1. They can sell their own goods in addition to offering their platforms as marketplaces. 

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

Ans: d

Explanation:

The Department of Industrial Policy and Promotion (DIPP) has issued the ‘Consolidated FDI Policy Circular of 2020’ (“FDI Policy”), which provides Foreign Direct Investment (FDI) regulations in Indian e-commerce in order to protect local retailers and small businesses from unfair competition. 

• Marketplace model: The current FDI policy in India allows 100% FDI under the automatic route for the marketplace model of e-commerce activities which means the e-retailer does not sell directly to consumers, but provides a platform to other sellers and acts as a facilitator between the buyer and the seller. 
• Inventory Model: The FDI policy in India prohibits foreign investment in the business of selling directly to consumers in the digital marketplace which means FDI is not permitted for the inventory-based model of e-commerce activities.
• B2B and B2C transactions: FDI guidelines in India allow business-to-business (B2B) e-commerce while putting restrictions on business-to-consumer (B2C) e-commerce.

This means foreign companies can establish e-commerce platforms that act as intermediaries between buyers and sellers without owning the goods sold. The policy is designed to ensure prevent price manipulation and avoid capital dumping, which could harm local businesses.

Additionally, foreign e-commerce entities must meet several conditions, including ensuring no single vendor accounts for more than 25% of their sales, submitting annual compliance reports to the Reserve Bank of India (RBI) and adhering to various GST compliance for e-commerce regulations.

Hence, both statements 1 & 2 are incorrect.

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