Government eases FDI rules for inventory-based e-commerce model to boost exports | Today’s news
The government on Thursday relaxed foreign direct investment (FDI) norms for e-commerce by allowing inventory-based e-commerce entities to export goods made or manufactured in India. The move is aimed at boosting outbound shipments and providing greater certainty to foreign investors. In an inventory-based e-commerce model, the online platform directly owns, stores and manages the inventory of products it sells to buyers.
The policy change comes as the government aims to increase the share of manufacturing in the gross domestic product (GDP) to 25% by 2035 and increase merchandise exports to $1 trillion by 2030. Manufacturing currently accounts for around 17% of GDP, while India’s merchandise exports stood at $26,442 billion in the fiscal year.
India’s e-commerce industry is dominated by small businesses that export products worth between ₹2,500 a ₹1,00,000, with popular items like handicrafts, art, books, ready-made garments, gems and jewellery.
In Press Note No. 3 (Series 2026) issued by the Department of Promotion of Industry and Internal Trade (DPIIT), the government said that the restrictions applicable to the inventory-based e-commerce model will not apply if such entities are exclusively engaged in the export of domestically manufactured or produced goods.
Under the existing FDI policy, 100% FDI is allowed in e-commerce and business-to-business (B2B) market models. However, FDI is not permitted in business-to-business (B2C) e-commerce or inventory-based e-commerce, where the platform owns the inventory and sells directly to consumers.
Broader access
The government said the policy was reviewed to facilitate greater exports by giving Indian sellers easier and wider access to global markets.
Accordingly, a new provision has been inserted in the Foreign Direct Investment Policy to allow an e-commerce entity to operate an inventory-based model exclusively for the export of goods manufactured and/or manufactured in India, subject to the provisions of the Foreign Trade Policy 2023, the Manual of Procedures (HBP) and the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, as amended from time to time.
The press release also clarified that existing restrictions on B2C and inventory-based e-commerce under the FDI policy will not apply to such export transactions. The decision will take effect on the date of notification under the Foreign Exchange Management Act (FEMA).
“The press release has provided a much-needed clarification that addresses the interpretation issue. The inventory-based e-commerce restriction was originally introduced to regulate domestic retail trading. However, questions have arisen as to whether the same restrictions should be extended to export-facilitating market models,” said Sunil Kumar, Partner, Tax & Regulatory Services, EY India.
“By clarifying the position, the government has removed uncertainty, strengthened policy predictability for foreign investors and aligned the FDI framework with India’s broader export promotion agenda while maintaining safeguards applicable to domestic e-commerce,” Kumar added.
