Proposal for Foreign Direct Investment in E-commerce Exports Under Review
The Ministry of Commerce and Industry has disseminated a proposal soliciting feedback from various central government entities regarding the potential allowance of foreign direct investment (FDI) in the inventory-based model of e-commerce, albeit strictly for export-oriented activities, as reported by PTI, citing an official source.
Initiated by the Directorate General of Foreign Trade (DGFT), this proposal is designed to enhance India’s export performance via e-commerce channels while safeguarding the interests of domestic retailers. The Department for Promotion of Industry and Internal Trade (DPIIT) is currently evaluating this proposition.
At present, India’s FDI policy precludes foreign capital in the inventory-based e-commerce model. In contrast, it permits a complete 100% FDI under the automatic route for firms utilizing marketplace-based models, such as Amazon and Flipkart.
The new initiative pertains to authorizing e-commerce entities to implement an inventory-based framework exclusively for the exportation of goods that are manufactured or produced within India, aligning with the prevailing FDI guidelines.
Under the existing FDI regulations, the inventory-based model is characterized by e-commerce entities owning the goods and services they sell. The marketplace model, by contrast, represents an IT platform enabling transactions between buyers and sellers without the imposition of ownership or control over inventory.
Experts observe that the present FDI policy framework, focused primarily on domestic sales, overlooks exports, resulting in ambiguities for firms dedicated to international e-commerce operations.
Commerce and Industry Minister Piyush Goyal recently affirmed that the proposal is under serious contemplation. “Should such e-commerce firms desire to maintain inventory for export purposes, then we have no objections to that,” Goyal remarked.
Stakeholders within the e-commerce industry have also implored the government to reassess the FDI policy to facilitate more streamlined cross-border trade activities.
This initiative coincides with the government’s efforts to enhance India’s export presence through the e-commerce sector, which includes ventures such as the establishment of e-commerce export hubs.
Currently, India’s e-commerce exports are valued at approximately $2 billion, a stark contrast to China’s estimated $350 billion. The global e-commerce market is approximately $800 billion, with projections indicating a potential leap to $2 trillion by 2030.
A study conducted by the Global Trade Research Initiative (GTRI) posits that India’s e-commerce exports could ascend to $350 billion by 2030, contingent upon the resolution of regulatory and banking issues to diminish operational costs.
The nascent e-commerce export ecosystem in India predominantly comprises small enterprises selling products within the price range of $25 to $1,000.
Major export categories encompass handicrafts, books, apparel, imitation jewelry, gems and jewelry, home décor, ayurvedic products, and sports equipment.
The government has articulated a merchandise export target of $1 trillion by 2030, positioning cross-border e-commerce as a pivotal avenue to realize this ambition.
Source link: Timesofindia.indiatimes.com.
