Govt allows FDI in inventory-based e-commerce only for exports
New Delhi, Jul 23, 2026
The government on Thursday allowed foreign direct investment (FDI) in e-commerce firms operating on an inventory-based model if their stock is domestically manufactured and is exclusively for exports, according to a notification issued by the Department for Promotion of Industry and Internal Trade (DPIIT).
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.
"In order to facilitate greater exports through easier and increased access to global markets by Indian sellers, the extant FDI Policy has been reviewed and it is decided that the restrictions on the inventory-based model of e-commerce shall not apply in case of exports of domestically manufactured and/or produced goods/products," the DPIIT said in a notification issued on Thursday.
Under the revised policy, an e-commerce entity is permitted to operate an inventory-based model exclusively for the export of goods manufactured or produced in India.
The relaxation, however, does not extend to the domestic market. FDI will continue to remain prohibited in inventory-based e-commerce entities engaged in business-to-consumer (B2C) sales within India. Foreign-owned e-commerce companies can continue to undertake domestic B2C operations only under the marketplace model. FDI is already permitted in inventory-based e-commerce entities engaged in business-to-business (B2B) operations.
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. India's FDI policy permits foreign investment in marketplace-based e-commerce for domestic retail, but bars FDI in inventory-based B2C e-commerce operations within the country.
The notification provides much-needed clarity by resolving an interpretational issue under the existing policy, said Sunil Kumar, Partner, Tax and Regulatory Services, EY India.
"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 exports," Kumar 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 added.
The policy change comes as the government seeks to raise manufacturing's share in gross domestic product (GDP) 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.
[The Business Standard]
