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

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