Govt allows FDI in inventory-based e-commerce only for exports

The DPIIT said the restrictions on inventory-based e-commerce models would no longer apply where such entities deal exclusively in exports of goods manufactured or produced in India

The government on Thursday allowed foreign owned retail e-commerce entities to build their own inventories exclusively for exports of goods manufactured and produced in India, which is likely to benefit the US based online retail giants like Amazon and Walmart owned Flipkart.  

 

Through press note 3 of 2026 series, the Department of Department for Promotion of Industry and Internal Trade (DPIIT) allowed foreign direct investment (FDI) in inventory-based retail e-commerce entities for the export of domestically manufactured goods.

 

“The above decision will take effect from the date of FEMA (Foreign Exchange Management Act) notification,” DPIIT said.

 

An Amazon spokesperson said it welcomes the government’s decision. “This policy clarity strengthens our vision of helping Indian businesses reach global customers. Importantly, this initiative empowers tier 2 and tier 3 manufacturers to go global and establish Brand India on the world stage. We're committed to supporting India's export ambitions, working toward our $80 billion cumulative export target by 2030—reflecting confidence in India's manufacturing prowess. 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," the spokesperson added.

 

 

An email sent to Flipkart didn’t elicit any response till the time of going to the press.

 

At present, the government allows 100 per cent FDI in marketplace based e-commerce models but prohibits FDI in inventory based e-commerce models. By allowing FDI in inventory based e-commerce for exports only, the government has partially liberalised its existing policy while retaining the ban on ban on foreign-funded inventory-led e-commerce for the domestic market.

 

Under the inventory-based model, an e-commerce entity owns the inventory of goods and sells them directly to consumers. In contrast, under the marketplace model, the platform acts only as an intermediary, connecting independent sellers with buyers without owning the inventory.

 

DPIIT said the policy is intended to “facilitate greater exports through easier and increased access to global markets by Indian sellers”.

 

The policy also ends the distinction in business-to-business (B2B) and business-to-consumer (B2C) ecommerce when it comes to exports as FDI is already permitted in e-commerce entities engaged in B2B operations since 2000.

 

Ajay Srivastava, founder of Global Trade Research Initiative said permitting inventory-based e-commerce for exports is unlikely to remain a narrow exception. “Once foreign-funded platforms are allowed to own and manage inventory in India, pressure will inevitably grow to extend the same model to domestic sales—a demand global e-commerce companies have pursued for years. In practice, maintaining separate inventories for exports and domestic sales will be difficult to monitor, making the export-only carve-out a likely stepping stone towards full-scale inventory-based e-commerce under FDI,” he added.

 

However, Sunil Kumar, Partner, Tax and Regulatory Services, EY India said the notification provides much-needed clarity by resolving an interpretational issue under the existing policy. "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. 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 added.

 

The policy change comes as the government seeks to raise manufacturing's share in gross domestic product to 25 per cent by 2035 and increase merchandise exports to $1 trillion by 2030. Manufacturing currently accounts for around 17 per cent of GDP, while India's goods exports stood at $442 billion in the last financial year.