India allows FDI in ecomm inventory model for exports
The FDI policy on e-commerce has been amended to permit the inventory-based model exclusively for the export of goods manufactured or produced in India.
The change was notified through a Press Note issued by the Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry.
The relaxation applies only to export transactions and must comply with the Foreign Trade Policy 2023 and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015.
Domestic B2C retail sales through the inventory-based model remain prohibited for foreign-invested e-commerce entities, preserving safeguards for small retailers.
The move is aimed at giving Indian sellers easier and increased access to global markets to boost outbound shipments.
FDI Policy in E-Commerce — Marketplace vs Inventory Model
India's Consolidated FDI Policy distinguishes two e-commerce business models. The marketplace model is where the e-commerce entity acts only as a technology/facilitation platform connecting buyers and sellers without owning the inventory — 100% FDI is permitted here under the automatic route. The inventory-based model is where the e-commerce entity itself owns the goods and sells directly to consumers (B2C) — FDI in this model has been prohibited to protect small and medium retailers from being undercut by deep-discounting foreign-funded platforms.
Key Details
- 100% FDI under automatic route is allowed in the marketplace model of e-commerce and in B2B e-commerce.
- FDI is not permitted in inventory-based B2C e-commerce as a general rule.
- Press Note 2 (2018 Series), effective 1 February 2019, tightened marketplace-model rules — an e-commerce platform is deemed to "control" a seller's inventory if 25% or more of that vendor's purchases come from the platform or its group companies, and such vendors are barred from selling on that marketplace (to prevent platforms from indirectly running inventory-model B2C retail through preferred sellers).
- The new amendment carves out a narrow exception: inventory-based FDI is allowed only when the goods are exported (not sold domestically) and are manufactured/produced in India.
The new provision does not alter the general marketplace-vs-inventory framework — it adds a targeted exception so that FDI-funded entities can hold and directly export India-made inventory abroad, without gaining the ability to sell that inventory to Indian consumers.
Foreign Trade Policy (FTP) 2023 and Export Promotion Framework
The Foreign Trade Policy 2023, administered by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry, replaced the FTP 2015-20 and moved from an incentive-based to a remission/entitlement-based, process-simplification approach to export promotion (e.g., tie-in with RoDTEP — Remission of Duties and Taxes on Exported Products).
Key Details
- FTP 2023 has no fixed end date (dynamic, updated as needed) unlike earlier five-year policies.
- It emphasizes ease of doing business, automatic approvals, and reduced compliance burden for exporters.
- Any inventory-based e-commerce export activity under the new FDI carve-out must additionally comply with FTP 2023 provisions and FEMA (Export of Goods & Services) Regulations, 2015, which govern realization and repatriation of export proceeds.
The government explicitly anchored the new FDI exception to compliance with FTP 2023 and FEMA export regulations, meaning any FDI-funded inventory-led export business must still operate within India's existing export documentation, GST refund/RoDTEP, and foreign exchange realization framework.
FDI in Retail — Broader Policy Context
India permits 51% FDI (via government approval route) in multi-brand retail trading (MBRT) subject to conditions (minimum investment, 30% local sourcing, etc.), and 100% FDI in single-brand retail trading (mostly automatic route since 2018 reforms). E-commerce retail to consumers by an entity in which a foreign company has FDI is treated as a specific, more restrictive category to prevent circumvention of MBRT conditions via online channels.
Key Details
- Single-brand retail trading (SBRT): 100% FDI, automatic route (relaxed local sourcing norms introduced in 2018).
- Multi-brand retail trading (MBRT): 51% FDI, government approval route, conditions on minimum capitalization and local sourcing.
- E-commerce inventory-model B2C retail has stood apart from both, remaining closed to FDI to prevent large foreign-funded platforms from bypassing MBRT/SBRT conditions.
By limiting the new exception strictly to exports of India-made goods, the government avoids reopening the inventory-model B2C retail question domestically, keeping the safeguards for small retailers (kirana stores) intact while unlocking a new FDI-funded export channel.
- The exception applies to inventory-based e-commerce only for export of goods/products manufactured and/or produced in India.
- Notified via a DPIIT Press Note under the Ministry of Commerce and Industry.
- Marketplace model of e-commerce: 100% FDI permitted under the automatic route (unchanged).
- Inventory-based B2C e-commerce for domestic sale: FDI remains prohibited.
- Compliance required with Foreign Trade Policy 2023 and FEMA (Export of Goods & Services) Regulations, 2015.
- Press Note 2 (2018 Series), effective 1 February 2019, is the last major overhaul of e-commerce FDI rules before this export-specific carve-out.