The Central Government has made a big and important change in the rules of Foreign Direct Investment (FDI) related to the e-commerce sector of the country. Under this new step taken by the government, green signal has been given for foreign investment in the inventory-based e-commerce model only for the purpose of export. This simply means that now foreign funded e-commerce companies will be able to keep their stock within India and will also be able to sell goods abroad, but they will not be allowed to sell goods to domestic customers of the country through this model.
The government clearly believes that with this new decision it will be much easier for the best products manufactured in India to reach the global market directly, which will give a new impetus to the country’s overall exports. Along with this, the government has also made it clear that there has been no change in the stringent FDI rules already in place in the domestic e-commerce market.
What is this inventory-based e-commerce model?
Mainly two types of business models work in the world of online shopping and e-commerce. The first is the ‘Marketplace Model’, in which any e-commerce company only provides a platform to connect buyers and sellers. The second one is ‘inventory-based model’, in which the company itself buys the goods in bulk or through other means, stores them in its warehouses and sells them directly to the customers.
Till now, foreign-invested companies in India were not allowed to sell goods directly in the domestic market through this inventory-based model. The government has continued to ban this for the domestic market, maintaining its old policy and protective stance, but now special relaxation has been given only for export activities.
A big strategy to increase the country’s exports
The main objective of the government is to make India a huge manufacturing and export hub of the world. With the implementation of this new system, foreign-invested e-commerce companies will be able to store products in India and easily send them to different countries of the world. This step is expected to greatly help our country’s manufacturers, especially MSMEs, small traders and local artisans and producers in gaining access to the international market.
Many market and business experts believe that this step of the government will further strengthen the big initiatives like ‘Make in India’ and ‘Local for Global’ in the country. Apart from this, with the huge investment coming in the logistics, warehousing and supply chain sector of the country, new and excellent employment opportunities will also increase rapidly.
What will be the impact on domestic businesses and shopkeepers of the country?
There were many discussions regarding this new change, but the government has completely clarified the situation and made it clear that this special exemption has been given only for exports. This simply means that e-commerce companies with foreign investment will not be able to do any online retail business within India through this inventory model. All the old rules and restrictions related to FDI in the country’s domestic market will remain in force exactly as before.
The main objective of this policy is to ensure that the interests of the traditional shopkeepers and small domestic retail traders of the country are completely protected. While on one hand the government wants to take the exports from the country to sky-high heights, on the other hand it also seems to be fully committed to maintaining a good balance between the interests of domestic traders. This new policy is being considered a very important milestone in the direction of increasing India’s global business. If foreign companies use this wonderful opportunity properly, then in the coming few years there can be a huge boom in e-commerce exports from India.
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