India to Ease 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 proposal will take effect only after the corresponding notification is issued under India’s foreign exchange regulatory 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), proposing 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.

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.

When will the policy take effect?

The amendment does not become effective immediately.

PN3 (2026) expressly states that the relaxation will take effect only after the corresponding amendments are notified under the Foreign Exchange Management framework. The press note has already been forwarded to the Department of Economic Affairs and the Reserve Bank of India for incorporation into the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and related reporting systems.

Until those amendments are notified, foreign-funded e-commerce companies should continue to comply with the existing restrictions on inventory-based B2C e-commerce.

Business implications

The July 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

Businesses considering the new model should assess several operational and compliance issues before implementation.

Product eligibility

Companies should maintain documentation demonstrating that exported inventory comprises goods manufactured or produced in India. Supplier declarations, procurement contracts, invoices, production records, and origin documentation may be required to substantiate eligibility.

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. If implemented through the corresponding FEMA amendments, the policy 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.

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