FDI in Inventory-Based E-Commerce for Exports: NDI Rules Now Amended

The Ministry of Finance has notified the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2026 (S.O. 4870(E)) (Amendment Rules), effective from their publication in the Official Gazette on September 3, 2026. The Amendment Rules insert a new serial number 15.2.5 in the Table in Schedule I of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (NDI Rules) — the table that sets out permitted sectors, entry routes, and sectoral caps for foreign investment — permitting foreign direct investment (FDI) in the inventory-based model of e-commerce exclusively for the export of goods or products manufactured or produced in India. The rules are framed under the Foreign Exchange Management Act, 1999 (FEMA).

This is the FEMA notification that the Department for Promotion of Industry and Internal Trade (DPIIT) Press Note 3 (2026 Series) required to become legally operative. The investment permission under this route is now in force, though the Reserve Bank of India (RBI) — which administers the NDI Rules — is yet to update its Master Direction – Foreign Investment in India to reflect this amendment.

Background

The prohibition on FDI in inventory-based e-commerce has been a long-standing feature of India’s FDI regime. While the marketplace model — where the platform facilitates transactions between third-party buyers and sellers — has been open to 100% FDI under the automatic route, the Consolidated FDI Policy (Para 5.2.15.2) has expressly barred FDI in the inventory-based model, where the e-commerce entity owns the goods and sells directly to consumers.

The export-only exception took shape after the Ministry of Commerce and Industry began consultations in 2025 on permitting FDI in inventory-based e-commerce solely for exports of Indian-manufactured goods — a targeted relaxation that leaves the domestic Business-to-Consumer (B2C) prohibition intact. The change came through four documents, each building on the last:

1. DPIIT Press Note No. 3 (2026 Series)

On July 23, 2026, DPIIT amended the Consolidated FDI Policy by inserting a new Para 5.2.15.2.5, permitting e-commerce entities with FDI to engage in the inventory-based model exclusively for the export of goods or products manufactured and/or produced in India. The Press Note stated that the change would “take effect from the date of FEMA notification.”

2. DGFT Notification No. 27/2026-27 and Public Notice No. 25/2026-27

On August 5, 2026, the Directorate General of Foreign Trade (DGFT) inserted a new Section D (Paras 9.13–9.19) into the Foreign Trade Policy 2023 (FTP 2023), titled the “Inventory-based Cross-border E-Commerce Facilitation Framework,” and amended the Handbook of Procedures (HBP) to operationalise it. The framework defines the Exporter-on-Record (EOR) and Seller-on-Record (SOR) architecture and sets out substantive conditions around eligibility, title transfer, payment timelines, seller protections, and reverse logistics. DGFT registration for EOR entities is open. (Our earlier post on the FDI policy change and the DGFT framework is available here.)

3. NDI Amendment Rules, 2026 — S.O. 4870(E)

The Amendment Rules insert a new serial number 15.2.5 in the Table in Schedule I of the NDI Rules, after serial number 15.2.4 and the entries relating thereto. The inserted provision reads:

“15.2.5 (a) An e-commerce entity is permitted to engage in inventory-based model of e-commerce exclusively for the export of goods or products manufactured or produced in India in accordance with the provisions of the Foreign Trade Policy 2023 read with the Handbook of Procedures (HBP) and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015.

(b) The restrictions on Business to Consumer (B2C) and the inventory-based model of e-commerce stipulated under the provisions from serial number 15.2.1 to 15.2.4 above, shall not apply to the export of goods or products through e-commerce as permitted under clause (a).”

Clause (a) creates the affirmative permission; clause (b) disapplies the existing B2C and inventory-model restrictions (serial numbers 15.2.1 to 15.2.4) for exports carried out under the new provision. The amendment comes into force from the date of its publication in the Official Gazette.

What This Means

The Amendment Rules create the investment permission and disapply the B2C and inventory-model restrictions for export-only e-commerce; the operational detail — the EOR/SOR architecture, seller protections, payment timelines, compliance requirements, and dispute resolution machinery — sits in the DGFT framework, which we covered in our earlier post.

With the FEMA notification now in force, e-commerce platforms with foreign investment can structure dedicated EOR entities to hold India-manufactured export inventory and manage international fulfilment directly — a route that the Government appears to view as a lever toward its stated target of USD 1 trillion in combined goods and services exports for FY 2026-27. For Indian manufacturers and MSMEs, this opens a new, regulated pathway to global markets through established platforms.

The existing B2C and inventory-model restrictions under serial numbers 15.2.1 to 15.2.4 continue to apply for domestic commerce. 

Looking Ahead

What was, until last week, a fully worked-out compliance architecture sitting ahead of the law is now a legally operative regime — at the FDI policy, foreign trade, and FEMA levels. RBI’s Master Direction – Foreign Investment in India (last updated June 15, 2026) is yet to be updated to reflect this amendment. We will continue to track further developments as they unfold.