Introduction
The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, India, has unveiled a significant update to the country’s foreign direct investment (FDI) policy concerning e-commerce. The announcement, detailed in Press Note No. 3 of 2026 dated July 23, 2026, introduces a focused relaxation aimed at export-oriented e-commerce.
Evolution of India’s E-commerce FDI Policy
India’s FDI policy on e-commerce has seen considerable evolution over the past twenty years. Initially, Press Note No. 2 of 2000 allowed up to 100% FDI in e-commerce activities, albeit limited to business-to-business transactions and not extending to retail trading.
In response to the burgeoning digital commerce sector, Press Note No. 3 of 2016 distinguished between the marketplace model and the inventory-based model of e-commerce. The former allowed up to 100% FDI via the automatic route, while the latter prohibited FDI.
The inventory-based model involves an e-commerce entity owning and selling goods directly to consumers. Conversely, the marketplace model involves providing a digital platform to facilitate transactions between buyers and sellers.
Further clarifications came with Press Note No. 2 of 2018, which defined ‘control over inventory’ as a scenario where over 25% of a vendor’s purchases were from the e-commerce platform or its group entities. This clarity ensured that such businesses would fall under the inventory-based model, activating specific FDI policy provisions.
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What’s New in Press Note No. 3 of 2026?
The recent development introduces a new provision, paragraph 5.2.15.2.5, into the FDI policy. This allows e-commerce entities to operate an inventory-based model strictly for exporting goods manufactured or produced within India. This change exempts these operations from existing business-to-consumer and inventory-related e-commerce restrictions.
E-commerce companies with FDI can now engage in procurement, ownership, warehousing, and direct exports of Indian-manufactured goods to international customers. However, this relaxation is strictly for export purposes and does not apply to domestic retail sales. These exports must comply with the Foreign Trade Policy, 2023, related procedures, and prevailing foreign exchange regulations governing exports.
Conclusion
Press Note No. 3 of 2026 marks a noteworthy step in enhancing India’s FDI policy for e-commerce, specifically facilitating export-oriented inventory operations. While it expands market opportunities for Indian manufacturers, it maintains the standing prohibition on domestic inventory-based consumer transactions.
Companies looking to leverage this policy change must ensure their operations align with the relevant FDI, foreign trade, and exchange control regulations.
About the authors: Vaishakh Kapadia is a Partner, and Malini Mukherjee is an Associate at ALMT Legal.
Disclaimer: The views expressed are those of the authors and do not necessarily reflect those of Bar & Bench.
