The Indian government on Thursday, 23 July 2025, permitted foreign direct investment (FDI) in the inventory-based model of e-commerce, but exclusively for the export of goods manufactured or produced in India — a targeted policy shift designed to expand global market access for domestic sellers while leaving protections for small retailers intact.

What the Policy Change Covers

The Department for Promotion of Industry and Internal Trade (DPIIT) issued a Press Note announcing that the existing restrictions on the inventory-based e-commerce model will no longer apply when the model is used solely for exporting domestically made goods. A new provision has been inserted into the consolidated FDI policy to formalise this carve-out.

Under the revised framework, e-commerce entities can now hold and sell inventory — something previously barred under FDI rules for the business-to-consumer (B2C) segment — provided the transactions involve exports only. All such exports must comply with the Foreign Trade Policy 2023 and the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015.

How the Existing FDI Framework Works

Under the current rules, FDI is permitted in business-to-business (B2B) e-commerce and the marketplace model, where platforms act as intermediaries connecting buyers and sellers. However, FDI in the B2C inventory-based model — where an e-commerce entity owns the goods and sells directly to consumers — has remained prohibited.

The new provision does not alter those domestic restrictions. It creates a parallel export-only channel where foreign-funded platforms can operate an inventory model, giving Indian manufacturers and producers a potentially faster route to international buyers through well-capitalised global platforms.

Why the Move Matters for Indian Exporters

The policy targets a structural gap: Indian small and medium manufacturers often lack the logistics, warehousing, and last-mile capabilities that large global e-commerce platforms can provide. By allowing FDI-backed inventory models for exports, the government is effectively inviting global platforms to front the capital and infrastructure costs, with Indian-made goods as the beneficiary.

Notably, the safeguard clause — restricting the model to exports only — is designed to prevent any spillover into domestic retail, where small traders have historically resisted FDI-backed inventory models over fears of predatory pricing and market displacement.

India's Rising FDI Profile

The announcement comes as India climbs the global FDI rankings. According to the United Nations Conference on Trade and Development (UNCTAD)'s World Investment Report, India rose two places to become the world's 11th largest FDI recipient in 2025, with inflows surging nearly 44% to $38.89 billion — up from $27.09 billion in 2024, when India ranked 13th.

The UNCTAD report noted that 'India continued to strengthen its position as a major investment destination in 2025, supported by an active policy agenda aimed at broadening its investment base beyond services and accelerating advanced manufacturing.'

What Comes Next

The revised FDI policy is effective from the date of the DPIIT Press Note. Industry bodies and export-focused e-commerce platforms are expected to begin structuring compliant models in the near term. The government's broader push to lift merchandise exports — amid a shifting global trade order — makes this a policy to watch for its implementation pace and uptake by international platforms.