Why in News?
The Department for Promotion of Industry and Internal Trade (DPIIT) has allowed Foreign Direct Investment (FDI) in the inventory-based model of e-commerce for the export of goods manufactured in India, marking the first major relaxation in India’s e-commerce FDI policy.
What is the New Policy?
- 100% FDI is now permitted in the inventory-based e-commerce model, only for exports of goods manufactured in India.
- The relaxation is under the Foreign Trade Policy (FTP), 2023 and related regulations.
- It does not apply to domestic e-commerce sales.
Marketplace vs Inventory Model
- Marketplace Model: The e-commerce platform acts as an intermediary connecting buyers and sellers without owning inventory. 100% FDI under the automatic route is already permitted.
- Inventory Model: The e-commerce entity owns the inventory and sells directly to consumers. FDI was previously prohibited but is now allowed only for export operations.
Why is this Significant?
- Aims to boost India’s e-commerce exports, currently around US$5 billion, compared to China’s US$300 billion.
- Encourages exports by Micro, Small and Medium Enterprises (MSMEs), artisans, and startups.
- Supports exports of handicrafts, garments, books, gems and jewellery, and other Made in India products.
Concerns
- Monitoring separate inventories for domestic and export sales may be difficult.
- Experts believe this could become a stepping stone towards permitting FDI in inventory-based domestic e-commerce.
About DPIIT
- Full Form: Department for Promotion of Industry and Internal Trade.
- Ministry: Ministry of Commerce and Industry.
- Functions:
- Formulates and administers India’s FDI Policy.
- Promotes industrial development and ease of doing business.
- Oversees startup and industrial promotion initiatives.
[2022] With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct?
1. They can sell their own goods in addition to offering their platforms as market-places.
2. The degree to which they can own big sellers on their platforms is limited.
Select the correct answer using the code given below:
[A] 1 only
[B] 2 only
[C] Both 1 and 2
[D] Neither 1 nor 2