FDI is permitted in Indian entities that carry out single brand retail via e-commerce. To encourage investment in e-commerce sector, FDI policy permits 100% foreign investment under the automatic route in companies engaged in e-commerce provided that such companies would engage only in Business to Business (B2B) e-commerce. Further, an entity is permitted to undertake retail trading through e-commerce under the following circumstances:

i) A manufacturer is permitted to sell its products manufactured in India through e-commerce retail.

ii) A single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

iii) An Indian manufacturer is permitted to sell its own single brand products through e-commerce retail. Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70% of its products in house, and sources, at most 30% from Indian manufacturers.

Recently, with the objective of bringing clarity on the FDI policy on e-commerce sector, the Government introduced Guidelines for Foreign Direct Investment (FDI) on e-commerce and clarified that 100% FDI under automatic route is permitted in marketplace model of e-commerce and FDI is not permitted in inventory based model of e-commerce.

This information was given by the Minister of State (Independent Charge) in the Ministry of Commerce & Industry Smt. Nirmala Sitharaman in a written reply in Lok Sabha today.

FDI in e commerce: marketplace model allowed under automatic route while inventory-based model remains prohibited. FDI in e-commerce permits the marketplace model under the automatic route while prohibiting inventory-based e-commerce. Full foreign investment via automatic route is allowed for companies engaged exclusively in B2B e-commerce. Retail e-commerce is permitted when a manufacturer sells products made in India, when an existing single-brand brick-and-mortar retailer moves online, or when an Indian manufacturer sells its own single-brand products; the investee must be the brand owner, manufacture the majority of products in India in-house, and source a limited share from other Indian manufacturers.