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The Central government has eased foreign direct investment (FDI) norms by allowing foreign-funded e-commerce companies to operate an inventory-based model exclusively for exports. The move is aimed at boosting India's outbound shipments while ensuring that domestic retail businesses remain unaffected. According to the Global Trade Research Initiative (GTRI), the policy is expected to benefit large global e-commerce companies, including Amazon, and could signal a broader opening of India's online retail sector in the future. However, the think tank also cautioned that the decision could weaken India's negotiating position in future trade agreements.
The Central government has permitted foreign direct investment (FDI) in an inventory-based e-commerce model exclusively for export activities, a policy change that is expected to strengthen India's exports while keeping the domestic retail market outside its scope. The relaxation applies only to goods that are manufactured or produced in India and exported overseas.
The decision marks a shift in India's foreign investment policy for e-commerce. Until now, foreign-funded e-commerce companies were permitted to operate only under the marketplace model, where online platforms act as intermediaries by connecting buyers and sellers without owning the products being sold.
Commenting on the development, Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said the policy relaxation is likely to benefit large American companies such as Amazon and could eventually pave the way for broader liberalisation of India's online retail sector. He noted that the new framework allows eligible companies to purchase, store and export goods directly from their own inventory, a practice that was not permitted earlier for foreign-funded entities.
Srivastava explained that India has maintained a clear distinction between the marketplace and inventory-based models for nearly a decade. Under the marketplace model, platforms function only as digital intermediaries and earn commissions, while independent sellers own and sell the products. In contrast, under the inventory-based model, the platform owns the goods and sells them directly to customers, similar to a conventional online retailer. He added that such a model gives platforms greater control over product sales and pricing, which could put pressure on independent sellers if introduced into the domestic market.
The think tank also raised concerns over the government's broader trade strategy. Srivastava said India has, on several occasions, offered unilateral concessions to US commercial interests without securing equivalent market access for Indian exports in return. He stated that if such policy changes had been negotiated as part of a trade agreement, India could have sought commercially meaningful concessions from the United States. According to him, offering these measures independently may reduce India's leverage during future trade negotiations.
India has historically allowed 100 per cent FDI under the marketplace model while prohibiting foreign investment in the inventory-based model, as the latter was seen as enabling foreign companies to enter multi-brand retail through online channels. FDI in multi-brand retail has remained subject to strict restrictions to safeguard domestic retail interests.
The restrictions on the inventory-based model were originally introduced to protect millions of small retailers from the market influence of global e-commerce companies, particularly through deep discounting, exclusive product arrangements and integrated logistics networks. The policy also aimed to prevent foreign companies from bypassing India's restrictions on multi-brand retail by selling products directly through online platforms.
The latest relaxation is limited to export-oriented operations and does not alter the existing rules governing foreign-funded e-commerce companies in India's domestic online retail market.
Source PTI
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