Chapter 4

“Technology is important But not a solution unto itseCf. It offers different tilings to
different people. Individual users want technology to male theirjoB easier. Managers
want technology to male their staffmore productive. Corporate officers want
technology to male them more competitive andimprove their own technology. None of
these people want technologyfor technology’s sale.
-G.A. ‘Andy’ Marken
(American Marketing Consultant)

SOCIAL
IMPLICATIONS OF
i-COMMERCE
 Section-I
Economic Implications of E-Commerce
Business and economy are inextricably linked with the development and
implementation of new technology. While e-commerce clearly has a positive impact on
the business sector, doubts have been raised about its impact on the macroeconomic
growth and development. Section I of the present work, aims to study the economic
implications of e-commerce. Impact of e-commerce on the different segments
(intermediation process, agriculture, labour market, transportation, taxation, cost price
and competition, monetary system) of economy has been studied in this section. In the
end of the section, concluding remarks are given.
The information revolution aided by the revolution in the telecommunications
and institutional innovations had initially promised to change the nature of the market
altogether. The market’s primary role as merely a place where buyers and sellers meet (it
had seemed) now has been revolutionized by the impact of the information revolution on
its subsidiary role, i.e., as a transmission belt of information. Today market is a place
where there is no intermediaries between a seller of a good and its final buyer to the
mutual benefit of both parties (Sengupta, 2004)'. The Internet and its enabled
technologies (especially electronic commerce) have caused the costs of many kinds of
market interaction to plummet (Saloner, 2001 )12. Not only cost reduction, e-commerce has
the potential to stimulate growth and employment in industrialized as well as developing
countries. Further, e-commerce allows economics agents (both buyers and sellers) to
interact more effectively by creating new market opportunities (Mukhopadhyay, 2002)3.
Thus, e-commerce has strong economic implications at both micro and macro level.

E-Commerce and Economic Growth4

While e-commerce clearly has a positive impact on the business sector, doubts
have been raised about its impact on the macroeconomic growth, and productive growth5
in particular. Various studies show that e-commerce had an impressive performance
particular in terms of productivity growth (Solow, 19876; Liebowitz, 20037; Lichtenberg,
19958; Sichel, 19979; Brynjolfsson & Hitt, 199610; Berndt et al, 199211; Dedrick et al,

1 Sengupta, Dipankar (2004), Exporting through E-Commerce: How Indian Exporters have Harnessed the
IT Revolution, CSH Occasional Paper, No. 8, p. 3.
2 Saloner, Garth and Borenstein (2001), “Economics and Electronic Commerce", Journal of Economic
Perspective", Vol. 15, No. 1-Winter, pp. 3-12.
’ Mukhopadhyay, Subrata (2002), “E-Commerce: Prospects, Problems and Fiscal Issues”, Vaanijya, July-
September, pp. 9-12.
4 This section of the study is based on the data, facts collected from the Report of UNCTAD on
E-Commerce and Development, 2001. However, the analysis is done by the researcher.
5 In previous technological revolutions, productivity gains have managed to provide for one of the main
goals of development in the long run, that is, to improve living standard.
6 Solow, R.M. (1987), We’d Better Watch Out, New York Times, Book Review, July 12, p 36.
7 Liebowitz, S. (2003), Rethinking of Network Economy: The True Force Driving the Digital Marketplace,
New York: American Press.
8 Lichtenberg, F.R. (1995), “The Output Contributions of Computer Equipment and Personnel: A Firm
Level Analysis", Economic of Innovation and New Technologies, Vol.3, No. 3, pp20-217.

90
200312 and Parson et al, 1993l3). The US, which leads the world in IT and e-commerce,
has had a notable economic performance, particularly in terms of productive growth,
since 1995. But, the same was not happened with the developing countries as they failed
to catch up technologically with the industrialized world. To assess the broader economic
impact of e-commerce and the ramifications of developing countries’ catching up or not,
UNCTAD has conducted a quantitative analysis based on two scenario: one in which the
developing countries fall behind technologically and one in which they catch up with the
developed countries. The analysis is centered on cost saving and assume that e-commerce
can reduce costs of services, particularly in retail and wholesale trade, transport and
financial and business services. Cost savings in services are stimulated through a
productive growth scenario, which allow for the analysis of such macro-economic
variables as GDP, welfare, wages and terms of trade. The analysis is a unique application
of a computable general equilibrium model to e-commerce at the global level.
According to the report, under the first scenario developed countries would have
welfare gains of $ 117 billion, while the developing world (excluding Asia) would lose
welfare of $ 726 million. The Asian region, on the other hand, would gain $ 802 million,
largely attributable to the transport services sector. Besides welfare and GDP losses,
developing countries would also experience a reduction in wages and deteriorating terms
of trade
Table 4.1
Welfare Impact of a 1% Increase in Productivity in Develo ped counties (SMillion
Trade Air Maritime Other Financial Business Services
Services Transport Transport Transport Services Services (l)to
(1) (2) (3) (4) (5) (6) (6)
Developed 47942 3365 2896 17238 12071 35081 117869
Countries
Eastern -55 -13 21 11 -8 -53 -93
Europe
Asia -121 130 528 261 -8 1 802
Latin -197 -5 83 -19 -52 -123 -301
America
Africa -45 -4 69 -40 -12 5 -23
Rest of -196 -38 96 -8 -56 -124 -309
the World
Source: UNCTAD, E-Commerce and Development Report, 2001

9 Sichel, D. (1997), The Computer Revolution: An Economic Perspective, Washington, DC: Brookings
Institution.
10 Brynjolfsson, E. and Hitt, L.M. (1996), “Paradox Lost: Firm Level Evidence on Returns to Information
System Spending", Management Science, Vol. 14, No. 4, pp 23-48.
" Berndt, E.R.; Morrison, C.J. and Rosenblum, L.S. (1992), High Tech Capital Formation and Labour
Composition in US Manufacturing Industries: An Exploratory Analysis, NBER Working Paper No. 4010,
Cambridge, M.A.
12 Dedrick, J.; Gurbaxani, V and Kranemer, K.L. (2003), Information Technology and Economic
Performance: A Critical Review and Empirical Evidence, Working Paper Series, Centre for Research on
Information Technology and Organizations, University of California at Irvine.
13 Parsons, D. J.; Gottlieb, C.C. and Denny, M. (1993), "Productivity and Computers in Canadian
Banking", Journal of Productivity Analysis, Vol. 4, pp 91-110.

91
 E-Commerce could therefore end up actually widening, and not narrowing, the
gap between the developed and developing countries.
Under the second scenario, however, if developing countries were to catch up
with developed countries in productivity, they would increase output, wages and welfare.
Table 4.2
Welfare Impact of a 1% Increase in Productivity in Each Developing Region Only.
__________ ($Million)________ _________ _________
Trade Air Maritime Other Financial Business Services
Services Transport Transport Transport Services Services (l)to (6)
(1) (2) (3) (4) (5) (6)
Eastern 6604 89 56 345 122 492 1770
Europe
Asia 3601 1914 1530 2389 863 1706 12012
Latin 1920 1199 860 1439 949 1236 7614
America
Africa 1214 144 139 1214 233 383 2663
Source: UNCTAD, E-Commerce and Development Report, 2001
A 1 % productive growth in the service sector in Asia, for example, would result
in welfare gains of $12 billion, GDP growth of 0.4% and a 2 to 3% growth in the service
exports (Table 4.1 & 4.2). By reducing costs, increasing efficiency, reducing time and
distance, e-commerce could thus become an important tool for development.

Impact of E-Commerce on Economy

Business and the economy are inextricably linked with the development and
implementation of new technology (Tassabehji, 2003)14. Growth and development of any
modern economy has been recognized by many economic theorists, such as Kondratieff,
Schumpeter, Mensch and Porter, to be based on innovation of new technology. In the
1 c

early twentieth century, the economist Kondratieff introduced his ‘Long Wave
Theory16’ of economic growth. He detailed the numbers of years that the economy
expanded and contracted during each part of the half-century long cycle, which industries
suffer the most during the ‘downwave’ and how technology plays a role in leading the
way out of the contraction into the next ‘upwave’. Building on this theory the economist
Schumpeter17 assigned technological innovation an almost exclusive role, as engine of
economic development: the fundamental impulse that sets and keeps the capitalist engine
in motion comes from the new consumers’ goods, the new methods of production or
transportation, the new market, the new forces of industrial organization that capitalist

14 Tassabehji, Rana (2003), Applying E-Commerce in Business, London: Sage Publications, p 260.
15 Kondratieff, N. D. (1926), “The Long Wave in the Economic Life", Economic Review, Vol. 11, No. 4,
pp. 519-562.
16 The theory was based on a Study of 19th Century price behaviour, which includes wages, interest rates,
new material, prices, foreign trade, bank deposits and other data. From this he suggested that a long order
of economic behaviour existed and could be used for the purpose of anticipating future economic
development. He mentioned that an economy goes through the phase of prosperity, recession and recovery
in cycles of around 50-60 years.
17 Schumpeter, J. (1961), Theory of Economic Development, Harvard University Press; Schumpeter,
J,(1964), Business Cycle, McGraw Hill.

