Govt Allows FDI In Inventory-based Model of e-commerce To Boost Exports
As per the latest FDI policy of the government, foreign investments are only permitted in business-to- business e-commerce and marketplace models
New Delhi: In a move to augment investment into the country, India on Thursday allowed foreign direct investment (FDI) in an inventory-based model of e-commerce exclusively for export purposes, a move which will help increase India's outbound shipments without impacting the businesses of small retailers.
As per the latest FDI policy of the government, foreign investments are only permitted in business-to- business e-commerce and marketplace models. However, it is not allowed in business-to-consumer e-commerce and inventory-based e-commerce models where inventory of goods and services is owned by an online retailer and is sold to consumers directly.
In a press notes (PNs), the department for promotion of industry and internal trade (DPIIT) under commerce ministry has said that in order to facilitate greater exports through easier and increased access of global markets by Indian sellers, the extant FDI policy has been reviewed and it is decided that the restrictions on inventory-based model of e-commerce shall not apply in case of exports of domestically manufactured and/or produced goods/products.
The DPIIT has also inserted a clause in the policy, which states: “An e-commerce entity is permitted to engage in an inventory-based model of e-commerce exclusively for the export of goods/products manufactured and/or produced in India as per the applicable provisions of the Foreign Trade Policy 2023… And the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015.”
The department has further said that the restrictions on B2C and the inventory-based model of e-commerce will not apply to the export of goods/products through e-commerce. “The decision will come into effect from the date of FEMA (Foreign Exchange Management Act) notification,” it said.
The proposal was initially mooted by the directorate general of foreign trade (DGFT), another arm of commerce ministry, which aimed at boosting India's exports through the e-commerce medium. E-commerce stakeholders, too, have demanded the same. The decision is important as the government is looking at ways to boost exports through the e-commerce medium.
As per the latest estimates of the government, the country’s e-commerce exports are about $2 billion currently compared to China's staggering $350 billion. However, the global e-commerce trade is about $800 billion and is estimated to reach $2 trillion by 2030.
