- India's government has eased foreign investment rules to allow e-commerce companies to buy products directly from Indian sellers and sell them to overseas customers, marking a major win for Amazon.
- This relaxation comes at a time when India and the United States are set to sign a trade agreement.
- The move represents a rare relaxation of India's tightly controlled e-commerce regime, which has long prohibited foreign online retailers from buying and selling goods directly.
- The government stated that the change aims to boost exports and facilitate greater access to global markets for Indian sellers.
- Amazon expressed that this policy change would help manufacturers in smaller towns reach overseas buyers and support its goal of achieving $80 billion in cumulative exports from India by 2030.
- For nearly a decade, India has only allowed FDI in business to business (B2B) e-commerce and where the e-commerce company serves as a marketplace without holding inventory.
- The Confederation of All India Traders (CAIT) has raised concerns that the change could be abused by foreign companies, giving them more control over supply chains.
- Experts believe that permitting inventory-based e-commerce for exports may lead to pressure to extend this model to domestic sales, which has been a long-standing demand from global e-commerce companies.
India's government has made a significant change to its foreign direct investment (FDI) policy for e-commerce, allowing companies to hold inventory for exports. This marks a departure from the long-standing restrictions that have limited foreign retailers like Amazon and Walmart from directly buying and selling goods in India.
The new rules enable e-commerce firms to purchase products from Indian sellers and sell them to international customers, a move aimed at boosting exports. Amazon has stated that this policy change will help manufacturers in smaller towns reach global markets, supporting its goal of achieving $80 billion in cumulative exports from India by 2030.5
The Confederation of All India Traders (CAIT) has expressed concerns that this change could give foreign companies an unfair advantage and potentially disrupt local supply chains. “A robust monitoring mechanism must be put in place to ensure there is no misuse of this provision,” said Praveen Khandelwal, Secretary General of CAIT.7
Trade experts have mixed views on the implications of this policy shift. While some see it as a necessary clarification that aligns with India's export promotion agenda, others warn it could ultimately harm small traders. “Permitting inventory-based e-commerce for exports is unlikely to remain a narrow exception,” noted Ajay Srivastava, founder of the Global Trade Research Initiative.
The e-commerce market in India is projected to grow to $250 billion by 2030, up from approximately $90 billion currently, according to a report by Google and Deloitte. This relaxation of FDI rules could reshape the competitive landscape of the sector.2
“The relaxation coincides with India and the US nearing a trade deal that has been a sore point, and Amazon set a goal of $80 billion in cumulative exports from India by 2030. However, CAIT warned the move could be abused by foreign firms and demanded a robust monitoring mechanism.”
