FDI Permitted in Inventory-Based E-commerce for Export of Indian Goods
- Praharsh Singh
- 13 hours ago
- 2 min read
On 23 July 2026, the Department for Promotion of Industry and Internal Trade (“DPIIT”) issued Press Note No. 3 (2026 Series) (“PN3”), introducing a significant but targeted relaxation to India’s foreign direct investment (“FDI”) framework for the e-commerce sector.[1]
Under the existing framework, FDI is permitted in business-to-business (B2B) e-commerce and the marketplace model of e-commerce. However, it is not permitted in the inventory-based business-to consumer (B2C) model i.e., where the e-commerce entity owns the inventory and sells directly to consumers.[2]
PN3 now creates a narrow exception by permitting foreign-funded e-commerce entities to operate an inventory-based model exclusively for the export of goods manufactured or produced in India.
Press Note 3 – The New Changes
1. PN3 permits an e-commerce entity with FDI to operate an inventory-based model exclusively for the export of goods manufactured or produced in India. This allows a foreign-funded e-commerce entity to purchase Indian-made goods, hold them as inventory and sell them directly to customers outside India.
2. These exports must be carried out in accordance with the Foreign Trade Policy, 2023, the Handbook of Procedures, and all applicable foreign exchange regulations governing exports.[3]
3. This is a significant change from the earlier framework, where e-commerce entities with foreign investment were generally allowed to operate only as marketplace platforms and were not permitted to own the inventory sold through their platforms.
4. Under the framework, eligible e-commerce entities may undertake export-only inventory operations through a registered Exporter-on-Record (“EOR”). The EOR procures goods from Indian Sellers-on-Record (“SORs”) against confirmed overseas orders, undertakes exports in its own name, and assumes responsibility for export operations as well as compliance with destination-country requirements.[4]
Domestic E-Commerce Remains Unchanged
1. The relaxation introduced under PN3 applies only to exports. It does not allow e-commerce entities with foreign investment to adopt an inventory-based model for sales to customers within India. As a result, the existing restrictions on FDI in inventory-based B2C e-commerce remain unchanged for domestic sales.
2. Businesses engaged in both, export and domestic operations will need to clearly separate the two business models. Inventory meant for export should be kept distinct from domestic marketplace operations, with strong inventory tracking systems and internal controls in place to ensure that export inventory is not diverted to the domestic market in violation of the FDI framework.[5]
Benefit of the Reform
1. The reform aims to make it easier for Indian manufacturers and sellers to access global markets. By allowing foreign-funded e-commerce platforms to directly purchase and export Indian-made goods, it can reduce the operational and compliance burden on individual sellers.
2. It also gives large e-commerce platforms greater flexibility to build export-focused supply chains, including procurement, inventory management and fulfilment. For Indian manufacturers, especially micro, small and medium enterprises (MSMEs), this provides a simpler way to reach overseas customers through established global platforms.
3. The reform aims to promote exports by helping Indian manufacturer’s access global markets, while continuing to maintain the existing restrictions on foreign-funded inventory-based e-commerce for domestic sales.
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