New Delhi, Nov 2 The Commerce and Industry Ministry is considering a proposal to permit foreign direct investment (FDI) in the inventory-based model of e-commerce as part of the government’s strategy to push exports.
The ministry has sought feedback on the issue from various Central government departments on the issue in order to move ahead with the proposal.
Senior officials cite the example of China to highlight the huge potential for promoting exports through e-commerce entities.
India's FDI policy allows 100 per cent FDI in the marketplace model of e-commerce under the automatic route, where companies, such as Amazon and Flipkart, act as platforms connecting buyers and sellers but do not own the inventory.
However, FDI is restricted in the inventory-based model, where the e-commerce entity directly sells its own inventory to consumers. While some specific exceptions allow manufacturers to sell their own products and single-brand retailers to operate via e-commerce, the general rule prohibits FDI in direct B2C sales through an inventory-based model.
Commerce and Industry Minister Piyush Goyal has also indicated that the government is considering the proposal to allow e-commerce companies to keep inventory exclusively for exports.
India's e-commerce exports are growing, with current estimates around $4-5 billion and a government target of $200-300 billion by 2030. Popular export products include fashion apparel, home decor, handicrafts, organic beauty products, toys, and electronic goods.
The Foreign Trade Policy 2023 includes a dedicated chapter on e-commerce to outline the roadmap for cross-border trade in the digital economy, reflecting the government’s initiatives to push exports via e-commerce.
The government has also extended the benefit of remission of duties and taxes on exported products (RoDTEP) to e-commerce exports, including those via postal and courier routes, to improve cost competitiveness.
The government also plans to set up e-commerce export hubs in partnership with the private sector under the Foreign Trade Policy. Besides, Digital India programs have helped by making online payments easier and simplifying customer verification.
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