India has permitted 100% foreign direct investment (FDI) in inventory-based e-commerce, but only for export operations. This move allows foreign-funded platforms to hold inventory to help Indian MSMEs sell globally, while keeping the ban on inventory-based FDI for the domestic market intact.
The Government of India has operationalized a new policy, effective through the Directorate General of Foreign Trade (DGFT) Notification No. 27/2026-27 dated August 5, 2026, which allows 100% foreign direct investment (FDI) in inventory-based e-commerce models specifically for export purposes. This policy marks a strategic shift to help domestic Micro, Small, and Medium Enterprises (MSMEs) expand their reach into international markets by removing logistical barriers.
Under this framework, foreign-funded entities can now hold inventory of Indian-manufactured goods to facilitate global sales. To operationalize this, companies must register as an 'Exporter-on-Record' (EOR) with the DGFT. By acting as the EOR, these platforms assume the responsibility for customs documentation, compliance, and international logistics. This aims to bridge the gap for smaller manufacturers who previously struggled with the complex, high-cost requirements of direct export operations.
The initiative is supported by the creation of specialized 'E-Commerce Export Hubs,' designed to streamline warehousing and digital customs clearances. By allowing platforms to manage inventory, the government hopes to enable faster fulfillment for global orders, which is expected to support the growth of India's merchandise exports in the coming years.
It is critical for stakeholders to note that this policy is strictly limited to export operations. The existing government policy, which prohibits inventory-based e-commerce for foreign-funded entities within the domestic Indian market, remains in full effect. The government has maintained this separation to protect smaller domestic retail players from potential competition from large foreign-funded platforms.
Despite the potential for export growth, the policy faces scrutiny regarding implementation. Industry bodies, including the Confederation of All India Traders (CAIT), have raised concerns about the risk of 'leakage.' There is a fear that goods originally intended for export could be diverted into the domestic market, potentially creating unfair pricing competition. The success of this policy will depend heavily on the effectiveness of regulatory monitoring systems to ensure that inventory meant for global buyers does not enter local supply chains.
Investors and businesses should monitor the implementation of the E-Commerce Export Hubs and the operational guidelines set by the DGFT. The key monitorable will be how effectively platforms manage the physical and digital separation of inventory to ensure strict compliance with export-only mandates, as any regulatory friction could slow the adoption of this model.