FDI policy rejig: Centre seeks views on allowing inventory-based e-commerce for exports; DGFT, DPIIT examining proposal

The Commerce and Industry Ministry has circulated a proposal seeking comments from various central government departments on allowing foreign direct investment (FDI) in the inventory-based model of e-commerce, but only for export activities, PTI reported citing an official.The proposal, initiated by the Directorate General of Foreign Trade (DGFT), aims to boost India’s exports through the e-commerce route without affecting domestic retailers. The Department for Promotion of Industry and Internal Trade (DPIIT) is examining the proposal.Currently, India’s FDI policy prohibits overseas investment in the inventory-based e-commerce model, though 100 per cent FDI is permitted under the automatic route in firms operating marketplace-based models like Amazon and Flipkart.The new proposal suggests allowing e-commerce entities to adopt an inventory-based model exclusively for the export of goods manufactured or produced in India, in line with the existing FDI policy.Under the FDI norms, the inventory-based model is defined as one where the e-commerce entity owns the goods and services it sells. The marketplace model, in contrast, refers to an IT platform that facilitates transactions between buyers and sellers without exercising ownership or control over inventory.Experts note that the current FDI policy framework governs domestic sales and does not cover exports, creating ambiguity for firms focusing solely on international e-commerce operations.Commerce and Industry Minister Piyush Goyal recently confirmed that the proposal is under active consideration. “If such e-commerce firms want to keep inventory for exports, then I think we have no objection to that,” Goyal said.E-commerce industry stakeholders have also urged the government to revisit the FDI policy to enable smoother cross-border trade operations.The move comes as the government works to expand India’s export footprint through the e-commerce medium, including initiatives such as establishing e-commerce export hubs.India’s e-commerce exports are currently valued at around $2 billion, far behind China’s estimated $350 billion. The global e-commerce trade stands at approximately $800 billion and is projected to touch $2 trillion by 2030.According to a report by the Global Trade Research Initiative (GTRI), India’s e-commerce exports could reach $350 billion by 2030, provided regulatory and banking hurdles are addressed to reduce operational costs.India’s e-commerce export ecosystem is primarily powered by small businesses selling goods priced between $25 and $1,000. Key export categories include handicrafts, books, apparel, imitation jewellery, gems and jewellery, home décor, ayurvedic products, and sports goods.The government has set a merchandise export target of $1 trillion by 2030, identifying cross-border e-commerce as a key channel to achieve this goal.