In a move that could potentially boost India’s goods exports, the government has permitted foreign direct investment in in an inventory-based model of e-commerce exclusively for export purposes.
“In order to facilitate greater exports through easier and increased access of global markets by Indian sellers, the extant FDI Policy has been reviewed and it is decided that the restrictions on inventory-based model of e-commerce shall not apply in case of exports of domestically manufactured and/or produced goods/products,” said the Department for Promotion of Industry and Internal Trade.
Under current guidelines, 100% FDI is permitted in Business to Business (B2B) e-commerce and marketplace model of e-commerce. However, FDI is not permitted in Business to Consumer (B2C) e-commerce and inventory-based model of e-commerce where inventory of goods and services is owned by e- commerce entity and is sold to the consumers directly, it said in the Press Note.
Through Press Note 3 (2026 Series), the DPIIT has accordingly inserted a clause in the FDI policy stating, “An e-commerce entity is permitted to engage in inventory-based model of ecommerce exclusively for the export of goods/products manufactured and/or produced in India as per the applicable provisions of the Foreign Trade Policy 2023…and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015.”
The move is expected to help small businesses access global markets and buyers more easily as well as global giants like Amazon.
Sunil Kumar, Partner, Tax and Regulatory Services, EY India said the Press Note has provided a much needed clarification that resolves interpretational issue. “The inventory-based e-commerce restriction was originally introduced to regulate domestic retail trading. However, questions had arisen on whether the same restrictions should extend to marketplace models facilitating export,” he said.
By clarifying the position, the government has removed uncertainty, reinforced policy predictability for foreign investors, and aligned the FDI framework with India’s broader export promotion agenda, while preserving the safeguards applicable to domestic e-commerce, he further said.
However, the Global Trade Research Initiative in a note said the move is expected to benefit large American companies such as Amazon and could pave the way for a wider opening of India’s online retail sector.
It noted that India had maintained this distinction for nearly a decade. “Under the marketplace model, the platform acts only as a digital intermediary, earning commissions while independent sellers own the goods. Under the inventory-based model, the platform owns the goods and sells them directly, like an online retailer. It can prioritize and squeeze the sellers,” it said.
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