GOVT. TO CLARIFY E-COMMERCE FDI RULES

• Be N By IAS, Delhi
• 09, Feb 2021

For: GS-3: Economy, E-commerce

CONTEXT:

The Centre plans to issue a clarification on the foreign direct investment (FDI) policy for the e-commerce sector in the wake of investigations into some foreign players’ operations following complaints about malpractices.

NEWS IN DETAILS:

• Online marketplaces: The government had sought information from the online marketplaces as part of a probe into ‘certain complaints from consumers and small retailers.
• E-Com as Service Provider only: Stressing that e-commerce platforms could only act as a service provider, the minister warned players ‘who break the law’ that they would have to correct their business practices at the earliest.

‘AGNOSTIC PLATFORM’:

• True spirit of the law: “Government is also considering certain clarifications to ensure that the e-commerce sector works in the true spirit of the law, of the rules that have been laid down.”
  • However. the e-commerce policy per se would, however, not be changed.

Agnostic platform: E-commerce is supposed to provide an agnostic platform so that buyers and sellers can trade with each other.

CONCERNS:

• The platform should not become a part of the trading transaction.
• Neither should it be funding it or having algorithms that give preference to one or the other.
• They should neither be promoting their own products, but provide all data required to make a rational choice and the choice should be the free choice of the consumers.”

WAY FORWARD:

“We believe that buyers and sellers should be given an opportunity to trade with each other; the platform is only a service provider,” the minister said. “And those who break that law will certainly have to respond to our concerns and correct their business practices at the earliest,” he added.

E-COMMERCE IN INDIA:

E-Commerce: E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. These business transactions occur either as

1. Business-to-business (B2B),
2. Business-to-consumer (B2C),
3. Consumer-to-consumer or
4. Consumer-to-business.

Types of E-Commerce:

1. Inventory base model of e-commerce
2. Marketplace base model of e-commerce
3. The hybrid model of inventory based and marketplace model.

Source: The Hindu

MCQs:

Q. Consider the following statements about E-commerce in India.

1. In Inventory-based model, the e-commerce firm simply acts as a platform that connects buyers and sellers.
2. In Marketplace model, the inventory of goods sold on the portal is owned or controlled by the e-commerce company.

Which of the above statements is/are correct?

• a) 1 Only
• b) 2 Only
• c) Both 1 and 2
• d) None of the above

ANS: D