Foreign retail ecommerce firms: India has a large number of small manufacturers who can sell abroad, but exporting still requires many capabilities that they do not possess. Finding buyers, meeting customs requirements, arranging delivery and collecting payments can cost more than a small producer can afford. The government’s decision to allow foreign-owned ecommerce companies to hold Indian-made goods for export could reduce some of these barriers.
The Department for Promotion of Industry and Internal Trade amended the foreign direct investment rules in July to permit 100% FDI in inventory-based ecommerce entities engaged exclusively in exports. Companies such as Amazon and Walmart-owned Flipkart can therefore buy goods made in India and export them through separate entities. The restriction on foreign investment in inventory-based ecommerce for domestic sales remains.
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The new arrangement gives digital platforms a role similar to that performed by export houses. An intermediary can buy from manufacturers and take responsibility for selling abroad, while the producer concentrates on making the product. Ecommerce companies add established overseas marketplaces and fulfilment systems to this model. These capabilities could make exporting viable for firms that cannot build their own distribution networks.
India needs a wider exporter base. Merchandise exports stood at $437.42 billion in 2024-25, unchanged from the previous year. India accounted for just about 1.8% of world merchandise exports in 2024, against 14.6% for China. The gap cannot be closed by policy changes affecting ecommerce alone, but the figures show how limited India’s presence in global goods trade remains.
The government has been trying to bring smaller production centres into export markets through the Districts as Export Hubs programme. Draft export action plans have been prepared for hundreds of districts, identifying products that could find buyers overseas. Such programmes can identify potential exporters, but firms still need a commercially workable way of reaching customers.
That is where ecommerce could help. A manufacturer in Moradabad, Tiruppur or Surat may produce goods that are competitive abroad without having the resources to establish a sales operation in Europe or the United States. An ecommerce intermediary can take over much of the transaction work involved in supplying an overseas customer. NITI Aayog has also argued for separating the roles of Seller-on-Record and Exporter-on-Record so that smaller firms need not handle every export procedure themselves.
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Foreign retail ecommerce firms face strict export conditions
The government has kept the export concession separate from domestic ecommerce policy. Foreign-owned companies cannot use the inventory model to sell goods to Indian consumers. This restriction reflects the long-running concern among domestic traders that foreign-funded platforms could use their financial resources to build inventory and compete directly with retailers.
Rules announced in August require a foreign-funded ecommerce exporter to operate through an entity registered as the Exporter-on-Record. Procurement for export inventory is permitted against confirmed customer orders. The requirement limits the scope for platforms to accumulate stocks in India and later channel them into domestic commerce.
The treatment of returns also requires a clear separation between export and domestic inventory. Goods returned by overseas customers cannot simply be transferred into the platform’s Indian retail channel. The exporter has to manage their re-import and disposal within the rules governing the export operation.
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Other regulatory changes could make ecommerce exports easier to handle. The Central Board of Indirect Taxes and Customs removed the ₹10 lakh ceiling on courier export consignments from April 1 and simplified procedures for bringing back rejected or returned ecommerce shipments. These changes address problems that arise when exports consist of many relatively small parcels rather than bulk consignments.
Small manufacturers in textiles, handicrafts, leather goods, jewellery, home furnishings and engineering products could gain from easier access to overseas buyers. Many already produce for export markets through wholesalers or larger companies. Ecommerce gives them another route, particularly when individual order sizes are small.
The policy should nevertheless be judged against what India already permits. Export houses and trading companies can aggregate goods from small manufacturers and sell them abroad. GTRI founder Ajay Srivastava has therefore argued that the new rules mainly provide foreign-funded ecommerce companies with a clearer legal route under India’s FDI regime. They do not create a new principle in export policy.
There is a further question about the bargaining position of manufacturers. If export sales become concentrated on a few global platforms, smaller suppliers may have little influence over commissions, search rankings or changes in marketplace terms. Competition among export intermediaries will therefore affect how much of the benefit reaches producers.
The government has removed one regulatory barrier to ecommerce exports while retaining the domestic inventory restriction. The useful measure of the policy will be whether more Indian manufacturers begin selling abroad and whether their cost of reaching overseas customers falls.