FDI Permitted In Inventory-based E-Commerce Indian Entities Focused On Exports

The Department for Promotion of Industry and Internal Trade (“DPIIT”) has, on July 23, 2026, issued Press Note No. 3 (2026 Series) (“Press Note 3”)¹ amending the foreign direct investment (“FDI”) policy applicable to the e-commerce sector. Under the Consolidated FDI Policy 2020² as amended from time to time (“FDI Policy”), FDI was not permitted in Indian entities that carried on an inventory-based model of e-commerce (where the inventory of goods/ services is owned by an e-commerce company and is sold to consumers directly). Press Note 3 now carves out a limited exception to this restriction for exports only. 

What Has Changed 

Press Note 3 inserts a new Para 5.2.15.2.5 (Inventory-Based Model of E-Commerce Exclusively for Exports) into the FDI Policy. By virtue of this insertion, FDI into an e-commerce entity that is engaged in the inventory-based model of e-commerce would be permitted where the model is limited exclusively for the export from India of goods/products that are manufactured and/or produced in India.

However, the changes introduced through the Press Note 3 will take effect only from the date of the corresponding notification under the Foreign Exchange Management Act, 1999.

Key Takeaways

This is a significant liberalisation of the Indian exchange control framework by the Government of India. The earlier restrictions on FDI into Indian companies carrying on the inventory-based model of e-commerce was intended to protect the interests of domestic retailers. The new liberalisation has been brought about to facilitate greater exports through easier and increased access of global markets by Indian sellers. For Indian manufacturers and homegrown brands, it is expected to ease access to global buyers and it could significantly expand the global reach of Indian brands.

By carving out exports of goods/products from the restrictions under the FDI Policy, DPIIT has sought to align the FDI Policy with India's export promotion objectives. The provisions of Press Note 3 are expected to accelerate export-linked inventory investment by large e-commerce platforms and increase sourcing from Indian manufacturers.

It is important to note that this liberalisation and the changes introduced through the Press Note 3 will take effect only from the date of the corresponding notification under the Foreign Exchange Management Act, 1999 and until such time, the existing restrictions on foreign direct investment into Indian entities carrying on the inventory -based model of e-commerce would continue. 

Footnotes

1. DPIIT F. No. P-15015/9/2025-FDI Policy dated 23 July 2026.

2. DPIIT File Number 5(2)/2020-FDI Policy Dated the October 15, 2020

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