Govt allows FDI in inventory model for e-commerce exports, Pg15

Key Highlights:

• The Department for Promotion of Industry and Internal Trade (DPIIT) has permitted Foreign Direct Investment (FDI) in the inventory-based model of e-commerce exclusively for exports.
• This policy change aims to boost Indian exports by easing compliance burdens for Micro, Small, and Medium Enterprises (MSMEs).
• Previously, FDI was allowed only in the marketplace model of e-commerce, with the inventory-based model being restricted.
• The move comes as the U.S. is proposing a 12.5% tariff on Indian goods deemed to be produced through forced labor.
• The new provision applies to goods manufactured and produced in India, adhering to the Foreign Trade Policy 2023 and other relevant regulations.

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Detailed Insights:

• The relaxation in FDI norms is intended to provide Indian sellers with easier and increased access to global markets.
• Indian manufacturers, particularly MSMEs, can now leverage large e-commerce platforms like Amazon and Flipkart to handle complex export paperwork.
• This policy shift addresses concerns from MSMEs regarding the tedious individual compliance requirements for international trade.
• The change is also crucial for Indian exports to comply with evolving global traceability norms, such as the Digital Product Passport (DPP) regulations in the EU.
• While FDI is now permitted for export-oriented inventory-based e-commerce, it remains prohibited for domestic business-to-consumer (B2C) sales in this model.
• Experts suggest this move could be a precursor to allowing FDI in the inventory-based model for domestic sales, a long-standing demand from global e-commerce companies.
• The government aims to increase manufacturing's share in GDP to 25% by 2035 and merchandise exports to $1 trillion by 2030.

Key Concepts Involved:

• Foreign Direct Investment (FDI): An investment made by a firm or individual in one country into business interests located in another country, establishing lasting interest and managerial influence.
• Inventory-based e-commerce model: An e-commerce activity where the e-commerce entity owns the inventory of goods and services and sells them directly to consumers.
• Marketplace-based e-commerce model: An e-commerce model where the entity provides an information technology platform to act as a facilitator between buyers and sellers, without owning the inventory.
• Department for Promotion of Industry and Internal Trade (DPIIT): A central government department under the Ministry of Commerce and Industry responsible for industrial policy, FDI, and ease of doing business.