India Amends FDI Policy to Allow Export-Only Inventory-Based E-Commerce

The Department for Promotion of Industry and Internal Trade (DPIIT) has amended India's Foreign Direct Investment (FDI) Policy to allow foreign-invested e-commerce companies to operate an inventory-based e-commerce model exclusively for the export of goods manufactured and/or produced in India. The move aims to strengthen India's export ecosystem, promote domestic manufacturing, and enhance the country's integration into global value chains.

What is the Amendment?

¨     Foreign-invested e-commerce entities can now own and operate an inventory-based e-commerce model solely for exports.

¨     The permission applies only to goods manufactured and/or produced in India.

¨     The relaxation does not change the existing rules governing domestic e-commerce operations.

Key Highlights of the Decision

¨     DPIIT has reviewed the existing FDI Policy and relaxed FDI norms for the inventory-based model of e-commerce exclusively for exports.

¨     A new provision has been inserted in the FDI Policy stating: An e-commerce entity is permitted to engage in an inventory-based model of e-commerce exclusively for the export of goods/products manufactured and/or produced in India.

¨     The relaxation applies only to exports of domestically manufactured and/or produced goods and does not apply to domestic retail sales.

¨     Existing restrictions on Business-to-Consumer (B2C) and inventory-based e-commerce continue for the domestic market.

¨     Export operations must comply with the Foreign Trade Policy (FTP), 2023, Handbook of Procedures (HBP) and Foreign Exchange Management (Export of Goods & Services) Regulations, 2015, as amended from time to time.

¨     The decision will take effect from the date of notification under the Foreign Exchange Management Act (FEMA).

About FDI in E-commerce

¨     Existing FDI Policy: India permits 100% Foreign Direct Investment (FDI) under the automatic route in Business-to-Business (B2B) e-commerce and the marketplace model of e-commerce.FDI is not permitted in Business-to-Consumer (B2C) e-commerce and the inventory-based model of e-commerce.

¨     Marketplace Model: In the marketplace model, the e-commerce entity provides a digital platform connecting buyers and sellers.The platform acts only as a facilitator and does not own inventory.Goods are sold by independent sellers through the platform.

¨     Inventory-Based Model: The e-commerce entity owns the inventory of goods and services.The platform directly sells goods to consumers.FDI was not permitted in this model because it effectively allows foreign companies to enter multi-brand retail, a sector where FDI has remained tightly restricted.The restriction was originally introduced to regulate domestic retail trading and protect small retailers.

Why was this Change Needed?

¨     To Facilitate Greater Exports: The amendment enables easier access to global markets for Indian sellers, supporting the Government’s target of US$1 trillion merchandise exports by 2030.

¨     To Reduce Compliance Burden on MSMEs: Large e-commerce companies can handle export documentation, paperwork, testing and labelling, helping MSMEs, of which only about 12,000 currently undertake e-commerce exports.

¨     To Meet Emerging Global Traceability Requirements: Large e-commerce companies can help MSMEs comply with new traceability regulations, including the European Union’s Digital Product Passport (DPP).

¨     To Address US Tariff Challenges: The amendment comes ahead of the United States replacing the 10% global tariff and proposing a 12.5% tariff on certain goods imported from India, strengthening the need to boost export competitiveness.

¨     To Provide Policy Clarity: The amendment clarifies that inventory-based restrictions do not apply to export operations, reinforcing policy predictability while preserving domestic e-commerce safeguards.

Significance

¨     Boost to MSME Exports: Enables MSMEs to access global markets through large international e-commerce platforms while reducing the burden of paperwork, testing, labelling and export compliance.

¨     Supports Manufacturing and Export Targets: Supports the Government’s objective of increasing manufacturing’s share in GDP from around 17% to 25% by 2035 and achieving US$1 trillion merchandise exports by 2030.

¨     Improves Ease of Doing Business: Removes policy uncertainty and reinforces policy predictability for foreign investors.

¨     Supports Tier-II and Tier-III Manufacturers: Enables regional manufacturers and SMEs to reach global customers and strengthen Brand India.

¨     Better Integration with Global Supply Chains: Provides greater flexibility in sourcing, warehousing and shipping Indian-made products to overseas markets.

¨     Strengthens India’s Export-led Growth Strategy: Expands the role of global e-commerce platforms in increasing exports of domestically manufactured goods.

The government has amended the FDI policy to allow inventory-based e- commerce for exports of India-made goods, aiming to boost global market access for sellers.