Research and Articles

I. Introduction

India’s foreign direct investment (“FDI”) framework for e-commerce has historically maintained a clear distinction between foreign participation in domestic online retail and export-oriented commercial activity. While FDI has long been permitted under the automatic route in business-to-business (“B2B”) e-commerce and the marketplace model of e-commerce (subject to conditionalities), foreign-invested entities have been prohibited from operating inventory-based models through which they own inventory and sell directly to consumers. That prohibition reflected a deliberate policy choice to preserve the existing retail framework by preventing foreign-controlled platforms from competing directly with domestic retailers in India's online consumer market.

Against this backdrop, the Department for Promotion of Industry and Internal Trade (“DPIIT”) issued Press Note 3 (2026 Series) on July 23, 2026¹. This amendment will take effect upon the issuance of the corresponding FEMA notification.

With this, e-commerce entities with foreign investment are permitted to operate an inventory-based model exclusively for the export of goods manufactured and/or produced in India subject to the Foreign Trade Policy 2023, the Handbook of Procedures², and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015³. The amendment does not relax the existing restrictions applicable to domestic B2C and inventory-based e-commerce, which continue unchanged. It creates a narrowly tailored exception that is confined to export transactions.

The significance of the amendment lies in what that exception reveals about the evolving approach to India’s e-commerce FDI policy. The Government has now chosen to facilitate export-oriented digital commerce by allowing foreign-investment in e-commerce entities which can own inventory but the activity is exclusively linked to exports of goods manufactured and/or produced in India. The amendment is therefore best understood not simply as a narrow relaxation of the FDI policy, but as a shift in the nature of the regulatory inquiry governing inventory-based e-commerce. Where the framework previously focused on who owns the inventory, it must now also examine where that inventory ultimately goes to. 

II. Key Impacts of the Amendment 

1. Boost to Indian Manufacturing and Export-Oriented Digital Brands

By permitting foreign-invested e-commerce entities to own inventory exclusively for the export of goods manufactured or produced in India, the amendment creates a significant opportunity for Indian manufacturers, MSMEs and emerging digital brands to build export-focused online businesses. Indian businesses can now attract foreign capital not merely for scaling their digital commerce infrastructure, but also for expanding manufacturing capacity, strengthening supply chains, enhancing warehousing and fulfilment capabilities, and improving product quality to cater to international markets. The policy, therefore, integrates India’s digital economy with its manufacturing ambitions by encouraging investment across the entire export value chain. 

2. Enabling a new export operating model for foreign-invested e-commerce entities

Under the marketplace model, a foreign-invested platform (e-commerce entity) is structurally confined to the role of intermediary though it is explicitly permitted to offer supportive ancillary services such as warehousing, logistics order fulfilment, call centre, payment collection, the seller owns the inventory, sets fulfilment standards, and bears quality and delivery risk, while the platform merely connects seller to buyer. Ownership of inventory changes the relationship fundamentally. A platform permitted to hold its own export inventory can aggregate products from multiple manufacturers, standardise quality control, consolidate packaging and logistics, and manage the end-to-end customer experience for an overseas buyer.

Amazon’s public response to the Press Note makes the intended shift explicit: the company described the amendment as strengthening its ability to help Indian sellers “reach global customers”. They specifically framed the change as empowering tier-2 and tier-3 manufacturers to access international markets, in support of its stated cumulative export target of $80 billion by 2030.⁴ The value of the carve-out lies less in export promotion as a slogan and more in the specific structural capabilities that inventory ownership unlocks for platforms operating at scale.

The amendment thus alters the legal role that a foreign-invested e-commerce entity may perform in an export transaction. Until now, such entities were confined to acting as intermediaries connecting buyers and sellers. The new carve-out permits them, for export transactions alone, to function as principals by purchasing goods from Indian manufacturers, owning inventory and exporting those goods in their own capacity. This represents a significant departure from the traditional marketplace architecture and creates a new export operating model under India’s FDI regime. 

