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FDI in Now Allowed for Made in India Goods Exports Only
In a landmark policy shift, the Indian government has opened the door for in , but with a critical caveat: it applies exclusively to exports of domestically manufactured or produced goods. The decision, formalized through issued by the , marks the first time FDI has been permitted in the inventory model since the sector was liberalized in .
A Carefully Carved-Out Exception
Until now, FDI was allowed only in the
of e-commerce—where platforms act as intermediaries without owning inventory—and in
. The inventory-based model, where the e-commerce entity owns goods and sells directly to consumers, remained strictly off-limits for foreign investors. Press Note 3/2026 inserts a new paragraph, 5.2.15.2.5, into the consolidated FDI policy, creating a narrow exception:
"An e-commerce entity is permitted to engage in inventory-based model of e-commerce exclusively for the export of goods/products manufactured and/or produced in India."
The policy change is effective from the date of a corresponding notification under the , which is expected shortly. The has already issued on , operationalizing the framework through amendments to the .
What the New Framework Requires
The DGFT notification lays out a detailed compliance structure designed to prevent misuse and ensure that the relaxation benefits only genuine exports. Key requirements include:
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Separate Legal Entity: Any e-commerce entity that already operates a cannot use the same entity for inventory-based exports. It must set up a separate legal entity, registered as an with the DGFT. This effectively prevents existing foreign-backed marketplace giants from blending domestic and export inventory operations.
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Confirmed Export Orders Only: Goods can be procured from domestic sellers () only against a from a buyer outside India. Title in the goods does not pass to the EOR until such an order is in place, preventing speculative inventory buildup that could be diverted to the domestic market.
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: Every EOR must maintain a digital repository that tracks inventory from procurement through export, enabling regulators to trace each item backward to the domestic seller and forward to the overseas buyer. Physical segregation of export-designated stock from any other inventory is mandatory.
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Payment Guarantee for Sellers: The EOR must pay domestic sellers within seven days of acceptance of goods, irrespective of whether payment from the overseas buyer has been received. This places the burden of export realization—normally allowed nine months under FEMA—squarely on the e-commerce platform.
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Responsibility: The EOR must own and manage all for returned or rejected consignments, bearing the costs. Returned goods cannot be sold in the domestic market, closing a potential loophole.
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Pass-Through of Export Incentives: Any cash or cash-equivalent export incentives, such as or , must be passed on to the domestic seller in proportion to their goods' . This ensures that small manufacturers, not just the exporting platforms, reap the benefits.
A Strategic Boost for 'Made in India'
The policy is widely seen as a win for foreign e-commerce players like Amazon and Flipkart, which have long sought greater operational flexibility in India. However, the separation of entities and strict compliance norms level the playing field to some extent, preventing them from leveraging their domestic marketplace infrastructure for export operations.
For Indian manufacturers and sellers—especially micro, small, and medium enterprises (MSMEs) in Tier-II and Tier-III cities—the framework offers a direct route to global markets without the complexities of export documentation and logistics. By placing the compliance burden on the e-commerce platforms, the government hopes to lower entry barriers for small producers while retaining control over the export process.
Looking Ahead
Press Note 3/2026 and the accompanying DGFT notification represent the most significant relaxation of FDI in e-commerce since . While tightly circumscribed—limited to exports of Indian-origin goods—it signals a willingness to experiment with inventory-based models under controlled conditions. Industry observers expect this to serve as a pilot for further liberalization, possibly extending into multi-brand retail trading in the future.
For now, the message is clear: India is open for foreign investment in e-commerce, but only if it helps take 'Made in India' products to the world.
