India Relaxes FDI Rules To Allow Inventory-Based E-Commerce For Exports

The centre has relaxed foreign direct investment (FDI) rules for export-focused e-commerce, allowing foreign-owned online retailers to hold inventory for goods shipped overseas. The decision marks the first major easing of India's e-commerce FDI framework in years and comes as the government looks to give exports a push after net FDI recorded an outflow of $74 million in May 2026.

Companies such as Amazon stand to gain from the policy change, which lets foreign-funded e-commerce firms source products directly from Indian sellers for exports instead of operating only as online marketplaces. The government said the decision is meant to give Indian manufacturers and exporters easier access to international markets.

What Does The New Policy Allow?

Until now, foreign-funded e-commerce companies could only operate as online marketplaces that connected buyers and sellers. They were not allowed to own inventory because India prohibits FDI in multi-brand retail and has sought to shield small traders from large foreign retailers.

A press note issued by the Ministry of Commerce and Industry said this restriction will no longer apply when the inventory consists of goods manufactured or produced in India and meant solely for export. The government said the move is aimed at increasing exports by improving access to global markets for Indian sellers.

Amazon said the policy would help manufacturers, especially those in smaller towns, reach overseas buyers. The company has set a target of enabling $80 billion in cumulative exports from India by 2030.

Experts Welcome Clarity But Flag Risks

The policy has drawn mixed reactions. Some trade and tax experts say the announcement removes long-standing uncertainty over whether inventory restrictions applied to export-focused e-commerce. They argue the original rules were designed to regulate domestic retail, and the latest clarification brings the FDI framework in line with the government's push to increase exports while leaving domestic e-commerce safeguards unchanged.

The export-only relaxation has also raised concerns over implementation. Some trade observers say it may be difficult to monitor whether inventory is used only for overseas sales. They believe the carve-out could eventually strengthen calls for similar rules to apply to the domestic market.

The Confederation of All India Traders (CAIT) has also urged the government to put in place strict monitoring, saying the export-only provision should not become a backdoor route for foreign companies to gain greater control over India's retail supply chain.

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