3. Creation of export fulfilment and logistics infrastructure in India

The policy objective behind the amendment is unambiguous: the stated intent is to facilitate greater exports through easier and increased access to global markets by Indian sellers, without disturbing the domestic e-commerce landscape. The change arrives as the Government pursues two significant targets: raising manufacturing’s share of GDP to 25% by 2035 (from roughly 17% at present) and increasing merchandise exports to $1 trillion by 2030, against exports of $442 billion in the last financial year.⁵ Viewed against those targets, the amendment reads as one instrument among several intended to draw foreign capital into India's export infrastructure.

Beyond facilitating exports, the amendment is likely to encourage the establishment of dedicated export fulfilment infrastructure within India. Since foreign-invested e-commerce entities may now own inventory exclusively for exports, they can establish integrated warehousing, packaging, quality inspection, labelling, consolidation and fulfilment facilities designed specifically for servicing overseas consumers. This represents a departure from the traditional marketplace model, where inventory ownership rested with individual sellers. Over time, the amendment may position India not merely as a manufacturing base but also as a regional export fulfilment hub for cross-border e-commerce, strengthening the country’s logistics ecosystem and reducing barriers for Indian manufacturers seeking access to global markets. 

4. The amendment shifts the regulatory centre of gravity from prohibition to compliance 

The most significant legal consequence of the amendment is that the regulatory focus shifts from ownership of inventory to its end use. Earlier, a foreign-invested e-commerce entity could not own inventory for sale to consumers. Under the new carve-out, inventory ownership is permitted where it is used exclusively for exports. As a result, compliance will now depend on demonstrating that goods are genuinely export-bound.

This raises practical questions regarding –

1. inventory procurement and segregation;

2. shared warehousing;

3. documentation and audit trails;

4. platform for such exports.

which the Press Note does not address. The effectiveness of the amendment will therefore depend on the compliance framework and implementation guidance issued in the future. 

5. Potential restructuring of existing e-commerce businesses

The compliance risks outlined above cuts both ways. Foreign-invested groups relying on the carve-out will likely move toward structural separation between export-facing and domestic-facing operations, through dedicated entities for export, ring-fenced warehousing, or distinct procurement and fulfilment arrangements.

The Press Note does not require this, but clean segregation is probably the most defensible way to show that inventory is used “exclusively” for exports. Some platforms may pursue full corporate restructuring; others may simply tighten internal controls. Which approach prevails will likely vary and become clearer only as implementation guidance emerges. 

6. A shift towards outcome-based regulation

Perhaps the most enduring significance of the amendment lies in its regulatory philosophy. Rather than regulating e-commerce solely by reference to business models such as marketplace or inventory ownership, the Government has introduced a purpose-based exception linked to the economic outcome of the transaction i.e., promotion of exports and domestic manufacturing. This may indicate a gradual evolution towards more calibrated, objective-driven regulation, where policy relaxations are granted for activities that advance broader national priorities while preserving the underlying restrictions applicable to the domestic retail market.

Maulin Salvi, Santosh Gangavati and Aaron Kamath
You can direct your queries or comments to the authors.

¹Available at:  https://www.dpiit.gov.in/static/uploads/2026/07/ceb0cae74fd4e83094dc6b50c3d53f92.pdf (Last accessed on August 4, 2026)

²Available at:  https://content.dgft.gov.in/Website/dgftprod/e1cb52ea-0c3a-4c2a-8cd7-dd992e9bdc98/HBP_2023.pdf (Last accessed on August 4, 2026)

³Available at:  https://www.rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=10256 (Last accessed on August 4, 2026)

⁴Available at:  https://www.aboutamazon.in/news/small-business/amazon-to-enable-80-billion-in-ecommerce-exports-msmes (Last accessed on July 27, 2026)

⁵Available at:  https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1962137&reg=48&lang=2 (Last accessed on July 27, 2026)