With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct?

UPSC Prelims 2022 Question:

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct?

1. They can sell their own goods in addition to offering their platforms as market-places.
2. The degree to which they can own big sellers on their platforms is limited.

Select the correct answer using the code given below:

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Correct Answer: Option b) 2 only

Explanation:

Learn more about Foreign owned e-commerce Firms operating in India in the given explanation below.

FDI Policy in India

• The FDI Policy prohibits retail trading in any form through e-commerce for the companies with FDI engaging in the activities of multi-brand retail trading. Multi-brand retail trading means selling different products of various brandsthrough one platform. India has not allowed FDI in inventory-driven models of e-commerce. The inventory model, which Walmart and Amazon use in the United States, is where the goods and services are owned by an e-commerce firm that sells directly to retail customers. The restriction is aimed largely at protecting India's vast unorganized retail sector that does not have the clout to purchase at scale and offer big discounts. So, statement 1 is not correct.
• India amended its FDI policy in e-commerce marketplaces in 2018 to classify any vendor accounting for more than 25% of the platform’s total sales as "controlled" by the marketplace operator. So, no seller must exceed 25 per cent of the total business on any foreign e-commerce platform. So, statement 2 is correct.

Therefore, option (b) is the correct answer.

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