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:
Correct Answer — D
Explanation
The official UPSC answer for this question is Neither 1 nor 2.
Here is how the law stood when the question was framed versus the recent regulatory update:
Then (When UPSC Asked the Question / FDI Norms & 2020 Rules):
- Statement 1 is incorrect: 100% FDI was permitted only in the marketplace model (acting purely as a digital intermediary). FDI in the inventory-based model was completely prohibited. Foreign platforms were barred from owning inventory, selling their own goods, or listing their own related entities as sellers to Indian consumers.
- Statement 2 is incorrect: The permitted ownership stake was not “limited”—it was zero. Under DPIIT Press Note 2 (2018), a marketplace entity was barred from hosting any vendor in which it or its group companies held equity participation or inventory control.
Now (Recent 2026 Policy Update):
- The Export-Only Exception (Press Note 3 of 2026 / FEMA NDI Rules): Foreign-funded entities are now permitted to hold inventory strictly for cross-border exports of goods manufactured/sourced in India.
- Domestic Retail Remains Barred: For the domestic Indian consumer market, foreign entities still cannot hold inventory, sell their own products, or own equity in sellers operating on their domestic marketplace.
Summary : The domestic retail position remains completely prohibited (Neither 1 nor 2); the recent reform is exclusively an export-promotion carve-out.