On Thursday, the government approved foreign direct investment in an inventory-based e-commerce model solely for export purposes, a step aimed at boosting India’s outbound shipments while avoiding any adverse impact on small retailers’ businesses.

To promote higher exports by providing Indian sellers with simpler and broader access to global markets, the existing FDI Policy has been reassessed, and it has been decided that the restrictions on the inventory-based model of e-commerce will not apply to exports of goods or products that are manufactured and/or produced domestically, the Department for Promotion of Industry and Internal Trade (DPIIT) stated in a press note.

According to the consolidated foreign direct investment (FDI) policy, FDI is allowed in Business-to-Business (B2B) e-commerce and in the marketplace model.

However, it is prohibited in Business-to-Consumer (B2C) e-commerce and in the inventory-based model of e-commerce, where the inventory of goods and services is owned by the e-commerce entity and sold directly to consumers.

The DPIIT has added a provision to the policy stating: "An e-commerce entity may operate an inventory-based model of e-commerce solely for exporting goods or products that are manufactured and/or produced in India, in accordance with the relevant provisions of the Foreign Trade Policy 2023 and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015."