India’s Commerce Ministry Strives to Enhance Export Potential Amidst Challenging Tariff Climate
The Ministry of Commerce and Industry in India is exerting concerted efforts to augment the nation’s export figures, severely impacted by elevated tariffs imposed by the United States.
One strategic avenue for revitalization involves enabling foreign direct investment (FDI) in the inventory-based e-commerce model. The ministry is currently soliciting perspectives from relevant stakeholders.
An official spokesperson disclosed that the initiative seeks to bolster India’s exportation capabilities without adversely affecting local small retailers.
At present, the nation’s FDI regulations prohibit international investments within the inventory-based e-commerce framework, permitting only 100% FDI through the automatic route for firms adhering to a marketplace model, exemplified by giants like Amazon and Flipkart.
The inventory-based e-commerce model entails an operational structure where entities possess the inventory of goods and services. In contrast, the marketplace-based model serves as an informational platform within a digital network, facilitating interactions between buyers and sellers.
In this proposed shift, e-commerce entities operating under the inventory-based model would be permitted strictly for the export of products manufactured or produced within India, abiding by the prevailing FDI regulations, as stated by the official.
Additionally, the FDI policy stipulates that any e-commerce entity functioning as a marketplace must not exercise ownership or control over the inventory of goods listed for sale. Engaging in such ownership would transition the business configuration into an inventory-based model.
Current estimates indicate that India’s e-commerce exports languish at merely USD 2 billion, starkly contrasting with China’s impressive USD 350 billion.
On the global stage, overall e-commerce trade is valued at approximately USD 800 billion and is projected to escalate to USD 2 trillion by 2030.
India has set an ambitious target of achieving USD 1 trillion in merchandise exports by 2030, with cross-border e-commerce identified as a pivotal contributor to fulfilling this goal.
This proposal, originally suggested by the Directorate General of Foreign Trade (DGFT) and now under review by the Department for Promotion of Industry and Internal Trade (DPIIT), has been deliberated for some time, according to Commerce and Industry Minister Piyush Goyal.
“If such e-commerce firms wish to maintain inventory for export purposes, we have no reservations regarding that,” he remarked.
Furthermore, stakeholders within the e-commerce sector have advocated for a reassessment of the FDI policy related to this matter.
The government is exploring avenues to propel exports through e-commerce channels, including the establishment of specialized e-commerce export hubs.
A recent report by the economic think tank GTRI highlighted that India’s e-commerce exports possess the potential to reach USD 350 billion by 2030; however, banking challenges significantly impede growth and escalate operational expenditures.
The nation’s e-commerce landscape is predominantly driven by small businesses that export goods with valuations ranging from USD 25 to USD 1,000.
These items encompass handicrafts, art, literature, ready-made garments, imitation jewelry, gems and jewelry, home decor, Ayurveda products, and sporting goods.
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