Government explores inventory-based e-commerce to boost exports amid US tariffs: Report

The Commerce and Industry Ministry has begun discussions with industry stakeholders, including major e-commerce players like Amazon and Flipkart, as well as Indian small and mid-sized manufacturers to explore models that could enhance e-commerce exports, a media report has said. This comes amid steep 50% US tariffs affecting Indian exports.

According to the source cited by The Indian Express, one round of consultations has already taken place, and the Department for Promotion of Industry and Internal Trade (DPIIT) has scheduled a second round next week.

The discussions aim to expand exports under the e-commerce Export Hubs (ECEHs) model announced in the Union Budget and to examine measures to support MSMEs.

Currently, 100% foreign direct investment (FDI) is allowed under the automatic route for the marketplace model of e-commerce, where companies act as digital intermediaries between buyers and sellers.

FDI is not permitted in the inventory-based model, where e-commerce entities can own and sell inventory directly. The government is evaluating whether allowing FDI in the inventory-based model could help MSMEs reduce compliance burdens, though retailers have expressed opposition.

India’s e-commerce sector is dominated by small businesses exporting products valued between $25 and $1,000, including handicrafts, art, books, ready-made garments, and gems and jewelry.

According to the Global Trade Research Initiative (GTRI), India’s e-commerce exports currently total around $5 billion, compared with China’s $300 billion, but have the potential to reach $350 billion by 2030.

The GTRI report also notes that India’s current e-commerce export provisions were designed for traditional B2B exporters, creating significant compliance challenges for smaller firms.

To address these issues, the report recommends a separate e-commerce export policy, citing examples from countries like China, Korea, Japan, and Vietnam, where dedicated policies have successfully supported global sales.