India Eases FDI Rules for Inventory-Based E-Commerce Exports

On July 23, 2026, the DPIIT announced a policy decision to relax India’s FDI rules for the e-commerce sector by permitting foreign-funded e-commerce entities to operate an inventory-based model exclusively for exporting goods manufactured domestically.

The framework was put into effect on August 5, 2026, following the issuance of the corresponding notifications under India’s Foreign Trade Policy and foreign investment framework.

India’s central government agency has announced a targeted relaxation allowing foreign-funded e-commerce companies to own and export inventory comprising goods manufactured or produced in India. The change is intended to expand overseas market access for Indian sellers while retaining existing restrictions on foreign-funded, inventory-based e-commerce serving domestic consumers.

On July 23, 2026, the Department for Promotion of Industry and Internal Trade (DPIIT) issued Press Note No. 3 (2026 Series), or PN3 (2026), stating an exception to India’s foreign direct investment (FDI) restrictions on inventory-based e-commerce.

While inventory-based e-commerce remains restricted for domestic sales, the revised policy will permit e-commerce entities with FDI to source goods from Indian manufacturers, maintain inventory, and sell those goods directly to customers outside India.

The policy has now been operationalized through two notifications issued by the Directorate General of Foreign Trade (DGFT) on August 5, 2026. These notifications establish the registration, operational, and compliance framework for inventory-based cross-border e-commerce exports.

What has changed under India’s e-commerce FDI policy?

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Previously, foreign investments in India’s B2C e-commerce sector were limited to the marketplace model, where e-commerce platforms facilitate transactions between independent buyers and sellers without owning the goods being sold. Foreign-invested e-commerce companies were generally prohibited from operating an inventory-based model, under which they own inventory and sell products directly to consumers.

PN3 (2026) creates a limited exception by allowing e-commerce entities with FDI to adopt an inventory-based model exclusively for exporting goods manufactured or produced in India.

Eligible companies will be able to do the following:

1. Purchase qualifying Indian-made goods from manufacturers or suppliers
2. Hold those goods in their own inventory
3. Manage pricing, warehousing, fulfillment, and export processes
4. Sell the goods directly to customers outside India

Regulatory framework governing the new export model

The revised FDI policy does not create a separate export regime. Companies must continue to comply with India’s existing export and foreign exchange regulations.

Together, these frameworks determine who may undertake the activity, how exports must be carried out, and how export payments must be received and reported.

What remains prohibited?

The amendment does not change India’s existing restrictions on domestic inventory-based e-commerce.

Businesses operating both domestic marketplace platforms and export-oriented inventory operations should maintain clear separation between the two models.

How has the policy been operationalized?

The latest policy relaxation for foreign-funded e-commerce has now been operationalized through DGFT Notification No. 27/2026-27 and Public Notice No. 25/2026-27, both issued on August 5, 2026. The notification incorporates the Inventory-based Cross-border E-Commerce Facilitation Framework into the FTP 2023, while the public notice amends the HBP 2023 to establish the registration process, operational procedures, and compliance requirements for eligible businesses.

Business implications

The 2026 announcement allows foreign-funded e-commerce companies to take greater control of export-oriented supply chains by purchasing goods directly from Indian manufacturers, maintaining inventory, and managing international fulfillment.

Compared with the marketplace model, this approach may also support the following:

• Centralized quality control and packaging
• Greater control over pricing, customer service, and returns and
• More efficient consolidation of products from multiple Indian suppliers.

For Indian manufacturers, particularly MSMEs, the policy could simplify access to overseas markets. Rather than managing exports independently, manufacturers may supply products directly to inventory-based export platforms.

Industries likely to benefit include:

1. Apparel and textiles
2. Handicrafts and home furnishings
3. Consumer electronics and accessories
4. Beauty and personal care products
5. Toys and educational products
6. Leather goods and footwear
7. Jewelry and accessories
8. Packaged and specialty food products.

Market access will nevertheless remain subject to product-specific export controls, certification requirements, destination-country regulations, and intellectual property considerations.

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Compliance considerations

With the operationalization of the policy, businesses adopting the inventory-based export model must establish compliance mechanisms covering registration, inventory management, supplier relationships, export documentation, and ongoing regulatory reporting.

Product eligibility

Companies must ensure that only goods manufactured or produced in India are exported under the framework. Exporters should maintain adequate records linking procurement, GST invoices, and export documentation to demonstrate that exported inventory satisfies the framework’s eligibility requirements and origin declarations.

Separation of export and domestic operations

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Companies operating both marketplace and export inventory models should establish separate inventory controls, warehousing arrangements, accounting records, sales channels, and fulfillment workflows.

Export and foreign exchange compliance

Businesses must clearly allocate responsibility for customs declarations, export documentation, goods and services tax (GST) treatment, product classification, export proceeds, and foreign exchange reporting in accordance with the FTP, HBP, and Foreign Exchange Management Act (FEMA) regulations.

Supplier due diligence

Inventory ownership increases commercial and regulatory responsibility. Companies should strengthen supplier verification, product quality controls, intellectual property checks, product safety assessments, and destination-market compliance procedures.

Outlook

PN3 (2026) represents a targeted liberalization rather than a broad overhaul of India’s e-commerce FDI policy. The policy, now in effect, could encourage greater investment in export-oriented supply chains, improve overseas market access for Indian manufacturers, and support more integrated cross-border e-commerce operations.

(This article was originally published on August 4, 2026. It has since been updated Auguat 5, 2026.)

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