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The government is examining a proposal to relax foreign direct investment (FDI) restrictions in the inventory-based model of e-commerce to accelerate export growth. The Commerce and Industry Ministry has begun consultations with several Central departments to assess the potential impact of the move and gather feedback from stakeholders.

Officials said the proposal forms part of a broader plan to expand India’s digital export footprint by allowing e-commerce companies to hold inventory solely for export purposes. The initiative, they added, could help Indian firms and foreign investors collaborate more effectively to scale up global shipments through online platforms.

Senior officials pointed to China’s success in boosting exports through e-commerce platforms as a model India could adapt. “China has demonstrated how e-commerce can serve as a powerful tool for integrating small manufacturers and artisans into global value chains,” one official noted, adding that India’s own small and medium enterprises could benefit from similar policy flexibility.

Currently, India allows 100 per cent FDI in the marketplace model of e-commerce under the automatic route, where companies such as Amazon and Flipkart act as intermediaries between buyers and sellers. However, FDI is prohibited in the inventory-led model, where a company directly sells goods it owns to consumers. Exceptions exist for single-brand retail and manufacturers selling their own products online.

India’s e-commerce exports are estimated at around $4–5 billion annually. The government has set an ambitious target of $200–300 billion by 2030. Export categories showing strong demand include fashion apparel, home décor, handicrafts, organic beauty products, toys, and electronic goods.

The Foreign Trade Policy 2023 features a dedicated chapter on e-commerce, detailing measures to promote cross-border trade in the digital economy. It extends the Remission of Duties and Taxes on Exported Products (RoDTEP) benefit to online exports, including those shipped through postal and courier routes, to improve cost competitiveness.

The government is also working to establish dedicated e-commerce export hubs in partnership with private players to streamline logistics, warehousing, and customs clearances. Digital India initiatives, including easier online payments and simplified customer verification, have strengthened the ecosystem for small exporters to reach global markets.

Commerce and Industry Minister Piyush Goyal has suggested that limited relaxation of FDI rules for export-linked inventory could encourage multinational companies to invest in India’s digital trade infrastructure while ensuring compliance with domestic retail restrictions.

If approved, the move would represent a significant policy shift in India’s e-commerce framework, potentially aligning it with global best practices. Officials said the proposal is still under inter-ministerial review and will be finalised after consultations with industry associations, exporters, and logistics partners.

The decision is seen as a step towards deepening India’s participation in the global e-commerce supply chain and supporting the government’s target of making the country a major export hub by 2030.

Ankit Kumar is a Senior Sub Editor at Zee Business. He covers international affairs, politics, climate change, business, finance and global elections. With experience acros