0 months ago
DGFT notifies export-only inventory framework for foreign-funded e-commerce firms
India made a new rule for online shopping companies.
Some online shopping companies, like Amazon and Flipkart, get money from other countries.
Before, these companies were not allowed to keep their own stock of products in India.
Now, they can keep products made in India, but only to sell them to buyers in other countries.
Small Indian factories and businesses, called MSMEs, make the products and stay as the sellers.
The foreign companies help send the products to overseas customers and handle all the paperwork and shipping.
The government says the products can only be exported and cannot be sold inside India.
The companies must keep careful digital records and pay the Indian sellers within seven days.
The sellers can also see the final sale price and track their shipments.
Some experts worry that later these companies might be allowed to keep stock for sales inside India too.
India's DGFT notified the E-commerce Export Framework allowing foreign-funded e-commerce companies to hold Indian-made goods inventory exclusively for exports.
The framework, implementing DPIIT's July 23 FDI relaxation, requires eligible firms to register as an exporter-on-record and create separate legal entities.
Indian manufacturers, primarily MSMEs, remain sellers-on-record, receiving rupee payments, export rebates, and visibility into sale prices, orders and shipments.
Safeguards include procurement only against confirmed export orders, digital repository traceability, a domestic-sale ban, and payment to sellers within seven days.
Trade think-tank GTRI warned the move establishes a principle that could create pressure to extend inventory ownership to domestic sales and harm local traders.
- Who
- The Directorate General of Foreign Trade (DGFT), implementing a DPIIT decision, with foreign-funded e-commerce firms such as Amazon and Walmart-owned Flipkart, Indian MSME manufacturers, and think-tank GTRI involved.
- What
- New rules allow foreign-funded e-commerce companies to hold Indian-made goods inventory exclusively for exports through a registered exporter-on-record.
- Where
- India, with five pilot E-commerce Export Hubs operating in Delhi, Bengaluru and Mumbai.
- When
- Wednesday, August 5, 2026, when the DGFT notification was issued, implementing a DPIIT decision from July 23, 2026.
- Why
- To help Indian sellers, mainly MSMEs, reach overseas markets by delegating export documentation, compliance, logistics and fulfilment to foreign-funded e-commerce firms.
Supporters of the FDI export relaxation
Critics concerned about the precedent
Export-only scope
Supporters of the FDI export relaxation
The relaxation is strictly limited to exports, with safeguards such as confirmed export orders, digital repository traceability and a ban on diverting inventory to domestic sales.
Critics concerned about the precedent
GTRI warns it establishes the principle that foreign-funded e-commerce companies may own inventory, creating pressure to extend the model to domestic sales and harm local traders.
Need for the policy change
Supporters of the FDI export relaxation
The move opens overseas markets to MSME sellers, who can delegate documentation, compliance, logistics and fulfilment to the exporter-on-record.
Critics concerned about the precedent
GTRI's Ajay Srivastava said the policy is broadly similar to DGFT's existing export house model, and e-commerce companies were already free to use that arrangement, so the FDI policy change may not have been needed.
Impact on Indian sellers
Supporters of the FDI export relaxation
Indian manufacturers and MSMEs gain orders, business stability, timely rupee payments and visibility into final sale prices, order status and shipments.
Critics concerned about the precedent
Allowing foreign-funded, largely American e-commerce firms to own inventory could threaten domestic sellers if the model later expands beyond exports.
Key facts
- Regulator
- Directorate General of Foreign Trade (DGFT)
- Policy body
- Department for Promotion of Industry and Internal Trade (DPIIT)
- Notification date
- August 5, 2026
- Underlying decision
- DPIIT's July 23, 2026 FDI relaxation
- Beneficiaries
- Global giants like Amazon and Walmart-owned Flipkart
- Seller role
- Indian manufacturers, primarily MSMEs, as sellers-on-record
- Payment timeline
- Within seven days of accepting goods
- Export incentives
- Duty Drawback, RoDTEP and RoSCTL, passed through to sellers
Quotes
Ajay Srivastava
Founder of Global Research Initiative (GTRI)
“"Although currently limited to exports, it establishes the principle that foreign‑funded e‑commerce companies may own inventory. Soon, this could create pressure to extend the same model to domestic sales, opening the door to inventory‑based e‑commerce across all transactions."”
financialexpress.com
“"The new policy is broadly similar to DGFT’s existing export house model under which small firms supply goods to export houses for overseas sales. E-commerce companies were already free to use this arrangement so a change in FDI policy may not have been needed,"”
financialexpress.com
Directorate General of Foreign Trade (DGFT)
Representative of India's DGFT, the body's regulator of foreign trade
“"An e-commerce entity, other than a marketplace e‑commerce entity, may undertake export‑only inventory operations through an exporter‑on‑record (EoR) registered under this framework. Such EoR may hold inventory of goods exclusively for export through e-commerce and undertake all export‑related activities, subject to this framework and the consolidated FDI Policy, as in force from time to time."”
thehindubusinessline.com
GTRI
Trade policy think‑tank GTRI analysts
“"Although currently limited to exports, it establishes the principle that foreign‑funded e‑commerce companies may own inventory. Soon, this could create pressure to extend the same model to domestic sales, opening the door to inventory‑based e‑commerce across all transactions."”
thehindubusinessline.com
Sources
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