Major win for Amazon: India relaxes FDI-norms for e-commerce firms
What's the story
In a major policy shift, the Indian government has relaxed its foreign direct investment (FDI) rules. The new provision allows foreign-funded e-commerce companies to directly purchase products from Indian sellers and export them to overseas customers. This change is expected to boost exports by providing easier access to global markets. It also comes as a major win for Amazon, which has been seeking more flexibility in its e-commerce operations in India.
Impact on manufacturers
Inventory-based model for exports
The policy change is expected to benefit manufacturers, especially those in smaller towns and cities, by giving them access to overseas buyers.
The Department for Promotion of Industry and Internal Trade (DPIIT) issued a new provision under India's FDI policy through Press Note No. 3 (2026 Series) on July 23.
The amendment will allow foreign-funded e-commerce companies to operate an inventory-based model for exporting goods manufactured or produced in India.
Operational changes
Changes needed in FEMA rules
The new provision will come into effect after necessary amendments are made to the Foreign Exchange Management (Non-Debt Instruments) Rules through a notification under the Foreign Exchange Management Act (FEMA).
Under current rules, foreign-funded e-commerce companies can only operate as marketplaces. They can connect buyers and sellers but can't own goods sold on their platforms.
Now, they will be able to purchase, store, and export Indian products directly from their own inventory.
Government's stance
Export promotion or US pressure?
The Indian government has framed the policy change as an export-promotion measure.
However, it also comes amid long-standing pressure from US companies for greater access to India's e-commerce market.
The timing of the decision is particularly noteworthy as India and the United States are currently engaged in difficult negotiations over a trade agreement.
E-commerce and market access have been contentious issues in this broader bilateral trade relationship.
Retailer concerns
Traditional retailers oppose policy change
The policy change has also drawn criticism from India's traditional retailers.
The Confederation of All India Traders (CAIT), which represents millions of brick-and-mortar retailers, has opposed any move that could give foreign e-commerce companies greater control over supply chains.
The organization has warned that the new provision could be misused by large foreign companies to expand their control over sourcing, inventory, and distribution.