92
enterprise creates18. Mensch (1979)19 updates the Schumpeter theory, giving it an
empirical base in history, where clusters of innovation take place and generate
completely new sectors. He stressed that only technological innovations can overcome
depression and that government must implement an aggressive innovation policy to
stimulate the search for new and basic innovation. Further, Porter (1990)20, emphasizes
that the prosperity and competitive advantage of a nation is no longer as a result of a
nation’s natural resources and its labour force, but rather the ability of its industry to
innovate and upgrade. This can be seen as a disruptive technology on a macro
environmental level. And today, whether economic community subscribes to these
economic theories or not, the impact of new technology on the economy of a nation is
indisputable. Continuous growth of e-commerce is expected to have deep impact on
structure and functioning of economies at various levels and overall impact on macro­
economy. Some key areas are discussed below:

Impact on Intermediation
Traditional production, transportation and distribution process is characterized by
the liner-point-to-point path21. In this process intermediaries play an important role (see
figure 4.1). In physical world22, because of large distance between production units and
consumer units, it is not possible for consumers to approach producers directly and vice
versa. The existence of intermediaries namely, distributors, wholesalers and retailers, this
increase the transaction costs for both the producers and consumers.

18 Dicken, P. (1992), Global Shift: The Internationalization of Economic Activity, Paul Champman.
19 Mensch, G. (1979), Stalemate in Technology, Ballinger.
20 Porter, M. (1990), The Competitive Advantage of Nations, MacMillian.
21 In a typical (point-to-point) supply chain, physical goods flows from up stream to down stream (i.e.,
products from manufacturers to wholesalers, wholesales to distributors, distributors to retailers and retailers
to the customers)
" Physical world here mean, an environment in which all commercial activities are conducted without the
help of any electronic media.

93
 Figure 4.1: Traditional Intermediation Process

But in the emerging economic scenario, liner-point-to-point information and

knowledge flow no longer represent the reality. In the process of e-commerce
transactions, it is possible for the consumer to conduct and place an order with the
manufacturer instantly and directly (Singla, 2000)23. And same is possible within the
various agents of this process (i.e., between producer and Retailers, Retailers and
Distributors, Distributors and Retailers etc.). E-Commerce technology brings about the
benefits of more accurate and timely information flow, administrative saving, lowering
total distribution cost24, closer trading relationship (see Figure 4.2), improved cash
flows25, and moving closer to the end consumers (Gattoma & Walters, 1996).

Singla, M.L. (2000), “Using IT for Competitive Advantage: A Supply Chain Perspective”, Productivity,
Vol. 41, No. 2, pp. 223-230.
24 E-Commerce can coordinate distribution, transport, buying in bulk, which has the effect of lowering total
cost of distribution.
25 Macbeth, Douglus (1995), “Logistics Management”, in Handbook of Management (ed) by Stuart
Cranier, London: Pitman Publications.
26 Gattoma, J.L. and Walters, D.W. (1996), Managing Supply Chain, London: Macmillan Business.

94
 Figure 4.2: E-Commerce based Intermediation Process

No doubt that online ordering arid delivery of product is reducing the role of
intermediaries. Therefore, it is also feared that intermediaries would be completely
eliminated in the e-commerce economy. However, this fear may be unfounded. In
e-commerce economy, though it is possible to deliver a number of goods and services
online, it may not be possible to eliminate the physical delivery of many goods because
of their vary nature. Goods such vegetables and grocery, garments and shoes, toys etc
cannot be delivered online (they have physical existence). Though intermediaries like
wholesalers and retailers can be eliminated in such transactions, it may not be possible to
eliminate distributors and transporters. The demand for distributors and transporters is in
fact expected to increase tremendously (Westland and Clark)27. Even with the advent of
e-commerce technology, the functions of intermediaries will not change, because
collecting information is a labour and time intensive task. However, this group can
exploit new opportunities28 and challenges.

Impact on Agriculture
The open access architecture of the Internet, declining information technology
costs, and high volume have resulted in progressive steps forward for the entire
marketing system. Parallel changes in the structure of agriculture have also contributed

27 Westland, J. Christopher and Clark, M.K.Theodore (2001), Global Electronic Commerce, MIT
University Press.
28 The corresponding fall in the cost of and time required to collect this information will increase the
productivity and customers will respond accordingly by asking for more services from the intermediaries.
Within this activity, intermediaries will contribute in a positive manner to the value of the product and to
their customers and as purchasing costs are lowered; they will generate more demand for their services.
29 USDA’s annual National Agricultural Resources Management Study, showed 29% of the farms had
Internet access by 1995 and about 15% of those had conducted some business (E-Commerce) over the
Internet, mostly to purchase crop inputs (Morehart, M. and Hopkins, J. (2000), "On the Upswing: Online
Buying and Selling of Crop Inputs and Livestock ”, Agricultural Outlook, September, p. 4. Further, study of

95
to the popularity of the current generation of information technology. Chief among the
changes is in the need for closer coordination of the supply chain-both upstream and
downstream from the producer-and stretching from seed, fertilizers, and machinery
suppliers, to the food processors and retailers30. Thus, technologies like electronic
commerce have forced new relationships between and among the buyers of agribusiness
to form a complex web interaction (Ehmake el ai, 2001 )31.
Various studies shows that there is much about the potential success of
e-commerce’s in agriculture. Common agribusiness business-to-business transactions
such as buying, selling, trading, delivering and contracting seem to be natural targets for
conversion to e-commerce (Shapiro and Varian, 1999)32. Many theoretical benefits of
e-commerce in agriculture have been identified such as: (1) promotion of information
•7 T

flow, market transparency and price discovery (Poole, 2001) ; (2) facilitation of industry
coordination (Nicolaisen, 2001 )34; and reduction or elimination of transaction costs
(Porter, 200l'C Thompson, 199636). Internet based e-commerce also offer tremendous
opportunities to create collaborative marketplaces in low-cost, effective way (Nicolaisen,
■> n

2001) . E-commerce can also change the situation of hard bargain caused by scattered
farmers and lack of information. At the same time, the fast and convenient electronic
bargain manner can accelerate the circulation of commodities, and lessen the risk, and
increase the competitions of agricultural products in the international market (Cao and
TO

Chen, 2001) . These theoretical benefits appear to be undisputed. However, these have
yet to materialize into profitability. Study of Golman Sachs (2000)39 discussed the
general barriers citied by business to Internet based e-commerce adoption and explained
that these barriers also apply to agribusiness as well. These barriers include: (1) unclear
return on investment (2) lack of budget (3) lack of stakeholders support and (4)
complicated technology. Added to these, there may be some other factors40 slowing down

Goldman Sachs estimates that 12% of all agricultural sales in the US will be conducted over the internet in
the year 2004, compared to only 4% in the year 1999.
’° In traditional form of supply system products moved from the manufacturer to a series of wholesale
distributors before reaching the retailers and the producers.
jl Ehmke, Cole; Ernst, Stan; Jeffrey Hopkins and Luther Tweeten (2001), The Market for E-Commerce
Services in Agriculture, Paper Presented at AAEA Annual Meeting, Chicago, Illinois, August 5-8.
’2 Shapiro, C. and Varian, H. (1999), Information Rules, Boston: Harvard Business School Press.
Poole, B. (2001), How Will Agricultural E-Markets Evolve? Paper Presented at the USDA Forum,
Washington DC, February 22-23.
,J Nicolaisen, R. (2001), How Will Agricultural E-Markets Evolve? Paper Presented at the USDA Forum,
Washington DC, February 22-23.
■° Porter, M. (2001), "Strategy and the Internet’’, Harvard Business Review, Vol. 74, No.2, pp. 63-78.
’6 Thompson, S. (1996), "Potential Effects of Information Technologies on the Economic Performance of
Agricultural and Food Markets ”, Paper Presented at symposium on ‘Global Restructuring of Agro-Food
Markets: Need for Change in Marketing Policies’. Alexandria, Va., January, accessed on
http://www.aguiue.edu/famc/thompsons.html.
’7 Nicolaisen, R. (2001)
’8 Cao, Y. and Chen, Y. (2001), China's Access to WTO and its Impact on China Agriculture, Proceedings
of the International Workshop on Technical Training for Rural Development Towards the 21s' Century, pp
173-176.September, Boaoding, Hebei.
’9 Goldman, Sachs (2000), "B2B: 2B or not 2B- The Second Survey", accessed on
http://www.gs.com/hightech/research/b2b-second-survey.pdf.
40 Lack of education, poverty, poor IT infrastructure and lack of technology savvy people (farmers and
business people) may be another reason for the poor implementation of e-commerce in agriculture; this is
especially true in the developing countries like India.

96
e-commerce adoption in agriculture. No doubt, e-commerce has huge opportunities for
the agricultural sector; but adoption of e-commerce in agriculture is not an easy task. And
at this point of time it is not very clear-the impact of e-commerce on farms, agribusiness
firms, markets, and rural communities. Are there only winners or are losers too? If so,
who are they? What will government to do, with or against e-commerce in agriculture?
Since e-commerce is still evolving, it is too early to definitive answer (Mueller, 2000)41.
An inspection of current practices; however, suggest that success of e-commerce in
agribusiness is undeniable. Factors specific to agriculture will create additional
challenges, which must be overcome before success may be attained. The ability of each
player to work though these challenges will determine the speed of implication of
e-commerce in agriculture.

