The Department for Promotion of Industry and Internal Trade (DPIIT) aims to facilitate greater exports through easier and increased access of global markets by Indian sellers.
- Earlier, 100% FDI under the automatic route was allowed in B2B e-commerce and marketplace model, while the B2C and inventory-based model were prohibited.
Models of E-commerce
Parameter | Inventory-Based Model | Marketplace Model |
Definition | E-commerce Platform owns inventory and sells goods directly to consumers. E.g. DMart Ready, Apple, Zara | E-commerce Platform acts as an intermediary connecting buyers and third-party sellers. E.g. Amazon, Flipkart |
Pricing | Platform controls product pricing. | Platform cannot influence sale prices. |
Revenue | Earns from direct sales and profit margins. | Earns through commissions, listing fees, and advertising. |
Liability | Platform is liable for product quality, warranties, and after-sales service. | Seller is liable for product quality and after-sales obligations. |
Significance of FDI Policy Revision
- Enable Global Market Access: Helps Indian exporters comply with global traceability norms (e.g., EU Digital Product Passport) and addresses structural barriers.
- Boost MSME Exports: Enables large platforms to handle export compliances (testing, labelling, paperwork) while connecting rural and Tier-2/3 MSMEs to global markets.
- Support National Export Goals: Contributes to the target of $1 trillion merchandise exports by 2030 and 25% manufacturing share in GDP by 2035.
- Protect Domestic Market: Restricts FDI relaxation to exports, safeguarding the domestic e-commerce market from predatory pricing.
Challenges
- Prevent Domestic Spillovers: Difficult to ensure export inventory is not diverted to domestic sales.
- Others: Regulatory Challenges related to taxation and fraud prevention; Data Misuse Risks by Global platforms, etc.
