targets it should be preferable to announce that it will link only under the condition that another system displays a similar level of ambition, thus using the

efficiency and potential reputational benefits from linking as a bargaining chip. Linking to less ambitious regions would undermine the credibility of such announcements. Harmonization of trading systems should start as early as possible in order to enable the option of linking ETS post-2012. For this purpose, ICAP could be a nucleus for such an international clearinghouse.

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