The Department for Promotion of Industry and Internal Trade (“DPIIT”), under the Ministry of Commerce and Industry, has issued Press Note No. 3 (2026 Series) dated July 23, 2026, announcing its decision to review the Consolidated Foreign Direct Investment Policy (“FDI Policy”). Pursuant to this decision, a new Paragraph 5.2.15.2.5 is proposed to be inserted into the FDI Policy to permit an e-commerce entities having foreign investment to undertake an inventory-based model of e-commerce exclusively for the export of goods manufactured or produced in India (“New Amendment”). The decision will come into effect from the date of the relevant notification under the Foreign Exchange Management Act, 1999.

This marks a significantly policy shift. While India continues to prohibit foreign investment in inventory-based e-commerce for domestic businesses to consumer (“B2C”) sales, the Government has now created a limited exception for export-oriented operations.

Existing FDI framework for e-commerce

Under the existing FDI Policy, 100% foreign investment is permitted under the automatic route in the marketplace model of e-commerce. In a marketplace model, the e-commerce entity merely provides a digital platform that facilitates transactions between independent buyers and sellers, and it cannot own or control the inventory being sold through its platform.

In contrast, foreign investment has generally not been permitted in the inventory-based model of e-commerce. The existing FDI Policy also provides that the inventory of a vendor is deemed to be controlled by an e-commerce marketplace entity where more than 25% of the vendor’s purchases are made from the marketplace entity or its group companies. This safeguard is intended to prevent marketplace operators from directly functioning as inventory for domestic online sales.

What has changed?

The New Amendment permits the e-commerce entities with foreign investment to undertake an inventory-based model exclusively for exporting goods or products that are:

• manufactured in India; or

• produced in India.

Such exports must be undertaken in accordance with the applicable provisions of the Foreign Trade Policy 2023, the Handbook of Procedures, and the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, as amended from time to time.

The restrictions relating to inventory-based e-commerce will not apply to export transactions permitted under the new provision. Accordingly, the e-commerce entities having foreign investment may, for export purposes:

• acquire and own inventory of Indian-manufactured or Indian-produced goods;

• market such goods to customers outside India; and

• sell the goods directly to overseas consumers.

Domestic Restrictions Continue to Apply

The New Amendment is limited exclusively to exports. It does not permit foreign-funded e-commerce entities to undertake unrestricted inventory-based B2C sales to customers within India.

For domestic sales, the existing marketplace-model conditions-including restrictions on ownership and control of inventory-will continue to apply. Therefore, the New Amendment should not be interpreted as a general liberalisation of inventory-based e-commerce in India.

Commercial Significance

The New Amendment has the potential to reshape India's Cross-Border e-commerce ecosystem.

Foreign-funded e-commerce companies can now establish export-oriented inventory export-oriented hubs in India, enabling them to procure goods from Indian manufacturers, maintain inventory domestically and fulfill international orders directly. This model may significantly improve delivery timelines, inventory management and customer experience in overseas markets.

For Indian manufacturers, artisans, micro, small and medium enterprises, and other domestic producers it may create significant opportunities by providing them with an additional export channel.

In nutshell, the New Amendment may potentially:

• attract additional foreign investment into export-oriented e-commerce operations;

• increase demand for goods manufactured and produced in India;

• strengthen warehousing, logistics and export-fulfilment infrastructure;

• generate employment in manufacturing, packaging, technology and logistics; and

• improve the global availability and visibility of Indian products.

At the same time, the independent exporters and sellers operating directly through cross border e-commerce marketplaces may face greater competition from large, foreign-funded e-commerce entities that possess stronger logistics networks, technology infrastructure and international marketing capabilities.

Compliance Considerations

While the New Amendment, introduces flexibility, inventory-based e-commerce entities intending to undertake inventory-based exports and access global market will need to establish robust compliance systems and an effective monitoring framework. In particular, such entities should ensure:

• clear segregation between inventory intended for export and inventory connected with domestic operations;

• proper documentation establishing that the goods were manufactured or produced in India;

• compliance with export documentation, customs and foreign-exchange realisation requirements;

• maintenance of transparent records relating to procurement, pricing, returns and overseas sales; and

• prevention of diversion of export inventory into the domestic B2C market.

Given the limited scope of the relaxation, the concerned Regulators may also need to establish appropriate reporting, certification and audit mechanisms to ensure that the export-specific relaxation is not used to circumvent the restrictions applicable to domestic inventory-based e-commerce.

Conclusion

The New Amendment represents a measured liberalisation in India’s FDI policy for e-commerce. Rather than opening the inventory-based model for domestic retail, it creates a targeted framework aimed at strengthening India’s export ecosystem and enhancing the global reach of Indian manufactured products and at the same time seeks to balance the protection of the domestic retail market.

Beyond facilitating Cross-Border e-commerce, the New Amendment, also aligns the Government’s broader objective of strengthening India’s external sector. By encouraging export-led investment and increasing merchandise exports, the framework has the potential to increase foreign exchange earnings and complement India’s wider efforts to improve external sector resilience through sustained foreign exchange inflows.

If implemented effectively, the New Amendment could encourage greater foreign investment in export-oriented e-commerce, strengthen India’s manufacturing and logistics sectors and provide Indian producers/ manufacturers with improved access to international markets.

Author:

Avantika Shukla – Senior Associate

Aditya Kamboj - Associate