The country’s Commerce and Industry Ministry is actively seeking to boost India’s exports, which have been hit hard by high US tariffs.
One way to do so is to allow foreign direct investment (FDI) in the inventory-based model of e-commerce, on which the ministry has sought the stakeholders’ views.
An official of the ministry said the proposal aims to increase India’s exports without impacting the businesses of small retailers.
Currently, the country’s FDI policy does not permit overseas investments in the inventory-based model of e-commerce, and instead allows 100 per cent FDI only via the automatic route in firms that are operating through a marketplace model, like Amazon and Flipkart.
The inventory-based model of e-commerce means an e-commerce activity where the inventory of goods and services is owned by e-commerce entities. A marketplace-based model, however, provides an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.
The proposal, meanwhile, seeks to permit e-commerce entities in the inventory-based model of e-commerce, exclusively for the export of goods and products manufactured or produced in India, in compliance with the existing FDI policy, the official said.
The FDI policy also makes it clear that an e-commerce entity providing a marketplace will not exercise ownership or control over the inventory, i.e. goods purported to be sold. Such an ownership, or control over the inventory, will render the business into an inventory-based model.
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As per estimates, India’s e-commerce exports currently stand at only USD 2 billion, compared to China’s staggering USD 350 billion.
The global e-commerce trade, on the other hand, is about USD 800 billion and estimated to reach USD 2 trillion by 2030.
India has set a target of USD 1 trillion of merchandise exports by 2030, and cross-border e-commerce trade has been identified as a source to meet this aim.
The proposal, which was mooted by the Directorate General of Foreign Trade (DGFT) and is being examined by the Department for Promotion of Industry and Internal Trade (DPIIT), has been under consideration for a while now, said the Commerce and Industry Minister, Piyush Goyal, last month.
“If such e-commerce firms want to keep inventory for exports, then I think we have no objection to that,” he had added.
E-commerce stakeholders, too, have asked for a relook at the FDI policy on this issue.
The government is looking at ways to boost exports through the e-commerce medium, for which it is working on measures such as setting up e-commerce export hubs.
A report by economic think tank GTRI said India’s e-commerce exports have the potential to reach USD 350 billion by 2030, but banking issues hinder growth and increase operational costs.
The country’s e-commerce industry is driven primarily by small businesses that export products valued between USD 25 and USD 1,000, including handicrafts, art, books, ready-made garments, imitation jewellery, gems and jewellery, home decor, ayurveda products and sports goods.
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