The Indian government has relaxed FDI rules for inventory-based e-commerce, allowing foreign investment for exports of domestically produced goods, aiming to boost exports.
New Delhi, India Jul 24, 2026 ALN: India on Thursday eased its Foreign Direct Investment (FDI) policy to allow foreign direct investment in the inventory-based model of e-commerce exclusively for export purposes, in a move aimed at increasing outbound shipments. This change marks a significant shift in the regulatory landscape for e-commerce in India, particularly for businesses looking to expand their reach in international markets.
The new guidelines state that the restrictions on foreign investment in inventory-based e-commerce will “not apply in case of exports of domestically manufactured and/or produced goods/products,” as confirmed by the Department for Promotion of Industry and Internal Trade (DPIIT) in a recent press note. This means that foreign entities can now invest in e-commerce platforms that hold inventory of Indian-made goods, provided these goods are intended for export.
The Indian government has been contemplating this regulatory easing since last year as part of a broader strategy to boost the country’s exports without adversely affecting small retailers. The initiative is seen as a response to the growing demand for Indian products in international markets and aims to leverage the capabilities of e-commerce to facilitate these exports.
The proposal was initially put forward by the Directorate General of Foreign Trade (DGFT), which is responsible for formulating policies governing foreign trade in India. The DGFT's primary concern has been to enhance India’s export capabilities through e-commerce channels, which have become increasingly important in the global trade landscape.
“The DGFT will come out with details and safeguards around the new policy in a few weeks, and it could take another 4-5 months to get operational,” an official involved in the discussions noted. This timeline indicates that while the policy has been announced, its practical implementation will require further regulatory work.
Currently, FDI is permitted in business-to-business (B2B) e-commerce and the marketplace model, but it remains restricted in business-to-consumer (B2C) e-commerce and inventory-based models where the inventory of goods and services is owned by an e-commerce entity and sold directly to consumers. The recent policy change is expected to create a new channel for Indian sellers to access global markets, allowing them to tap into the growing demand for Indian products worldwide.
Industry experts have expressed cautious optimism regarding the impact of this policy change. “I don’t see this having any meaningful impact on the domestic e-commerce landscape because the relaxation is exclusively for exports,” said a senior e-commerce industry executive who requested anonymity. “Where it could make a difference is in creating an additional channel for Indian-made products to reach global consumers.” This perspective underscores the view that while the change may not significantly alter the domestic market dynamics, it can open up valuable opportunities for exporters.
Amazon, one of the world’s largest e-commerce platforms, welcomed the policy decision, highlighting its potential to empower tier-2 and tier-3 manufacturers to reach global markets. An Amazon spokesperson stated, “This enabling amendment unlocks opportunities for regional manufacturers and SMEs, allowing us to better serve seller partners and contribute meaningfully to India’s export-led growth strategy.” Amazon’s endorsement suggests that major e-commerce players see the policy as a positive step toward enhancing their operational capabilities in India.
The Indian government had previously formed a working group comprising industry and government stakeholders to discuss the proposed e-commerce export inventory model. This initiative was partly in response to the 50% tariffs imposed by the United States in August 2025, which had raised concerns about the competitiveness of Indian exporters. The discussions were aimed at identifying new avenues for growth in exports while mitigating the impact of these tariffs on small exporters.
As part of the upcoming regulatory framework, the government is expected to introduce guardrails to ensure the effective implementation of the new policy. These may include mechanisms for export entities to claim goods and services tax refunds and duty remissions, as well as safeguards to prevent the misuse of seller-level data. Such measures are crucial for maintaining the integrity of the e-commerce ecosystem and ensuring that the benefits of the policy reach the intended beneficiaries.
The official cited earlier mentioned that while discussions took place at the cabinet level, the decision did not require the formal approval of the Union Cabinet. This indicates that the government is keen to expedite the implementation of this policy to capitalize on the current momentum in global trade.
Around 70% of India’s small and medium enterprises (SMEs) actively leverage e-commerce platforms in various segments, including fashion and apparel, gems and jewellery, home and living, organic wellness, beauty, and handcrafted lifestyle products. These SMEs are expected to be the biggest beneficiaries of the easing of FDI regulations, as they often face challenges in accessing international markets due to limited resources and exposure.
Recent data indicates that India’s goods exports rose by 15.5% year-on-year to $40.41 billion in June, with merchandise exports during the April-June FY27 period reaching $129.32 billion. The country’s e-commerce exports are estimated to be between $4-5 billion annually, highlighting the significant potential for growth in this sector. The easing of FDI regulations is expected to provide a boost to these figures, allowing more Indian products to compete on the global stage.
Terming the decision a “positive step for India’s export ecosystem and domestic manufacturers,” a second senior e-commerce executive remarked that companies like Flipkart, Amazon India, and Meesho will continue to operate under the existing domestic policy, as the new regulations do not alter the domestic marketplace framework. This suggests that while the policy change is primarily focused on exports, it will not disrupt the existing dynamics of the domestic e-commerce market.
In conclusion, India’s decision to ease FDI regulations for e-commerce exports is a strategic move aimed at enhancing the country’s export capabilities while ensuring that the interests of small retailers are safeguarded. By allowing foreign investment in inventory-based e-commerce for export purposes, the government is positioning Indian manufacturers to better compete in the global marketplace. The forthcoming details and safeguards will be critical in determining the effectiveness of this policy in achieving its intended goals.
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