Liberalisation Of FDI In The E-commerce Sector

In brief

In a significant liberalisation for FDI in the e-commerce sector, it now appears that the Government intends to lift the prohibition on inventory-based model of e-commerce for the exclusive purpose of boosting exports by domestic manufacturers and MSMEs, in line with the objectives of the Foreign Trade Policy 2023.

Presently, under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (‘NDI Rules’) and the FDI Policy, 2020 (‘FDI Policy’) issued by the Department for Promotion of Industry and Internal Trade (DPIIT), foreign direct investment (‘FDI’) is permitted up to 100% under the automatic route in B2B E-commerce operated through a marketplace model, whereby the e-commerce entity provides an information technology platform on a digital and electronic network for acting as a facilitator between buyers and sellers, without actually engaging in B2C themselves. However, FDI is prohibited in the inventory-based model of e-commerce, where inventory of goods and