India has revised its foreign direct investment (FDI) rules to allow foreign-funded e-commerce companies to use inventory-based models solely for exporting goods manufactured or produced in India.
The change was set out in a review of FDI policy on the e-commerce sector and modifies the 2020 Consolidated FDI Policy Circular.
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Under the current framework, FDI is allowed in business-to-business e-commerce and the marketplace model, but not in business-to-consumer (B2C), e-commerce or the inventory-based model, in which an e-commerce entity owns the inventory of goods and services and sells directly to consumers.
The government has added a new provision under the FDI Policy allowing e-commerce entities to operate an inventory-based model exclusively for the export of goods and products manufactured or produced in India.
Existing curbs on B2C and inventory-based e-commerce will not apply to exports carried out under the new provision.
The decision will come into effect from the date of the Foreign Exchange Management Act notification.
In a statement, the UK Department for Promotion of Industry and Internal Trade said: “In order to facilitate greater exports through easier and increased access to global markets by Indian sellers, the extant FDI Policy has been reviewed and it is decided that the restrictions on inventory-based model of e-commerce shall not apply in case of exports of domestically manufactured and/or produced goods/products.”
In a statement to Reuters, Amazon said that the policy shift would help manufacturers in smaller towns and cities access overseas buyers and would support its target of reaching $80bn in cumulative exports from India by 2030.
The relaxation follows closed-door meetings with the government last year in which industry groups representing small retailers opposed any loosening of restrictions for US companies.
The change marks a rare easing of India’s tightly controlled e-commerce regime, which has long prevented foreign online retailers from directly buying and selling goods.
Amazon and Walmart have said the restrictions constrain their expansion while retailer groups have warned that any relaxation could give foreign companies an unfair advantage.
The policy change comes as India and the US continue efforts to finalise a trade agreement.
India’s e-commerce investment rules affecting Amazon and Walmart have for years been a point of contention between India and the US.
