In a significant relaxation in its long-held stance, the government has proposed allowing foreign direct investment (FDI) in e-commerce companies that hold inventory and don’t just act as marketplaces as long as this inventory is used for exports.

India has for nearly a decade allowed FDI only in business to business (B2B) e-commerce and where the e-commerce company only serves as a marketplace but does not hold inventory of its own. This was aimed at protecting small traders in India and to uphold the government’s ban on FDI in multi-brand retails as well.

“In order to facilitate greater exports through easier and increased access of global markets by Indian sellers, the extant FDI policy has been reviewed and it is decided that the restrictions on inventory-based model of e-commerce shall not apply in case of exports of domestically manufactured and/or produced goods/products,” the Ministry of Commerce and Industry said in a Press Note issued on Thursday (July 23, 2026).

According to Sunil Kumar, partner in the tax and regulatory services division of EY India, this press note has provided clarity in an area that was earlier under doubt.

“The inventory-based e-commerce restriction was originally introduced to regulate domestic retail trading,” Mr. Kumar said. “However, questions had arisen on whether the same restrictions should extend to marketplace models facilitating export.”

“By clarifying the position, the Government has removed uncertainty, reinforced policy predictability for foreign investors, and aligned the FDI framework with India’s broader export promotion agenda, while preserving the safeguards applicable to domestic e-commerce,” he added.

According to Ajay Srivastava, founder of the trade think-tank Global Trade Research Initiative, the move benefits global platforms such as Amazon and creates a new exception to India’s marketplace-only FDI policy.

“Permitting inventory-based e-commerce for exports is unlikely to remain a narrow exception,” Mr. Srivastava said. “Once foreign-funded platforms are allowed to own and manage inventory in India, pressure will inevitably grow to extend the same model to domestic sales — a demand global e-commerce companies have pursued for years.”

He added that, in practice, maintaining separate inventories for exports and domestic sales will be difficult to monitor, making the export-only carve-out a likely stepping stone towards full-scale inventory-based e-commerce under FDI.

Published - July 23, 2026 10:23 pm IST