Impact on labour Market

E-Commerce, consisting of marketing and other business processes conducted
over the computer-mediated networks is changing the way organizations in many
industries operate. It leads to the automation of some job functions and replaces others
with self service operations, raising output per worker and dampening employment
requirements in some occupations, as well as in the industries in which these occupations
are concerned (Hecker, 2001 )42. The introduction and implementation of new
technologies has posed important challenges for the commercial workers and their trade
unions worldwide. Among the issues that unions have to deal with are, both B2B and
B2C, self-scanning, logistics system, multimedia and other in store sales support
applications. In many ways, they are already deeply affecting labour market (Gottardi et
al, 2004)43. In contrast, e-commerce has spurred44 employment in industries producing
software, and systems used by e-commerce and other occupations associated with
websites and networks.
Various studies45 showed that e-commerce has a positive impact on the labour
productivity. In a recent study, Atrostic and Nguyen (2004)46 considered the impact of
computer networks on the labour productivity in the US manufacturing sector, using
micro data predominantly for 1999. They found a positive and significant impact of
computer networks on plant level labour productivity, suggested that networks increase

41 Mueller, A.E.Rolf (2000), "Emergent E-Commerce in Agriculture”, AIC Issues Brief, Agricultural Issue
Centre, University of California, No. 14.
42 Hecker, E. Daniel (2001), “Employment Impact of Electronic Business ”, Monthly Labour Review. May.
4j Gottardi, G.; Bolisani, E. and M.Di Biagi (2004), “Electronic Commerce and Open Communities: An
Assessment of Internet EDI", International Journal of Service Technology and Management, Vol. 5, pp
151-169.
44 E-Commerce activities, in general, will spur employment needs for workers involved in e-commerce
systems and organizations and its website design. More computers workers are needed to set up, maintain,
and oversee the additional hardware and software systems that e-commerce require. Among the workers
needed are computers and information system managers, computer system analysts, computer engineers,
computer support specialists, database administrators, computer scientists and computer programmers, E-
Commerce activities also require more artist and commercial artists, designers and writers and editors.
45 Their studies is based on companies that use all computer mediated networks, including Internet and
therefore, it provides a useful reference for our analysis.
46 Atrostic, B.K. and S. Nguyen (2002), Computer Networks and US Manufacturing Plant Level
Productivity: New Evidence form CNUS Data, Centre for Economic Studies, Working Paper, 02-01, US
Bureau of the Census, Washington DC.

97
labour productivity by around 7.5 per cent. Motohashi (2001)47 provides evidence for the
positive impact of different information networks on labour productivity in Japan. In the
UK a recent study by Criscuolo and Waldron (20 03)48, based on Annual Business
Inquiry, shows that buying online positively affects the labour and total factors of
productivity, while selling online has a negative impact on productivity.
But, perhaps the larger impact of e-commerce on labour market can be seen in the
form of online job search. However, very little is known about the importance of online
job applications or direct employer initiated contracts with potential candidates. Even
then, online job posting has grown spectacularly (Autor, 2001)49. Estimates place the
number of online job boards50 at over 3000, the number of active resumes online at over
7 million, and the number of job posting at 29 million (Boyle et al, 199951; Computer
Economics, 200052). Kuhn and Skuterud (2000)53 reported that 7 per cent of employed
workers regularly use the web to search for a new job in 1998. The leading job board ,
Monster.Com, offered 3.9 million resumes and 4, 30,000 jobs in August 2000 (Nakamura
and Pugh, 2000)55. Further, the Internet is likely to change how some workers deliver
labour services. For example, falling telecommunications traffic regardless of where it
originates (Call Centres, 199756; Uchitelle, 2000?7). Improvements in communication and
control technology likely mean that people who monitor equipment or other workers can
perform their task at the greater physical remove. Remote access to e-mail and company
documents will enable many workers to perform some or all of their work from home to
elsewhere.

47 Motohashi, K. (2001), Economic Analysis of Information Network Use: Organizational and Productivity
Impacts on Japanese Firms, Research and Statistics Department, METI Tokyo, Japan.
48 Criscuolo, C. and K. Waldron (2003), E-Commerce and Firm Productivity, Economic Trends, pp 52-57.
49 Autor, H. David (2001), "Wiring the Labour Market”, The Economic Perspectives, Vol. 15, No. 1, pp
25-40.
50 Job boards holds several advantages over their textual counterpart, newspaper help wanted ads. They
offer more information about more jobs in more locations than is conceivable for paper equivalents. They
are easier to search. They are potentially more up-to-date, because ads are posted more immediately and
can be edited frequently. Job boards can also take an active role in matching, rather than waiting on
workers or firms to find one to another, software can parse posted job listings and resumes to identify
plausible matches and notify both the parties.
31 Boyle, H. Perry Jr.; Lynn A. Summer and Benjamin Koby (1999), E*Cruiting: From Job Boards to Meta
Markets, Thomas Wiesel Partners, May.
52 Computer Economics (2000), "Resume Renaissance: Projected Number of Resumes From 2000 to
2003 ”, Internet Marketing and Technology, July 6-7.
5j Kuhn, Peter and Mikal Skuterud (2000), "Internet and Traditional Job Search methods, 1994-1999”,
Paper Presented to the IRPP and CERF Conference on Creating Canada’s Advantages in an Information
Age. May.
34 Some job boards are provided on a non-profit basis. For example, the US Department of Labour runs
America’s Job Bank, to be found at (http://www.ajb.org), which makes the job listing and search services
of the Us Public Employment Service broadly accessible, and Canada’s CareerOwl job search facility,
developed by the university faculty, volunteers and found at (http://www.careerowl.ca), provides job search
assistance for the Canadian Student.
55 Nakamura, Alice and Theresa Pugh (2000), “Internet Recruiting: A Background Report", Paper
Presented to the IRPP and CERF Conference on Creating Canada’s Advantage in an Information Age,
May.
56 Call Centres (1997), " A Nation of Telephonist", The Economist, November 1.
57 Uchitelle, Louise (2000), “TheShifting Workplace”, The New York Times, August 21.

98
Impact on Transportation
At least from a theoretical point of view, it seems quite clear that the online
shopping58 could lead to reduction of transport demand. In some cases, online shopping
eliminates any kind of physical transport (when goods can be dematerialized as software,
books, music etc.). In other cases, a goods transport is still necessary, but the journeys to
shops are eliminated or reduced. Even if the purchase is finally made at the shop, the
consumer can have used the Internet, looking for information, instead of visiting different
shops (Keskines et al, 2001)59. Thus, electronic commerce transactions have strong
implications on transportation. In this context, numbers of studies have been conducted to
measure the impact of e-commerce on the number of trips. Browne (2001)60 first quoted
the study made by Farahmand and Young (1998). It modeled the effects of the number of
trips by switch to home shopping of 10 per cent of the customers of a grocery store and a
DIY store (of a typical size) in the UK. They assumed that delivery vans would carry the
loads of nine customers on each round trip. In both the cases, the reduction in total trips is
around 9 per cent. The vehicle kilometer made by the delivery vans for the 10 per cent of
home shoppers suppose a reduction of 87 per cent in comparison with the vehicle
kilometers previously made by car. Further, the study (Coirm, 1999) also modeled a case
of grocery home delivery in UK and their result shows that if 10-20 per cent of shoppers
use home shopping, the reduction in the trips could arrive to 7-16 per cent. For the
purchase made from home, the reduction in vehicle kilometers is 70-80 per cent even if
each van only carries eight loads.
Not only on the retail transportation, e-commerce does have impact on the
companies where heavy transportation is needed. E-transportation tool can enable
seamless connectivity, provide dock-to-dock visibility of the supply chain, and deliver
real time information that leads to better and faster decisions61. E-transportation also
enables shippers a choice of carriers to be used for shipments of merchandise varying in
weights and service, and identifies all shipping packing, marking, labelling and
communications requirements as well. (Vevaldi and Prasad, 2002)62. But many shippers
still are not quite ready to put their faith in this relatively new e-commerce tool. Indeed,
as with the introduction of new technology, e-commerce as it relates to the transportation
industry, is going to take time to catch on.

58 Online shopping represents about 10-20 per cent of total e-commerce (B2C+B2B) and just a little
proportion of retail trade, less than 1 per cent in the US, the most developed e-commerce market. However,
now it is growing very fast. Colin, (2001) estimated that online shopping could arrive to around 5-7 per
cent of retail trade in 2005 in the US and Europe. {(Colin, J. (2001), The Impact of E-Commerce on
logistics, Paper Presented at OECD/CEMT Joint Seminar on ' The Impact of E-Commerce on Transport’,
Paris, June.
59 Keskinen, Auli; Delache, Xavier; James Cruddas; Jan Erik Linjord and Casimiro Iglesias (2001),
“ Impact of E-Commerce on Transportation and The Environment ”, Report of Working Group 3 to the
European Commission Joint Expert Group on ‘Transport and the Environment’, November 15.
60 Browne, M. (2001), "E-Commerce and Urban Transport”, Paper Presented at OECD/CEMT Joint
Seminar on ‘The Impact of E-Commerce on Transport’, Paris, June.
61 Other benefits of e-transactions are: (1) electronic execution of transactions (2) elimination of clerical
error (3) compressed cycle time (4) increased asset utilization and increased incremental revenue for
private fleets (5) streamlined procurement practices (6) direct savings ranging up to thousands of million of
dollars and (7) automation of time consuming manual process.
62 Vivaldi, Swapna and Prasad, Raj Kumar (2002), "The Coming Age of E-Transportation”, E-Commerce,
Vol.2, No. 1, pp 16-17.

