India Consults on Allowing Foreign E-commerce Firms to Build Export Inventory

The Ministry of Commerce and Industry has initiated discussions with various government departments regarding a significant policy shift that could permit e-commerce companies with substantial foreign investment to establish and manage their own inventory of products specifically for export from India.

Under the prevailing regulations, foreign-invested e-commerce platforms are restricted to functioning solely as marketplaces within the Indian domestic market. They are prohibited from holding their own inventory or selling goods directly on their own account. The proposed policy change is intended to leverage the rapidly growing global e-commerce export market, where India currently holds a small share. Projections indicate the global cross-border e-commerce market could reach $2 trillion by 2034, while India aims to increase its e-commerce exports from $4-5 billion annually to $200-300 billion by 2030. China currently leads in this segment with $250 billion in exports.

Government officials believe this move will not adversely impact small domestic retailers, as the focus is on exports, thereby avoiding direct competition within the Indian market. Products such as handicrafts, garments, jewelry, and home decor are identified as having high export potential through e-commerce channels.

Impact: This policy change could significantly boost India's foreign exchange earnings, create new opportunities in the logistics and supply chain sectors supporting exports, and help Indian businesses reach a wider global customer base through enhanced e-commerce channels. The government's proactive stance in policy evolution positions India to capture a larger share of the global digital trade pie. Impact Rating: 8/10

Difficult terms: Inventory: A stock of goods that a company has available for sale. Marketplaces: Online platforms where multiple sellers list their products, facilitating transactions between buyers and sellers (e.g., Amazon Marketplace, eBay). Cross-border e-commerce: The sale of goods and services across international borders using electronic means. OECD's two-pillar solution: An international agreement framework led by the Organisation for Economic Co-operation and Development to address tax challenges arising from the digitalization of the economy. ECEH (E-commerce Export Hubs): Dedicated facilities designed to streamline the export process for e-commerce shipments, offering services like expedited customs clearance and quality certification. RoDTEP (Remission of Duties and Taxes on Exported Products): A scheme that reimburses certain duties and taxes incurred during the manufacturing and export process, making Indian exports more competitive. Duty drawback: A refund of customs duties paid on imported goods that are subsequently exported.