India Eases E-Commerce FDI Rules, Allows Foreign-Funded Firms to Own Inventory for Exports

India has relaxed its foreign direct investment (FDI) rules for e-commerce, permitting foreign-funded companies to own and sell inventory—but only for exports. The change, announced by the government, marks a significant departure from earlier regulations that strictly prohibited foreign-owned inventory in the e-commerce sector. Previously, foreign-funded platforms like Amazon and Flipkart were required to operate as marketplaces, connecting sellers with buyers without holding stock themselves. The new policy creates a targeted exception: foreign-funded firms can now own inventory if the goods are exported out of India. The goal is to boost India's export competitiveness, integrate small businesses into global supply chains, and attract foreign investment in logistics and warehousing. Export-focused companies, especially those in textiles, handicrafts, and electronics, stand to benefit. Meanwhile, domestic retailers' associations have expressed concern that the rule could be misused, eventually allowing foreign firms to circumvent the marketplace model. The government has stated that strict monitoring will prevent diversion of inventory to domestic sales. The impact on India's $50 billion-plus e-commerce market remains to be seen, as companies assess the operational feasibility of export-only inventory ownership.