99
Impact on Taxation
When new technologies evolve, can taxation issues be far behind? If e-commerce
is being billed as one of the greatest economic developments of the 21st century the
taxation issues63 arising therefrom poses the single biggest challenge of the century to
both-the businesses and the taxman’s. (Girish, 20001 y This is particularly true in the
context of digitized products because transactions of such products are not backed up by
any physical of goods. As e-commerce transcends the barriers of geographical boundaries
the concept like the place of transactions and place of consumption become immaterial.
Therefore, it is often difficult to determine national jurisdiction and revenue rights
particularly in the case of digitized products.
It is trite, but true, that taxation of e-commerce is a major concern for the
international agencies and the tax authorities worldwide. In Europe, North America, and
Australia and in many Asian Countries (particularly India and Singapore) substantial
research65 have been conducted on the impact of the e-commerce on taxation. Among the
plethora of books, reports, articles and papers produced on this topic however, the work
of Organization for the Economic Co-Operation and Development (OECD) stands out as
the most significant66, given its commitment to consulting broadly with the governments

6> Briefly, the following issues arise for consideration:

• Traditional “source” concepts were based on a strong connection between economic activity and a
specific location. Traditional “residency” concepts were based on the parameters such as personal
and economic relations, physical presence and place of effective control. These concepts were
used as effective tools in a allocating taxing rights between various countries. As technological
changes weaken the physical nexus of business with a specific geographical point, what are the
implications for the above concept? With whom lies the jurisdiction to tax?
• A related issue to the above is about the constitution of a Permanent Establishment (PE) in a world
where business is carried on its bits and bytes. Are the traditional principles of PE valid in the
determination of the jurisdiction to tax? Can a server or a server space constitute a PE for the tax
purpose?
• How can income from transfer of technology over the Internet be characterized? Does it constitute
business profits or royalties? Is there is an erosion of source taxation?
• How can new technologies be used to improve the administration of taxes by checking problems
of tax evasion, identifications and audit trails of the transactions and providing better services to
the tax payers?
• What would be the transfer pricing issues arising out of EC transactions?
• What are the issues arising in relation to Value Added Tax (VAT).
64 Gisrish, K.R. (2000), “Some Tax Aspects of Electronic Commerce", Forum of Free Enterprise,
December.
65 A proactive and interesting conclusion is submitted by Krever (2000), “Electronic Commerce and
Taxation -A Summary of the Emerging Issues”, Asia Pacific Tax Bulletin, June, p 151, who states: “a more
sober study will reveal that in many respects much of the hyperbole about the e-commerce and tax is just
that and in the overall scheme of thing the impact of e-commerce on tax systems may be limited. It is the
case, however that e-commerce will place enormous strains on the some aspects of consumption tax bases
and will test the boundaries of some important international income tax concepts such as the source of
income and the definition of ‘permanent establishment’ See also Mattson (1997), “Demystifying
Taxation of the Global Electronic Commerce: Let’s Get On With the Business of E-commerce”, Paper
submitted to the OECD for round table discussion on November. And Boyle; Peterson, Sample;
Schottenstein and Sprague (1999), “The Emerging International Tax Environment for Electronic
Commerce”, Tax Management International Journal
66 the OECD has done some pioneering work in highlighting not only issues connected with the Electronic
Commerce, but on the overall e-commerce industry. For example, in 1992, the OECD revised its
commentary on Article 12 of its model convention to incorporate the income characterization relating to the

100
worldwide as well as with the business community to develop an integrated and
comprehensive approach to the taxation of e-commerce.
The identification and analysis of the inter jurisdictional measures imposed by e-
commerce is one thing. The formulation of domestic and treaty policies for dealing with
e-commerce is another, even more controversial challenge. Perhaps, the most
fundamental threat to the international tax system is the erosion of the worldwide tax
base. It is increasingly possible for a company to try to divert income to a tax haven by
locating its server there. This raises issues of allocation of business profits between the
residence and source countries and leakage to tax haven (Cidambi, 2000)67. The debate
over how international tax principles ought to be revealed and may be reformed is still in
its formulative stage. It would be necessary to equip the tax administration after
reviewing the entire procedure in the light of the advent of e-commerce. First, the
procedures have to be simplified. Second, it would be necessary top create an
environment within the tax department to ensure that the tax laws are implemented
appropriately, and that integrity of the tax base is maintained68. (Mantravadi and
Chowdary, 2002)69.
For India, it is high time to learn from the experience of the work of OECD, Japan
and the US to suggest a strategy to encourage e-commerce and integrate the tax system in
such a way that it takes care of the twin problems of determining the sites of sales and
also identifies the jurisdiction with regard to its authority to tax transactions. In doing so,
we have to keep in mind the associated risk for the tax compliance.

Impact on Cost, Price and Competition

Logically, e-commerce reduces search and transaction cost (Mukhopadhya,
2002) . The net impact of e-commerce on UK Economy has been estimated to be
between 2% to 3% of GDP (Landon Economics, 2000). It has also been estimated that
improved demand forecasting and stock management as a result of e-commerce will
enable reduction in overall inventories by as much as 25% in the US. At the micro level,
there is evidence that this will provides an one-off sustainable improvement in the
profitability by an average of 5% or more for the enterprises currently working with low
margin (Goldman Sachs, 1999). The e-commerce lowers costs because71, the Internet

software transactions. It was the first attempt at issuing specific guidelines for the software transaction.
The OECD convened its first informal discussion of EC tax issues with the business community in Turku,
Finland in November 1997. The conference was one of the first initiatives taken on a collective basis by the
member countries to identify the key issues involved in e-commerce.
67 Cidambi, Samantha (2000), “Direct Tax: Cyber Taxation", The Chartered Accountant, July Issue, pp.18-
24.
68 For example the system of registration of dealers and submission of tax returns could be through e-mail.
Dealers could submit their accounts, alongwith their software program to the development on a floppy disk,
69 Mantravadi, Pramod and Chowdary, V. Nagendra (2002), “E-Commerce and Taxation Issues and
Imperatives", E-Commerce, Vol. 2, No. 5, pp36-39.
70 Mukhopadhay, Subarta (2002), “E-Commerce: Prospects, Problems and Policy Issues ", Vaanijya, July-
Septemeber, pp 9-12.
71 E-commerce provides a new distribution channels, ideally suited to products and services that can be
digitized (such as software, information etc.). These can be delivered for a fraction of cost of traditional
distribution channels. Enterprises working online have greater reach, so that they are able to find the
cheapest suppliers for their purchasers, e-commerce enables rationalization of the supply chains as more
efficient intermediaries emerge to displace existing ones.

101
lowers selling search costs as well as, by allowing seller to communicate product
information cost effectively to potential buyers, and by offering sellers new ways to reach
buyers through the targeted advertisement and one-on-one advertising. Thus it is helpful
in reducing the search costs on both the sides. By reducing search costs on both sides of
the market, it appears likely that buyers will be able to consider more product offering
and will identify and purchase products that better match their needs, with a resulting
increase in economic efficiency. But the reduction in the cost combined with new
capabilities of technology can set off more complex market dynamics (Bakos, 2001)72.

Decrease in the cost Increase in the cost

• Paperless transactions • Packing cost
• Reduction in the inventory level • Transportation and distribution cost
• Reduction in the middlemen • Payments to portals and e-retailers
• Lower manpower • Increase in the number of
• Reduction in the property cost warehouses
• Reduction in the advertising cost • High cost of e-advertising
• Increasing the return to scale • Web page development
• Lower transaction cost

The lower search and information cost should push markets towards a greater
degree of price and competition, and this outcome is certainly possible, especially for the
homogeneous goods. On the other hand the use of Internet technology to provide
differentiate and customized products, and thus avoid competition purely on the price.
Lower search costs in the digitized markets will make it easier for the buyers to
find low cost sellers and thus will promote price competition among the sellers. Thus
e-commerce economy comes quite close to the features of the prefect competition, as
larger numbers of buyers and sellers can instantly interact with each other. However,
some of the distinguishing characteristics of the e-commerce set up also have the
potential for creating the monopoly power in the certain lines of products. The
e-commerce set up has negligible distribution cost for the intangibles and therefore
marginal cost of the production and distribution is almost nil for these goods. Sales of
these goods to a particular customer does not reduce its availability to the other potential
customers. Economies of scale arising out of negligible marginal cost, along with
network externalities and consumer preference for the already acquired skills, provide
natural monopoly power to some of the products in the e-commerce set up. Early birds
are thus expected to reap the benefits in these lines of production. Therefore, in the e-
commerce environment, monopoly is expected to exist along with the prefect
competition. Competition would be especially seen in those areas where goods and
services cannot be digitized and economies of scale are not very prominent. Breaking the

2 Bakos, Yannis (2001), "The Emerging Landscape of the Retail E-Commerce”, The Economic
Perspective, Vol. 15, No. 1, winter, pp 69-80.
7_> This effect will be most pronounced in the commodity markets, where lowering search costs may result
in the intensive price competition, as customers can ‘shop’ around the world and conduct conduct
comparison either directly by visiting different sites, or by visiting a single site where prices are aggregated
from a number of providers and compared (example: www.moneyextra.co.uk; for financial products and
services)

102
monopoly power to remain in the competition would require high speed of innovation
and making the product visible all the time, whether there is a demand for the products or
not. Competition would be basically in the forms of converting ideas, knowledge and
brainpower into innovation.

