India plans to ease foreign investment rules to boost e-commerce exports

India is set to ease foreign investment rules for e-commerce exports, allowing firms like Amazon to buy directly from Indian sellers and sell products overseas, boosting trade potential

The government has drafted a proposal to relax foreign investment rules, allowing e-commerce firms such as Amazon to buy products directly from Indian sellers and sell them to customers abroad, according to a report by news agency Reuters.

 

Currently, foreign e-commerce companies in India are not allowed to sell goods directly to consumers, either domestically or internationally. They can only operate as marketplaces connecting buyers and sellers for a fee.

 

The restriction has been a contentious issue between New Delhi and Washington for years. Amazon has reportedly been lobbying the Indian government to ease the rules specifically for exports.

 

The proposed changes arrive amid ongoing talks between India and the US over a long-delayed trade deal. At the same time, many groups representing millions of small Indian retailers have urged the government to reject Amazon’s request, arguing that the company’s financial strength could threaten their businesses, Reuters reported.   

Export potential for small Indian businesses

 

According to a 10-page proposal from the Directorate General of Foreign Trade (DGFT), seen by Reuters, less than 10 per cent of small Indian businesses selling online domestically participate in global e-commerce exports. They are “constrained by complex documentation, compliance requirements".

 

“The proposal envisages a third-party export facilitation model, wherein a dedicated export entity linked to e-commerce platforms would manage compliance,” the DGFT document said. The draft proposal will need cabinet approval before implementation.

 

In December last year, Amazon said that it helped generate $13 billion in cumulative exports for Indian sellers since 2015, with plans to increase that figure to $80 billion by 2030.

 

The DGFT draft clarifies that the relaxed rules would only apply to exports. Any violation of the policy could lead to heavy penalties and criminal action.

 

Last year, India’s antitrust regulator found that Amazon had violated competition laws by favouring certain sellers, an allegation the company denies.

 

(With agency inputs)