India has allowed foreign direct investment in the inventory-based model of e-commerce, but only for exports of goods manufactured or produced in the country, marking a targeted shift in its tightly controlled digital retail policy. The move, announced by the Department for Promotion of Industry and Internal Trade (DPIIT) through a press note, removes the long-standing bar on foreign investment in inventory-led e-commerce when the activity is confined to outbound shipments.
Under the revised framework, restrictions on foreign investment in inventory-based e-commerce “will not apply in case of exports of domestically manufactured and/or produced goods/products,” according to DPIIT. E-commerce entities receiving foreign capital will be permitted to own inventory and directly export Indian-made goods, subject to the Foreign Trade Policy 2023, its handbook of procedures, and applicable foreign exchange regulations. The relaxation is explicitly limited to export operations, with existing rules continuing to prohibit foreign investment in inventory-led models for domestic business-to-consumer sales.
India’s FDI regime has so far allowed 100% foreign investment under the automatic route only in marketplace-style e-commerce platforms, where the online operator acts as a facilitator between buyers and sellers. In contrast, inventory-based models—where the e-commerce entity owns the goods it sells—have been treated as multi-brand retail and kept closed to foreign capital. DPIIT’s latest decision carves out an exception to this prohibition by ring-fencing inventory-led operations to exports of Indian-origin products.
The government has framed the policy change as a measure to boost India’s outbound shipments while maintaining safeguards for domestic retailers. By allowing foreign-funded e-commerce firms to hold stock and execute export orders directly, policymakers expect Indian sellers to gain easier access to global markets and more streamlined cross-border logistics. At the same time, the continuation of curbs on inventory-based and B2C e-commerce for domestic sales is intended to ensure that small local retailers are not displaced by foreign-backed platforms in the home market.
The new provision will take effect once it is notified under the Foreign Exchange Management Act (FEMA), completing the regulatory changes required for implementation. Until then, marketplace-based e-commerce with 100% FDI under the automatic route remains the primary model open to foreign investors for domestic operations in India.
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