Impact on Money
With the new economic landscape now outline, let us return to the money. Not
surprisingly, in the intangible (e-commerce based economy) economy, money is also
becoming increasingly intangible. The relative weight on non-cash monetary transactions
now exceeds the value of cash money by the factor of ten (Goldfinger, 2002)74. Money
and payments are delivered via electronic networks as data bits and database entries. At
the wholesale level, money representation and manipulation are fully automated. Beyond
the alteration of the appearance and mechanics of money, there are deeper structural
changes. The triumph of markets means that money is increasingly used to settle
multilateral transactions rather that the bilateral commercial transactions. The functional
evolution in turn leads to profound modification in the design of the clearing system and
networks, which need to handle large volume, work in real time, and offer more open
access. Growth of e-commerce and development of various payment alternative channels
(ie. Debit and Credit Cards, E-Cheque, Digital Purse, E-Cash etc.) assist payment
channels. The delivery channels greatly impacted the retail banking and the wholesale
markets of banks (Avasthi and Sharma, 2001)75. And today, these new technologies have
transformed the banking business almost beyond the belief in the last decade and the
half76. Most of all the customers have benefited77, as have the bank themselves
(Sumanjeet and Mehlawat, 2005) . But, this new forms of money has also posed certain
challenges before the banking sector, most of them are related to IT plans79 (Kamesan,

74 Goldfinger, Charles (2002), "Intangible Economy and the Electronic Money", in OECD, The Future of
Money (ed), OECD, p 103.
75 Avasthi, G.P. and Sharma, Meera (2001), “Information Technology in Banking: Challenges for the
Regulations", Prajnan: Journal of Social and Management Science, Vol. XXIX, No. 4, pp. 343-357.
76 The first banking system designed for the Internet was written in 1996 and the first Internet bank was set
up in US. However, the concept of using IT in banking actually begun in the 1950s when the first
automated book-keeping machines were installed at the few US Banks.
77 In the banking sector IT can reduce costs (according to American Banking Association, the cost of a
single banking transaction at a traditional bank branch is $1.1, whereas an internet transaction costs barley
0.1, Indian rates are Rs. 35.38 though the traditional account, Rs. 14-16 though an ATM and only Rs. 1-3
via the Internet), increase volume, and facilitate customized products. It opens up new markets. Funds can
be transferred electronically between accounts accounts, drastically reducing the need to keep hard cash.
Besides, there are lower service fees but the higher interest rates of deposits. The investment for the setting
up bank branches is reduced, as the online trading requires fewer branches. There is no need of manual
updating of accounts. Relocation of customers does not matter. Internet based banking offers a bouquet of
services- mutual funds, brokerage, consumer finance and credit cards. Last but not the least, very large data
can be stored for information and decision-making. More secrecy is observed in using IT in banking sector
as compared to the manual file system.
78 Sumanjeet and Mehlawat, Seema (2005), “Information Technology and Banking Sector", Vision, Vol
XXIV, No. 3&4, pp. 12-20.
79 Deciding the IT plans for the bank as whole; working out the strategy for the implementation of plan’
training requirements for the IT implementation data warehousing, data mining and other related areas;
souring of IT requirements; standardization of the various components of IT-including hardware, software,
operating system and application software platforms; interfacing across the banks-especially in the context

103
 OA

2003) . No doubt, these changes make money more visible and pervasive but also less
stable, more volatile in its value and more elusive. Therefore, in the new economy,
monetary policy become more important as a lever of economic management at the same
time that the classical monetary aggregates-Mi, M2, M3 -lose their reliability as signals of
the future economic growth and inflation (Goodhar, 1984)81. Nevertheless, one thing
appears certain, electronic money will continue to emerge, rendering the overall money
landscape more intricate and multifarious. To facilitate the emergence of electronic
money, it is important to be open minded, to accept innovate vision of money and money
transaction. At the same time it is also essential to recognize that many of these visions
will either never be implemented or fail the critical test of customer acceptance.

Concluding Remarks:
The emergence and rapid growth of Internet and E-Commerce has strong
implications on economic and social actitivities. It is quite possible that these new
technologies might transform the future of economic and societal landscape. At the
economic front, there is a clear evidence that E-Commerce and Internet techonolgy have
positive impact (UNDP, (2003)82, Pohjola (2000)83, Dewan and Kramer (2000)84,
Kraemer and Dedrick (2000)85}. To study the economic implications of e-commerce, few
areas of economy (transportation, Intermediation, Agriculture, Labour Market, Taxation ,
Cost, Price and Competition, and money) has been selected. On the basis of various
studies it is revealed that e-commerce technology have strong economic implications. At
the general level, there are two types of potential economic gains from the use of E-
commerce and IT enabled technologies. First, are the gains in efficiency, both in static
and dynamic. Static gains are one-time, and come from more efficeint use of scarce
resources, allowing higher consumption in the present. Dynamics gains come from higher
growth, potentially raising the entire future stream of consumption and population.
Efficiency gains of e-commerce also come about through the enabling of new digitized
goods and services. The second type of potential benefits comes from cost reduction.
Studies indicates that e-commerce is helpful in reduction of search cost, administration
cost, distribution cost and even the labour costs. However, all these opportuities are yet to
materlize in to profitability i. e. in agricultural sector, benefits of e-commerce exists, but,
only theortically; not practically, as the implemetnation of e-commerce technolgy in

of disparate systems across different banks and outsourcing of the various components of IT including
maintenance.
80 Vepa, Kamesan (2003), “Recent Technological Development in the Banking Sector", Reserve Bank of
India Bulletin, Vol LVII, No. 9, pp 1035-1042.
81 Goodhart, Charles (1984), Monetary Theory and Practice, London: Macmillan.
82 UNDP (2003), “E-Commerce and Development Report", United Nations, New York and Geneva,
UNCTAD/SIDTE/ECB/20031 accessed on http://www.unctad.org/e-commerce
8> Pohjola, M. (2000), “Information Technology and Economic Growth: Cross Country Analysis”, in M.
Pohjola (ed), Productivity and Economic Griowth, New York: Oxford University Press, pp 242-256.
84 Dewan, S. and Kraemer, K L (2000), “Information Technology> and Productivity: Evidence from Cross
Country Data”, Management Sciecne, Vol. 46, No. 4, pp548-62.
85 Kraemer, K. L. and Dedrick, J. (2000), “Information Technology and Economic Development: Results
and ‘Policy Implications of Cross Country Studies”, in M. Pohjola (ed), Productivity and Economic
Griowth, New York: Oxford University Press, pp 257-279.

104
agricultural sector has certin challenges. Addes to this, e-commerce based economic
models has also posed number of challenges beofre the concerned people and
community. The area of e-taxation is one of the best example and most controversial
issue all over the world. As e-commerce transaccends the barriers of geographical
boundaries, the concept like the place of transactions and place of consumption become
immaterial. With the emergence and growth of digital money in the economy, the
chances of frauds have also incresased. Another most difficult issue is the planning
regarding the adoption and implemetation of e-commerce technology in the various
economic activities. In nutshall, with the e-commerce based economic models, there is
little to lose and more to gain.

105
 Section-II
Social Implications of E-Commerce
There are various things that can be done by the use of the web to make a
difference, whether it is donating money to charities via click through, educating people,
helping the local community, signing the online petition or accessing the information.
Section II of this chapter, mainly aims at to study the social implications of e-commerce.
To study the social implications of e-commerce and other IT enabled technologies in a
systematic manner, few areas have been selected, especially those which are of prime
social interest. Further, to justify the true impact of e-commerce on the society, negative
impact of e-commerce and IT on the society has been studied. In the end of this section,
concluding remarks are given.
Basically, electronic commerce is an economic phenomenon; it forms part of a
broader process of social change, characterized by the globalization of markets, the shift
towards an economy based on the knowledge86 and the information, and the growing
prominence of all forms of technology in everyday life. These major societal
transformations are now under way and will probably continue far into the foreseeable
future. As both a product and manifestation of such transformations, electronic commerce
is being shaped by, and increasingly will help to shape, modern society as a whole. Social
factors will thus have profound influence on its future development. They will also merit
attention from a public policy standpoint, both to establish the social conditions that
allow electronic commerce to reach its full economic potential and to ensure that its
benefits are realized by the society as a whole. It is therefore vital to understand the social
processes that will inevitably influence how electronic commerce evolves and how
quickly it can grow, as well as the areas where, through externalities of various kinds it
may profoundly affects society .

Impacts on Society
Initiatives beginning ICTs and Internet access to the poor people and communities
have been active since early 1990s. The 1998/99 World Development Report oo
entitled
‘Knowledge for Development’ accelerated this process (World Bank, 1998-99) . Support
often took the form of regional or global grant mechanism. Domestic organization

86 The knowledge-based economy is commonly thought of as an information technology economy, with an

emphasis on software and hardware. Information technology is however, primarily an enabler, not an end
in its own right (other than for data based products such as information). As such, it will have an impact on
the entire economy.
87 Analysis of social dimensions of electronic commerce is hindered, however, both by the rapidity of
change, which limits the collection of quantitative data on the growth and implications of new forms of
electronic business, and by the difficulty of isolating electronic commerce from ICTs more generally.
Research is also hampered by the pervasiveness of electronic commerce in the economy and the
consequently diffuse nature of its linkage to broader social, institutional and cultural factors. Within these
limitations, this section of study reviews literature and evidence from a variety of disciplines to point to
areas where a significant relationship appears to exist between social and economic considerations and
which consequently may merit attention in terms of public policy.
88 World Bank (1998-99), "World Development Report 1998-99”, accessed on http://www.
Worldbank.org/wdr/wdr98/contents.htm.

