- within Government and Public Sector topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- in United States
- with readers working within the Accounting & Consultancy, Basic Industries and Law Firm industries
Overview
The Department for Promotion of Industry and Internal Trade (“DPIIT”) issued Press Note No. 3 (2026 Series) on 23 July 2026 introducing a calibrated liberalisation to the Consolidated FDI Policy applicable to the e-commerce sector. The amendment does not overhaul the existing framework rather it carves out a narrow export-focused categories with the objective of enabling Indian manufacturers to access global markets through foreign-funded e-commerce platforms and supporting the government's broader export-promotion goals.
Background: The Existing Legal Framework
Foreign investment into India's e-commerce sector is governed by the FEMA (Non-Debt Instrument ) Rules 2019 and Consolidated FDI Policy Circular of 2020 as amended from time to time .Under this framework e-commerce activity is broadly classified into two models:
- Marketplace model — Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller and does not itself hold title to the inventory.
FDI up to 100% under the automatic route has been permitted in this model as well as e-commerce entities are allowed to enter into transactions with sellers registered on its platform on B2B basis.
- Inventory-based model — the e-commerce entity itself owns the inventory of goods and sells directly to consumers. FDI has been prohibited in this model to prevent large foreign-funded platforms from directly competing with domestic retailers.
What Has Changed: The New Export Carve-Out
Press Note 3 (2026) inserts a new provision proposed to be numbered Para 5.2.15.2 into the Consolidated FDI Policy. Under this provision an e-commerce entity will be permitted to adopt an inventory-based model exclusively for the export of goods or products manufactured or produced in India. Key features of this may include the following:
- Export-only scope: The relaxation applies solely to the outbound sale of India made goods. It does not extend to and expressly does not disturb the existing prohibition on inventory-based sale to Indian consumers.
- Sourcing and fulfilment flexibility: Eligible entities may purchase qualifying India-manufactured goods directly from Indian manufacturers or suppliers, take ownership of that inventory, and manage export fulfilment and logistics directly.
- Regulatory conditionality: The exception operates subject to the applicable provisions of the Foreign Trade Policy 2023, the Handbook of Procedures and FEMA regulations governing the export of goods and services including the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015.
Old Policy vs. New Policy
|
Particular |
Old Policy (pre-2026) |
New Policy (Press Note 3, 2026) |
|
B2B e-commerce |
FDI permitted |
Unchanged, still permitted |
|
Marketplace model |
FDI permitted |
Unchanged, still permitted |
|
B2C e-commerce |
FDI not permitted |
Unchanged, still permitted |
|
Inventory-based model (domestic sale) |
FDI not permitted — entity owns inventory and sells directly to consumers |
Still not permitted for domestic sale to consumers |
|
Inventory-based model for exports |
Not permitted — no carve-out existed |
Newly permitted, exclusively for goods manufactured/produced in India and sold for export |
Effective Date and Implementation
Press Note 3 (2026) is issued by DPIIT and not by itself a change in enforceable law. The liberalisation will take legal effect only once the Reserve Bank of India issue the corresponding amendment notifications under FEMA. Until such notification is issued the existing restriction on FDI in inventory-based e-commerce continues to apply.
Rationale and Policy Objectives
The amendment is proposed to empower an export from India. It is intended with following objectives:
- Provide Indian manufacturers particularly MSMEs to reach international markets by allowing them to supply directly to inventory based export platforms.
- Allow foreign-funded platforms to consolidate goods from multiple Indian suppliers, manage quality and packaging and build export-oriented supply chains with greater control than the marketplace model allows.
- Support the government's stated ambition of significantly scaling India's e-commerce exports over the coming years.
Implications for Stakeholders
For foreign-funded e-commerce platforms carve-out to open a new India specific export vertical but one that will require careful structuring including separate entities, accounts, or reporting lines to keep export-oriented inventory operations demonstrably distinct from any domestic marketplace business.
For Indian manufacturers and MSMEs, the change may create a new sales channel that reduces the operational burden of exporting independently though manufacturers will still need to independently satisfy origin, quality, and export documentation requirements under the Foreign Trade Policy.
Bottom Line
The core restriction on B2C and inventory-based e-commerce remains intact for India's domestic market. The only change introduced by Press Note 3 (2026) is a narrow which states about export-only exception, a foreign-funded e-commerce entity may now own inventory of India made goods and sell it abroad with FDI backing.The exception is not yet legally operative and will only take effect once the corresponding FEMA notification is issued.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The views expressed in this article are solely those of the author in her personal capacity and are based on her understanding of the applicable legal and regulatory framework. They do not necessarily represent the views, policies or practices of organisation with which the authors is associated.
