The Government of India has made a significant change to the Foreign Direct Investment (FDI) rules for the e-commerce sector after several years. Under the new rules, e-commerce companies with foreign investment will be able to directly purchase products made in India from Indian sellers, store them, and sell them to customers overseas. However, this permission is limited to exports, while the existing ban on direct sales in the domestic market will continue.
This change is not merely a relaxation of rules for large e-commerce companies. It is also aimed at giving manufacturers and SMEs, especially those in smaller cities, easier access to global markets.
Let us understand this policy change in detail and find out whether it can become a major opportunity for India’s e-commerce exports and investors.
What’s Happening?
In India, 100% FDI is currently allowed under the marketplace-based e-commerce model. In this model, the online platform only connects buyers and independent sellers. The platform cannot own the inventory of products or sell goods directly to customers.
In contrast, under the inventory-based model, the e-commerce company purchases goods, stores them, and then sells them directly to customers. The government has now allowed FDI in this model, but only for the export of goods manufactured or produced in India. Companies with foreign investment will not be allowed to use this relaxation to sell goods directly to customers in the domestic market.
The Department for Promotion of Industry and Internal Trade (DPIIT) introduced this change through Press Note 3 of 2026. The decision will come into effect from the date the relevant FEMA notification is issued. Companies will also have to comply with the applicable provisions of the Foreign Trade Policy 2023 and the Foreign Exchange Management Regulations, 2015.
How Will Indian Sellers and Exports Benefit?
Under the new model, e-commerce companies will be able to directly purchase products from Indian sellers. This can make it easier for sellers to reach international customers, as the platform will handle inventory management, overseas sales, and global distribution.
According to the government, the objective is to boost exports by giving Indian sellers easier and wider access to global markets. Manufacturers and small businesses in Tier-2 and Tier-3 cities, in particular, could benefit, as they often lack the resources to independently manage international logistics and marketing.
Amazon has welcomed the decision, stating that it will create new opportunities for regional manufacturers and SMEs. The company has set a target of enabling cumulative exports worth $80 billion from India by 2030. Flipkart, however, had not issued a statement on the policy at the time the reports were published.
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Ban on Domestic Retail and the Challenge of Monitoring
The government has made it clear that this relaxation applies only to exports. E-commerce companies with foreign investment will not be allowed to adopt the inventory-based model for domestic retail. The objective is to promote exports while ensuring that small domestic retailers are not adversely affected.
However, trader organisations have raised concerns about the possibility of misuse. The Confederation of All India Traders (CAIT) has argued that allowing foreign companies to control inventory could increase their influence over the supply chain. The organisation has called for a robust monitoring mechanism and strict oversight.
According to Business Standard, some experts believe that maintaining separate inventories for exports and domestic sales could be difficult in practice. Others view the move as an important policy clarification that could reduce uncertainty for foreign investors while preserving the existing safeguards for India’s domestic e-commerce sector.
What Does This Mean for Investors?
For investors, this policy change could create new opportunities for companies involved in e-commerce, logistics, warehousing, export services, and domestic manufacturing. By allowing companies to hold inventory for exports, e-commerce platforms can manage quality control, packaging, order fulfilment, and international deliveries more efficiently.
However, investors should look beyond the large e-commerce platforms and also focus on businesses that help connect Indian manufacturers and SMEs with global supply chains.
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What’s Next?
India’s e-commerce market is expanding rapidly, with major platforms such as Amazon and Flipkart playing a significant role. According to an April report by Google and Deloitte, India’s e-commerce market, currently valued at around $90 billion, is expected to grow to $250 billion by 2030.
This policy change is also aligned with India’s broader economic strategy. The government aims to increase the share of manufacturing in GDP from around 17% currently to 25% by 2035. It has also set a target of raising merchandise exports to $1 trillion by 2030, compared with goods exports of $442 billion in the previous financial year.
Therefore, this FDI relaxation is not merely a change in e-commerce regulations. It could become an important step towards connecting Indian manufacturers with global buyers, boosting exports, and strengthening e-commerce as a key driver of India’s manufacturing growth.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