106
cooperated with international donors (Spence, 2003)89 Recently countries experience a
more systemic diffusion of ICTs. with national programmes in most countries aimed at
introduction and rollout of e-strategies, like e-government, e-learning, e-commerce and
e-business, after financed by the international donor community.90
There are various things that can be done to use the web to make a difference,
whether it is donating money to charities via click through, helping the local community
or signing an online petition. The launch of a site from Amnesty International91 that
enables people to e-mail and SMS their support for the various cases is one such scheme.
Today, the response rate for each appeal has been growing rapidly and Amnesty can now
expert around 5000 people to respond within a couple of days, with people signing up to
the urgent appeals at a rate of two minutes. By using the web in this was to target users,
Amnesty International can now reach people that otherwise would never been able to get
involved with the organization.
To study the social implications of electronic commerce and other IT enabled
Technologies in a systematic manner, few areas have been selected, especially those,
which are of most social interest and where the impact of these technology can be seen
widely. Among them some of the most important are:

Health: Information technology and electronic commerce health care applications can
play an integral role in the promotion of virtuous cycle92. It can help realize cost saving
while broadening the reach of the health care system (Industry Canada, 1998) . In
addition Internet and other IT enabled technologies can assist the overall health system to
become more cost effective through, structural and functional rationalization of the
delivery system, and the wide implementation of ICT will result in improved availability
and quality of health services (European Commission, 1996)94. It can play a positive role
in expanding services and service delivery options while creating cost efficiencies in the
administration and management of health services and therefore lead to greater economic
prosperity. This is particularly true if access to these now and better services is extended
to the most disadvantaged segments of the society, as they have the most to gain from
improved health conditions.

89 Spence, R. (2003), “Information & Communication Technologies (ICTs) for Poverty Reduction: When,
Where and How? ", accessed on
http://www.idrc.ca/uploads/user/S7107402457518469203RS_ICT_Pov_18July.pdf.
90 Examples are the Botswana National e-learning strategy, co-funded by the European Union, Namibia’s
e-government strategy, Egypt’s e-government portal (www.egypt.gov-eg/english/default.asp), or the large
scale ICT programme for Education in Ethiopia, co-funded by the World Bank
(www.uneco.org/aisi/nici/ethiopia/ethiopia.htm).
91 This is one of the world most oldest and popular Human Right Organization.
92 It is well established that a population's overall health is closely related to its economic prosperity.
Improved health conditions and access to health information contribute significantly to economic growth,
because healthier workers are more productive. Government policies that promote health education help
people lead healthier lives by increasing their access to and are of relevant information. When combined
with polices to ensure effective and accessible health services and those generate income growth, a virtuous
cycle is created in which economic growth and improvements in health reinforce each other {World Bank,
1993), World Development Report 1993: Investing in Health, Oxford University Press, New York}.
9'' Industry Canada (1998), Sector Competitiveness Framework Series: Tele-Health Industry, Sector
Competitiveness Framework Services, Ottawa.
94 European Commission (1996), The Market for Electronic Information Service in the European Economic
Area, European Report on the Member State’s Study (MSSTUDY), October.

107
Education and Human Resource Development: ICTs integration in primary,
secondary and tertiary education is one major goal of ICT projects. One prominent
project is the SchoolNet initiative that aims to connect school to Internet and to train
teacher in the developing countries. They operate in partnership with the private sector,
government, NGOs and the donor community. In South Africa per example, where
SchoolNet is focusing on historically disadvantaged schools, almost 3000 schools are
already involved in the initiative (Spence, 2003)".
ICTs also have deep impact on distance education, which is currently most
relevant to poverty reduction. E-learning96 enhances the access to education for the who
have access to ICTs reducing several constraints that distance education has faced in the
past: lack of interactivity, long development cycles, lack of flexibility of materials and
insufficient support mechanisms for learners (UNESCO, 1996)97. In tertiary education
access to online journals and to other information through the world wide web (www) has
revolutionized research possibilities in the countries with the limited resources.

Poverty Alleviation/Reduction: information and communication technologies (ICTs)

have an important role to play in reducing the poverty by improving the flows of
information and communications. Much of the recent attention to the role of ICTs in
development has focused on the new technologies, such as the Internet and mobile
phones. Yet no full range of ICTs is relevant to the fight against the poverty (Chandra,
2003)98. The potential impact of ICTs on the poverty can be seen at the micro level,
intermediate and macro level. At the micro level, ICTs can be used by the poor directly to
address their information needs, develop their own strategies and solutions for improving
their lives, and articulate their interest in societal processes and institutions that affect
them. At the intermediate level, ICTs can help a range of intermediary institutions and
agents work more effectively and be more responsive to the needs of the poor. Health
workers can access the latest information, get assistance with diagnosis, and more
effectively target intervention and resources with the help of ICTs. At the macro level,
ICTs can help foster more efficient and transparent markets more participatory process of
the governance, and new forms of economic and social innovations that benefits the poor.

Gender Equality: Since recent studies indicate that the Internet use by men and women
may soon approach equality99, gender is becoming less of an issue. There is clear
evidence that the majority of poor are women and poverty reduction is nowadays highly

" Spence R. (2003).

96 E-leaming is the use of network technology to design, deliver, select, administer and extend learning. It
is an Internet enabled learning processes whose components include content deliver in multiple formats,
management of the learning experience and a community of networked learners, content developers and
experts. E-learning as a universe comprising three basic elements - content, services and technology.
[Deva, Vasu (2003), E-Learning: Search for Excellence, New Delhi: Commonwealth Publishers.]
11 UNESCO (1996), Information and Communication Technologies in Development: A UNESCO
Perspective, accessed on http://www.unesco.org/webworld/telematics/uncstd.htm
98 Chandra, Rakesh (2003), Information Technology: A Revolutionary Change, New Delhi: Kalpaz
Publication.
99 Commerce Net/Neilson Study as cited in “Starting Increase in Internet Shopping”, Business Wire,
December 31,1997.

108
correlated with the gender equality. Thus it is stressed to include the gender equality into
ICT Policies, programmes, projects at all level. Experiences range from empowerment
initiatives at local levels, to national and regional networks. However, implications of IT
for women empowerment are not an easy task. (Spence, 2003)'°°, identified that women
face specific barriers101 to the use of ICTs. Therefore, it is important to target women in
ICT projects specifically. On a community level experiences shows that radio favours
women to men, because radio requires little skills to operate and broadcast (Gerster and
Zimmermann, 2003)102. ‘Women for Change’ is a Zambian NGO, committed to working
with an empowering remote rural communities, especially women103. The essence of
networking for the ‘Women for Change’ is to share resources and action strategies for
women’s empowerment. Networking allows ‘Women for Change’ to stay in touch with
what is happening locally, regionally and internationally and use of information and
resources so gathered in helping the rural Zambian women. To facilitate the networking a
website and online content have been developed to disseminate the information.
Added to all this, e-commerce is also helping in reducing the gender gap. With
the emergence of IT enabled service industries, more and more women are getting
employment in these industries104. In these industries women have equal opportunities
(even more in some cases1(b) to men. Thus it is quite logical to conclude the IT and e-
commerce is helping in reducing the gender gap.

Access to Information on Community Level: We are moving on from IT to ICT and

from ICT to Information Society (IS), according to Richard Heeks. Electronic Commerce
and ICTs abolish distance and alter the concept of community. Many of these changes are
positive creating links with new people, maintaining closer ties with far-flung friends and
family members106, and creating new online communities with potentially global

100 Spence, R. (2003), “Information <& Communication Technologies (ICTs) for Poverty Reduction: When,
Where and How9", accessed on
http://www.idrc.ca/upIoads/user/S/107402457518469203RS_ICT_Pov_l 8July.pdf.
101 Lower level of literacy and education; domestic and reproductive responsibility; restricted access to
training; cultural attitudes and Practices; less proficiency in English; lower level of financial resources and
lower access level to ICTs at work, public access is located in the areas where women do not feel
comfortable. And higher density of women in the rural areas.
102 Gerster, R. And Zimermann, S. (2003), "Information and Communication Technologies (ICTs) and
Poverty Reduction in Sub Saharan Africa: A Learning Study", accessed on
http://www.gersterconsulting.ch/doecs/synthesis_report.pdf.
I0‘’ see http://www.wfc.org.zm
104 In some industries it is quite natural and logical to place a women than men. For example in call centers
women are preferred because of their soft voice and lower pitch pitch. And in these industries women can
work very easily because there is no physical work.
105 Like call centers, medical transcription and other voice based services and even in some industries
women are intentionally employed to attract more and more customers. (This statement is based on the
personal experience of the researcher. Working with India’s biggest stock broking company lindiabulls) the
research found this.
106 For example, e-mail brings family closer. A growing number of parents with children away at college
are surprised at the frequency that their children are using e-mail to stay in touch. Parents also find their
children are opening up to them via e-mail for more readily than if they were talking to them over the
telephone, or even face to face. Convenience is cited as a main reason for using e-mail, as well as cost
savings and 24 hours. Contact availability without disrupting scheduler.

