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UPSC Prelims 2022

Foreign-Owned E-Commerce Firms - UPSC Prelims 2022 Question

Prelims General Studies Paper - 1

Jan 10, 2023

2 min read

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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 

 

Answer

 

The correct answer is B. 2 only

 

1. They can sell their own goods in addition to offering their platforms as marketplaces, this is not true for foreign-owned e-commerce firms operating in India. According to the Foreign Direct Investment (FDI) policy on e-commerce, a foreign-owned e-commerce entity, whether an operator or marketplace, is prohibited from selling its own products or inventory on its platform. The policy aims to maintain a level playing field for both domestic and foreign e-commerce companies and prevent foreign-owned e-commerce companies from having an unfair advantage over domestic companies.

 

2. The degree to which they can own big sellers on their platforms is limited, this is correct statement. According to the FDI policy, a foreign-owned e-commerce marketplace entity cannot exceed 25% equity stake in an Indian-owned seller. The policy aims to prevent a situation where a foreign-owned e-commerce entity can influence or control the sale of goods on its platform through ownership of a large seller.

 

The FDI policy on e-commerce aims to provide a level playing field for all e-commerce companies, domestic and foreign, and to prevent foreign-owned e-commerce companies from having an unfair advantage over domestic companies. The policy is intended to protect the interests of small and medium-sized enterprises, and to ensure that e-commerce is conducted in a fair and transparent manner.

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