DPIIT Discusses FDI In Inventory-Based E-Commerce Amid Tariff Concerns

(MENAFN- KNN India) New Delhi, Aug 28 (KNN) India is exploring new ways to boost e-commerce exports, but differences among stakeholders over the inventory-based model are slowing progress.

Indian Express has reported that Micro, Small and Medium Enterprises (MSMEs) have urged the government to allow foreign direct investment (FDI) in this model, arguing that it would reduce compliance burdens. However, major MSME bodies and traders remain strongly opposed.

According to Federation of Indian Micro, Small and Medium Enterprises (FISME) while there is merit in the case that e-commerce platforms could be used to handle logistics and other formalities for MSMEs in exports, opening the FDI could be slippery rope.

Currently, India permits 100 per cent FDI under the automatic route in the marketplace model of e-commerce, where companies act as facilitators between buyers and sellers.

In contrast, the inventory-based model-where e-commerce platforms own goods and sell directly to consumers-does not allow FDI.

The debate comes at a time when MSMEs are under pressure from rising US tariffs. Proponents believe that adopting the inventory-based model could ease compliance for smaller exporters and help them compete globally.

Retailers, however, fear that such a move could tilt the playing field in favour of large e-commerce firms.

India's e-commerce exports are still at a nascent stage, valued at just USD 5 billion, far below China's USD 300 billion. According to a report by the Global Trade Research Initiative (GTRI), India has the potential to grow its e-commerce exports to USD 350 billion by 2030, driven largely by MSMEs.

Popular export categories include handicrafts, garments, jewellery, art and books, with products typically priced between USD 25 and USD 1,000.

Experts believe that India's e-commerce exports could grow at a pace similar to the country's IT exports in the early 2000s. However, the current system is weighed down by complex rules designed for traditional B2B exporters.

GTRI has recommended that the government create a dedicated e-commerce export policy, similar to frameworks in China, Korea, Japan and Vietnam, to make global sales easier for small businesses.

(KNN Bureau)

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