109
membership. The ‘e-governance’107 is a result of such development and has emerged
because of the increasing interest of government and citizen around the world.

Figure 4.4: E-Governance for Development

It involves new styles of leadership, new ways of debuting and deciding policy
and investment, accessing education, listening to citizens and organizing and delivering
information and services. Sumanjeet (2006)108 identified the following benefits of
e-governance.
• Increase the accessibility of individual citizens to information and services that allows
them to influence govt, operations.
• Opportunities to earn a living by learning a new skill in the knowledge based
economy.
• Producing same output at lower total cost.
• Opportunities to trade and banking online.
• Reduction in time and paperwork.
• Supports effective decentralized decision making by providing an efficient
information flow.
• Various govt, departments find it very easy to perform their functions like collection
of tax, water charges, professional taxes etc.
• Enhance access to information and communication across large distance.

107 E-Governance or Electronic Governance is an attempt of government to harness information technology

to improve the efficiency or effectiveness of the executing function of government including the delivery of
public services. In a very broad sense it can be defined as "the application of the electronic means in the
interaction between government and citizen (G2C) and government and business (G2B), as well in the
internal government operation (G2G) to simplify and improve the democratic government, and business
aspects of e-governance.

108 Sumanjeet (2006), "E-Governance: The Overview in the Indian Context’’, Indian journal of Political
Science, Vol. LXII, No. 4, pp 857-866.

110
• Deliver essential services to citizens.
• Improving agriculture productivity.
• Improves resource management.
• Enables marketisation by supplying information related to the market and enhances
public services.
• Transparency injudicial and administrative work.
• All notifications and circulars can be put online, so that cases can be disposed faster.
• Helpful in confidence building among the citizens and the government machinery.
• Market expansion and organized job creation and its overall impact on the macro
economy.
• Transition from cumbersome procedures for clearances to improved relations by
providing quick approvals.
• It is an innovative way of administration. It facilitates easy monitoring and tracking of
files. There is no place for red tapism.

Other Expected Implications: The Internet also has had a great influence in
empowering consumers over the last few years, and there is a great opportunity for
citizens to similarly empower themselves. Today, many communities have used the
Internet to effect change in the things that matter to them. This is because the Internet
allows communities of interest to communicate and share knowledge in ways never
before possible, unrestricted by previous geographical boundaries.
One consistent finding across many countries is that intensive users of information
technology tend to be well educated and to have higher than average household incomes
(IDC, 1998)109.
Last but not the least, ICT can assist notional management that relies critically on
good information and statistics notably social service delivery, especially health and
education require good information bases. Furthermore, ICTs are important for increasing
knowledge on human and constitutional rights, laws and regulations. ICTs such as radio
and the Internet have been used for monitoring government programmes, thus making the
powerful more accountable and giving the poor a voice, e.g. through rural radios. Thus
ICTs can be highly effective in enhancing transparency and accountability in the political
system.
Negative Impact of E-commerce and IT on Society
Internet and e-commerce offers many opportunities to those who are brave
enough to seize them. It not only opens the barriers to business, they also create a
thousand areas where crimes can proliferate. Due to technological advances, crimes are
committed today that could not have existed a decade ago and the traditional crimes are
being made easier (Crime Time, 2001 )no. With the growth Internet connection, the
opportunities to exploit weakness in information security are multiplying. People are
stalked and even murdered, credit card details are stolen, viruses wreak havoc,
companies’ trade secrets are liberated and drug dealers play their evil trade-and all via the
net. These crimes all exist any way web or no web and we call them cybercrime or e-

109 IDC (1998), "Internet Commerce Defined: Current State and Future”. Outlook; Presentation Material
prepared for the Internet Commerce Breakfast, June.
110 Crime Time (2001), .net, Vol. 2, No. 6, pp. 10-11.

Ill
crime, computer crime and IT crime111. But whatever be the name in essence, it is same-
all crime112 (Taneja, 2003)113.

Global Picture of Cybercrime

Cyberspace is a new frontier of different types of crimes. It provides huge
opportunities114 for criminals because of anonymous nature of Internet, it is possible to
engage into a variety of criminal activities with impunity and people with intelligence,
has been grossly misusing the aspect of Internet to perpetuate criminal activities in
cyberspace (Brains, et al, 2000)"'\ The field of cybercrime is emerging and new forms
of criminal activities in cyberspace are coming to the forefront with the passing of each
new day.
According to Web Statistics Crime: Total complaints filed in 1993 was 640 (1.7
per day), it went up from a total of 971 (2.6 per day) in 1994 to 1494 in 1995, to 4322 in
1996, to 12775 in 1997, to 47000 in 1998 and almost 100000 in 1999. And it was about
more than 280000 in the year 2000 at an almost phenomenal rate of almost 775
complaints per day.
Graph 4.1: Global Picture of Cyber crime

Web Crime Reported World Wide

Total Complaints
Reported

Year

Source: Web Statistics Crime Report, Various Years

111 The use of electronic communication resources especially the Internet to engage in unauthorized or
illegal acts.
112 The term ‘Crimes’ means any act of commission or which made punishable under the Indian Panel
Code, 1872 or any offence against morality, social order or any unjust or shameful act. The ‘offence’ is
defined under the code of criminal procedure to mean as an act or omission made punishable by any law for
the time being in force.
113 Taneja, Anita (2003), “Hacking as a Significant form of Cybercrime”, Economic Dataline, November
Issue, p. 24.
114 As cybercrime is easy to learn how to commit, easy to operate, faster, as compared to traditional crimes,
require few resources related to the potential damaged cause, can be in a jurisdiction without being
physically present in it and often not clearly illegal.
115 Brains, K. William; Sawyer, C. Stacey and Hutchinson, E. Sarah (2000), Using Information Technology,
New Delhi : Tata McGraw Hill

112
Forms and Consequences of Cybercrime
There are various kinds of computer, Internet and e-commerce related crimes116.
It can be an illegal act perpetrated against computers or telecommunications. Or it can be
use of computers or telecommunications to accomplish an illegal act. (Brains et al,
2000)117. Crimes against information technology include theft of hardware, of software,
of computer time, of cable or telephone services, of information and other illegal acts are
crimes of malice and destructions . Crimes using information technology include
hacking, cracking, Denial of Services (DoS), cyberprone and cyber terrorism etc.
Recently it has been expanded to include forgery, illegal gambling and cyber stalking119.
For the sake of systematic analysis, different types of cybercrimes could broadly be
classified under the following heads (Duggal, 2001),2°.
• Cybercrime agaisnt property
• Cybercrime against person
• Cybercrime agaisnt government (Cyber terrorism)

Cybererime Against Property : Cybercrime against property include hacking and

cracking of computer system121, secrete codes, trade names, domain names etc. It also
includes theft of hardware and software, theft of data and information, network sabotage,
viruses and malicious code and computer related fraud . The diagram shows the
incidence of cybercrime against property.

116 However in a very exact sense cybercrime constitutes a crime on the Internet.
117 Brains, K. William; Sawyer, C. Stacey and Hutchinson, E. Sarah (2000), Using Information Technology,
New Delhi: Tata McGraw Hill.
118 Computer Viruses, Worms and Trojan Horses are example of malicious code. A Trojan Horse is a
program which performs a useful function, but performs an unexpected action as well. Virus is a code
segment, which replicates by attaching copies to existing executables. A Worm is a program which
replicates itself and causes execution of the new copy. There can create havoc on the client side.
Gambling-Minn. Statistics, Sect 609-75 (1994). Cyber Stalking - 11 Del (Sect 1312A), fraud - United
Nations Infra Note 41 at 15.
120 Duggal, Pavan (2001), “Categorizing Cybercrime", E-Commerce, October, pp. 60-61.
121 Hacking and cracking are the most dangerous forms of cybercrime committed against property. Hacking
entails cracking system in order to gain unauthorized access to confidential information. Hacking and
cracking are closely correlated terms. A person engaged in one of crime deviance is likely to engage in
another.
122 Some such cyber assault reported in the year 2003 includes the following:
• Disgruntled Philadelphia Phillies fan charged with hacking into the computer triggering Spam e-mail
attacks (October 7, 2003).
• Former computer technician in Douglasille, Georgia arrested for hacking into the computer system in
Southern California (August 25, 2003).
• Russian man sentenced for hacking into computer system in the US (July 25, 2003).
• Southern California man who hijacked Al Jazeera website agree to plead guilty to federal charges
(June 12, 2003).
• Juvenile arrest for releasing vibrant of blaster of computer worm that attacked Microsoft (September
26,2003).
• Minneapolis, Minnesata 18 years old arrested for developing and releasing B vibrant of blaster of
computer worm (August 29, 2003).
• Queens, New York man pleads to federal charges of damage the privac of computer, access device
fraud and software.

113
 Figure 4.2: Incidence of Cyber Crime Against Property

Incidence of Cybercrime Against Property

(in Percentage)

Other
13% Data Theft
E-mail Abuse 29%
19%
inis Attack
5%
Unauthorized
Data Alteration
Access
14%
17%

Source: Computer Crime and Abuse Report, 2002.

