Govt eases FDI rules for inventory-based e-commerce model to boost exports

The government on Thursday relaxed foreign direct investment (FDI) norms for e-commerce by allowing inventory-based e-commerce entities to export goods manufactured or produced 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 stock of products it sells to buyers.

The policy change comes as the government seeks to raise manufacturing's share in 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 $442 billion in FY26.

India’s e-commerce industry is dominated by small businesses that export products valued between ₹2,500 and ₹1,00,000, with popular items including handicrafts, art, books, ready-made garments, gems and jewellery.

In Press Note No. 3 (2026 Series), issued by the Department for Promotion of Industry and Internal Trade (DPIIT), the government said restrictions applicable to the inventory-based model of e-commerce will not apply where such entities are engaged exclusively in exports of goods manufactured or produced domestically.

Under the existing FDI policy, 100% FDI is permitted in business-to-business (B2B) e-commerce and marketplace models. However, FDI is not permitted in business-to-consumer (B2C) e-commerce or inventory-based e-commerce, where the platform owns the inventory and sells directly to consumers.

Wider access

The government said the policy has been reviewed to facilitate greater exports by enabling easier and wider access to global markets for Indian sellers.

Accordingly, a new provision has been inserted into the FDI policy, allowing an e-commerce entity to operate an inventory-based model exclusively for the export of goods manufactured and/or produced in India, subject to the provisions of the Foreign Trade Policy 2023, the Handbook of Procedures (HBP), and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015, as amended from time to time.

The press note also clarified that the 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 from the date of notification under the Foreign Exchange Management Act (FEMA).

"The press note has provided a much-needed clarification that resolves an 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 exports," said Sunil Kumar, partner, Tax and Regulatory Services, EY India.

"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," Kumar added.