Foreign Trade Policy and FDI

In E-commerce, the Marketplace model is a platform that only facilitates trade between third-party sellers and buyers. India allows 100% FDI here. The Inventory model is where the e-commerce firm owns the goods and sells them directly. India does not allow FDI in the inventory model to protect small local shopkeepers. Example: Amazon India acts as a marketplace, but it cannot legally own the products sold by the biggest sellers on its site.

A BIT is an agreement between two countries to protect private investments made by citizens of one country in another. It ensures 'National Treatment,' meaning the foreign investor gets the same treatment as a local one. Recent treaties, like the India-UAE BIT (2024), include 'Pre-establishment' rights. This means the rules protect the investor even during the planning stage before the business officially starts. Example: It protects an Emirati investor from sudden law changes in India.

This term refers to money coming into a country that does not create a repayment burden. When a foreign company invests in India via FDI, they buy equity (shares). India does not owe them interest or the principal amount back. This is different from an External Commercial Borrowing (ECB), which is a loan that must be repaid with interest. Thus, FDI is preferred for economic stability. Example: If a German car maker builds a plant in Pune, it is a non-debt flow.