Internet fraud is also very dangerous forms of white color crime whose growth
may be as rapid as diverse as the growth of Internt itself . The special feature of Internet
fraud is that; it is easy for fraudsters to make their message look real and credible, but it
is nearly impossible for the people acessing hte information to tell the difference between
the fact and function. While there are immunerable scams and frauds going on that use of
the Internet. Many of there relate to investment124.

Cybercrime Against Person : There are also some other dangerous form of crime
exist, which cannot be measured in terms of money. These mainly includes
cyberstalking12s and child pornography126. Child poronography and cyberstalking, much

See, “Internet fraud: How to Avoid Internet Investment Scams”, at

http://www.sec.gov/consumer/cyberfr_htm.
124 Kolkota based businessman, Piyush Kankaria has set the ball rolling by filing a case with the West
Bengal Police, referred to Nigeria 419 fraud by the Federal Investigation and Intelligence Bureau, the case
has been registered by Howrah Police under section 420 of IPC along with section 75 (2) of the IT Act
2000 (Section 75 of IT Act apply for offences or contravention committed outside India). It has already
been transferred to CID in collaboration with Interpol. Kankaria’s case is not an isolated one. Many Indians
have been flooded and some traped with similar mails luring them to facilitate the transfer of millions of
dollars from an over-invoiced contract or a dormat account with no claimants mostly form Nigerian letter
fraud complaints have gone up from 2600 to over 16000 in 2002, according to Internet Fraud Complaints
Centre Annual Report. The total loss from all referred Internet fraud case during the year was dollar 5
million.
125 Cyberstalking, which is simply an extension of the physical form of stalking, is where the electronic
mediums such as Internet are used to pursue, harness or contact another in an unsolicited fashion.
126 Precisely what child pornography is, and what it is not, may not be explicitly defined in a given
jurisdiction. Moreover, definitional boundaries may expand or contract over time, depending upon evolving
social and political values. The narrowest definition would embrace only depictions of children engaged in
exploit sexual activity. One could, however, imagine suggestive depictions of a children entailing other
than sexually exploit behaviour. To some observers, there is a significant difference between pornography
and erotica; to others, not.

114
like any other crime, it very hard to assess in terms of its incidence and prevalence within
given population. Anyone can be stalkied online, but the majority of its victims as in real
life are female. Stalking estimates shows that 80% of stalked victims are women and
most cyberstalkers are male. It is estimated taht there are about 2,00,000 real life stalker
in America today. That is about 0.08% of the US population. In another word, there are
roughly 1 in 1250 person is a stalker . Stalking estimates also shows that over 1.5
million Americans today have been or currently stalking victims that is 0.6% or 1 per in
166.
In India first cyberstalker Manish Kathuria was arrested by the New Delhi Police.
He was stalking an Indian Lady, Ms Ritu Kohil by illegally chatting on the website
MIRC using her name128. He was charged under section 509 of IPC for outraging the
modesty of Ritu. In the year 2001 Mumbai Cybercell registered four crime within 15
days12913°.
191
Child pornography is another serious crime against individual not only in India
i32, but all over the world. This has especially distributing consequences in the case of
children. Obtaining porn material is not too difficult for them. Any search engine can do
this and many of these are free of cost. Furthermore, for more serious offences, which
have disapproved (such as child pronography), it is far easier for the offender to remove
material.

Cyber Terrorism: The cyberterrorism which is one of the recent coinage, is the
consequences of terrorism and Internet . It is genrally understood to mean unlawful
attacks and threats of attack against computers, networks, and information stored therein
when done to intimitate or coerce a governemnt or its people in furtherance of political
or social objectives134. Terrorists do use the cyberspace to facilitate the traditional forms

127 It is really very interesting to note that stalkers usually attained a greater educational qualification than
the other types of offenders.
128 See, “Cybercrime in India, Cyberstalking, Harassment", at
http://www.indiachild.com/cyberstalking.htm.
129 In the first case, a woman was threatened via mail by her boyfriend. In the second case, a woman was
abused by her husband through e-mail. In the third case, a Frenchman was found posting the phone number
of a Mumbai based woman on a chat site. The fourth case concerned the morphing of photographs of
nudes’ lady doctors, that were e-mailed back to these doctors.
1.0 See, http://www.indiachild.com/cyber crime_india.html.
1.1 In India, in the famous case of Ranjit Udeshi vs State of Mahararshtra (AIR 1964; SC 881), Supreme
Court of India for the first time after the coming into the effect of the Indian Constitution examined the
concept of obscenity and pornography and restrictions of the freedom of speech and expression.
1.2 In country- like India where peoples are not very much familiar with these new technologies, the chances
of misuse of these technologies are really very high. There are now many incidences in India i.e. DPS
Videoclip, Anara Gupta, Malika Sharawat (Original name was Lolo) etc. These are just the few examples,
as the very few peoples are reported.
Attacks that lead to death or bodily injury, explosion, plane crashes, water contamination, or serve
economic loss would be the examples. Serious attacks against critical infrastructure could be act as cyber
terrorism, depending on their impact.
1,4 In 1996, a computer hacker allegedly associated with the White Supremacist moment temporarily
disabled a Massachusetts ISP and damaged part of the ISP’s record keeping system. The ISP has attempted
to stop the hacker sending out the racist message under the ISP’s name. The hacker signed off with the
threat “you have yet to see true electronic terrorism. This is a promise”.
In 1998, Spanish posters bombarded the Institute of Global Communications (IGC) with thousands of
bogus e-mail messages. The posters also spammed IGC staff and members’ accounts, clogged the web page

115
of terrorism such as bombing. They put up the web site to spread their messages and
recruit supporters and they use the Internet to communicate and coordinate action.
However, there are few indications that they are pursing cyberterrorism, either alone or in
conjunction with the acts of physical violence. In Feburary 1998, Clark Staten, Executive
Director of Emergency Response and Research Institute in Chicago, testified before the
Senate Judiciary Committee on Technology, Terrorism and Government Informnation
that it was believed that “memebrs of some Islamic extremist organisations have been
attempting to develop a ‘hacker network’ to support their computer activities and even
engage in the offensive information warfare attakcs in the future”. And in Novmber, the
Detroit News reported that a member of the militant Indian separatist group Harket-ul-
Ansar had tried to buy military software from hackers who had stolen it from the
‘Departement of Defense; computers they had penetrated.
India is also facing the serious problem of cyber terrorism which is sponsored not
only by terrorist organisations, but also by some of the hostile neighbouring states (Singh
and Parsoon, 2004) ". In fact, it is reported quite often in the print media that Pakistani
computer hackers have been making continuous effort to penetrate protected Indian
computers site and systems. With the help of some Europena and American Cyber
experts, an attemt has been made to entre the mail server site of Bhaba Atomic Research
Centre in order to scan and decodify the secret e-mail.

Concluding Remarks:
At the social front, e-commerce and ICTs can definitely empower the poor, give
them a voice and connect them to the global world. These technologies can also help in
attaining a minimum level of education, health and nutrition. The ability to participate in
democratic decision making can also fall into this category. But it is difficult to predict
the extent to which these technologies will transform the developing countries. On the
basis of various studies, it is observed that, there is very high costs and relatively low
benefits of the direct Internet and e-commerce technolgies to the poor or the other needy
people. Access to radio and telephone services show a higher benefit cost ratio and lower
the overall costs as the alternatives to and intermediaries for the Internet and e-commerce
in poverty alleviation and other social upliftment programmes.
In a developing country such as India, it is of particular interest whether such
benefits can reach to the poor and even help directly or indirectly reducing the
deprivations assosciated with poverty. For example, better access to education,
agricultural market, information or to government services may be relatively more
valuable for the poor people who cannot afford to use the tradtional mehtods or
communications media, or to pay for the services of tradtional facilitaing intermediaries.

with the bogus credit card orders, and threatened to employ the same tactics against the organization using
IGC services.
In the same year, ethnic Tamil guerrillas swamped Sri Lank embassies with 800 e-mails a day over a two-
week period. The message read, “we are the Internet Black Tigers and we are doing this to disrupt your
communications.
During the Kosvo conflict in 1999, NATO computers were blasted with e-mail bombs and hit with denial
of services attack by hacktivists protesting the NATO bombing.
L’5 Singh, Veer and Parsoon, B. Bharat (2002), “Cyber Crimes and the Needfor National and International
Legal Control Regime”, Panajab Law Review, Vol 8, No 1&2, pp 36-51.

116
 In short, development of e-commerce and IT has great singinficance not only in
the economic growth, but also in human and social development. It boost social as well
economic infrastructure, generate revenue, provides employment and many more. But the
development of these technologies would remain uncomplete, unless the benefits of
these technolgies reaches to the common man.
These technological developments (especially Internet) not only open the barriers
to the business community, sociaty as well as the whole economy, they also create a
thousand areas where crimes can proliferate. But, net can not be held responsible for the
cybercrime. In fact, it is the first global communication that can be exploited in various
ways. However, studies indicates that there is positive correlation between the growth of
Internet and crime, but, in reality poor security system, lack of awarness, and poor legale
system is the most responsible factors for the growth of cyber crime. Therefore, there is a
strong need for a dedicated, continuous, updated training of the cyber law enforcement
agancies. At the same time it, it is necessary to train a pool of expertise so that necessary
skills are developed by all those who have to grapple with the problem fo cyber crime
including the policy maker, framers the judges, the lawyers and the administravtive. All
the more, the change will come only with awarness.

117