"FDI in the manufacturing sector is today on the automatic route. The manufacturing units will be allowed to sell its products through retail, including e-commerce platforms without any additional approval," Jaitley said while presenting the Budget for 2014-15 in Parliament.
Later on addressing the customary post-Budget press conference, Finance Secretary Arvind Mayaram said the move is not about allowing foreign retailers to sell items online, but to encourage domestic manufacturing.
"This provision is actually very simple. This is a clarification. When we talk about e-commerce, we talk about trading companies. That's different. Nothing has been said about (trading) companies in the Budget," he said.
Elaborating the step taken in the Budget to allow manufacturing units to use the e-commerce route, Mayaram said those companies who are manufacturing in India and have FDI, even if it is up to 100 per cent, are permitted to sell their products through E-commerce platform.
This move is aimed at giving a fillip to the manufacturing sector that has witnessed difficult times. In 2013-14, it contracted 0.8 per cent compared with a growth of 1.3 per cent previously. The manufacturing sector constitutes over 75 per cent of index of industrial production (IIP) that remained almost flat in 2013-14.
The IIP had declined 0.1 per cent compared with an expansion of 1.1 per cent in 2012-13, mainly on account of a drop in output in manufacturing, especially capital goods.
Manufacturing, which is considered as the critical area for job creation, contributes less than 16 per cent in the country's GDP. The government aims to increase it up to at least 25 per cent in the coming years.