India Considers Allowing Foreign Investment in Ecommerce Inventory for Export-Oriented Businesses

India Considers Allowing Foreign Direct Investment in Export-Focused Ecommerce Model

The Indian government is evaluating a proposal to permit foreign direct investment (FDI) in the inventory-based ecommerce model exclusively for exports, with safeguards in place to prevent misuse. This move, as reported by the Economic Times, aims to boost exports without disrupting small retailers, who are currently not allowed to participate in inventory-led ecommerce.

According to the proposal, FDI would be allowed in a separate export-focused entity in India linked to an FDI-funded marketplace. This entity would procure goods directly from domestic sellers for shipment to international customers against confirmed orders, handling end-to-end fulfilment, including logistics, compliance, and delivery.

To prevent diversion of products intended for export into the domestic market, the proposed framework includes mandatory physical segregation of goods meant for export from those intended for the domestic market. Strict separation and monitoring mechanisms would be essential, even if warehouses could be located adjacent to each other.

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The government is also working on systems to track goods from procurement to final export to ensure transparency. Consultations are ongoing with industry stakeholders, including on GST refunds, duty remission mechanisms, and safeguards around the use of seller data.

This move is expected to benefit small and medium enterprises significantly, with nearly 70% of SMEs using ecommerce platforms - especially in categories like fashion, jewellery, home décor, and wellness - potentially gaining from expanded export opportunities.

The Indian ecommerce market is projected to reach $150 billion by 2026, while exports via online platforms currently stand at around $4-5 billion annually, according to industry estimates.

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