FDI Policy Update - Inventory Based E-Commerce Model For Exports

BACKGROUND

• The Department for Promotion of Industry and Internal Trade (‘DPIIT’) issued a Press Note No. 3 (2026 Series) on 23 July 2026 amending the Consolidated FDI Policy Circular of 2020 dated 15 October 2020 (‘FDI Policy’) in relation to foreign funded ecommerce companies.
• With this amendment, an e-commerce entity with foreign investment is permitted to operate an inventory-based model exclusively for the export of goods manufactured
  in India. In other words, an FDI backed e-commerce entity can now purchase goods manufactured in India, hold them as inventory and sell them directly to customers
  outside India.
• We have summarized below the current regulatory position under FEMA, together with the amendments introduced by the DPIIT.

CURRENT POSITION

• Under the extant FDI policy, 100% FDI under the Automatic Route is permitted only in:
  - B2B E-commerce activity (i.e., online wholesale trading); and
  - Marketplace Model of E-commerce (where FDI backed entity acts purely as a facilitator between buyer and seller, without owning inventory)
• FDI is not permitted in the inventory-based model of e-commerce, i.e., where the ecommerce entity owns the inventory of goods and sells directly to the end users.

AMENDMENT

• As per the amendment, a foreign owned e-commerce entity would now be able to procure goods from Indian manufacturers, own the inventory and export them directly to overseas consumers.
• Further, the exports under this model should be in compliance with:
  - Foreign Trade Policy 2023 (FTP) read with the Handbook of Procedures (HBP); and
  - Foreign Exchange Management (Export of Goods & Services) Regulations, 2015
• The amendment will come into effect upon issuance of the corresponding FEMA notification.

AURTUS COMMENTS

• The amendment opens up a new export channel for Indian manufacturers, particularly MSMEs, by giving them access to the global reach and logistics networks of large e-commerce platforms.
• The amendment supports the Government's export promotion agenda amidst ongoing tariff and geopolitical challenges, while retaining the ban on FDI in inventory-based e-commerce for domestic sales to Indian consumers to protect domestic brick-and-mortar retailers.
• Businesses operating both export and domestic e-commerce channels may need to maintain clear operational segregation and robust internal controls to ensure that inventory procured under the export relaxation is not diverted to the domestic
  market.
• The policy change is not operational yet. It will become effective only upon issuance of the FEMA notification.