Boosting E-commerce Exports: India's New Initiatives

The Indian government is making significant strides to enhance e-commerce exports through dialogues with various stakeholders. This initiative comes in response to the challenging economic environment, particularly the steep 50 percent tariffs imposed by the US on Indian goods. The Commerce and Industry Ministry has engaged with e-commerce giants like Amazon and Flipkart, as well as small-scale Indian manufacturers, to explore viable models to boost e-commerce exports.

Recent consultations have focused on the e-commerce Export Hubs (ECEHs) model, which was introduced in the Union Budget. The Department for Promotion of Industry and Internal Trade (DPIIT) has already conducted one round of discussions, with more planned to identify effective strategies to support small and medium enterprises (MSMEs).

A key topic of discussion has been the inventory-based model of e-commerce. Currently, foreign direct investment (FDI) is permitted under the marketplace model, but not in the inventory-based model. MSMEs are advocating for the government to allow FDI in this model, arguing that it could significantly reduce compliance burdens. However, there is considerable opposition from retail stakeholders who fear it may disrupt the market.

The inventory-based model allows e-commerce companies to own the goods they sell, providing a more direct selling approach to consumers. In contrast, the marketplace model functions as an intermediary, connecting buyers and sellers without direct ownership of the inventory. This distinction is crucial as it affects the operational capabilities of small businesses.

India's e-commerce sector is predominantly composed of small businesses that export products valued between $25 and $1,000, including handicrafts, art, and garments. According to a report by GTRI, India's e-commerce exports could reach $350 billion by 2030. However, current exports stand at a mere $5 billion, starkly contrasting China's $300 billion in e-commerce exports.

Experts believe that India's e-commerce exports have the potential to grow rapidly, similar to the country's IT exports in the early 2000s. Yet, the existing e-commerce export provisions remain cumbersome, primarily reflecting regulations set for traditional B2B exporters. This has created a significant compliance burden for small enterprises, highlighting the need for a streamlined e-commerce export policy.

The report by GTRI suggests that India should formulate a distinct e-commerce export policy, drawing inspiration from successful frameworks in countries like China, Korea, Japan, and Vietnam. Such policies have empowered numerous firms to thrive in the global market, thereby enhancing their export capabilities.