The Indian government is considering a key revision to foreign direct investment policy that would allow e-commerce companies like Amazon to buy goods directly from Indian sellers for export—something currently prohibited under existing rules. A confidential draft prepared by the Directorate General of Foreign Trade (DGFT) proposes the establishment of a dedicated export entity, tied to platforms, which would manage export compliance on behalf of sellers. This move signals a potential pivot in India’s stance toward foreign platform involvement in cross-border e-commerce.

Under current regulations, foreign e-commerce companies in India must act solely as marketplaces—they are forbidden from holding inventory or selling items directly to consumers, domestically or abroad. The proposed tweak would carve out an exception *only* for exports: Amazon or similar firms could procure products from Indian sellers, consolidate them through the new export entity, and ship them to overseas buyers. Any violation of export policy would invite strict penalties and criminal action. The draft awaits cabinet approval before it can become operative.

If approved, the change aims to help small and medium Indian sellers who currently face significant compliance and logistical burdens in global commerce. Less than 10 percent of small online sellers in India engage in exports, often due to complex documentation, regulatory barriers, and fragmented logistics. The new export facilitation entity would handle tasks such as customs clearances, documentation, and refund or return management. For Amazon, this is seen as a tailwind: the company already claims it has facilitated $13 billion in cumulative exports from Indian sellers since 2015, and it aspires to ramp that number toward $80 billion by 2030.

Strategic Motivations and U.S.–India Trade Pressures

The proposal arrives against a backdrop of intensifying U.S.–India trade negotiations. Washington has long pressed New Delhi to grant U.S. e-commerce giants greater operating flexibility in India, viewing current restrictions—particularly the ban on inventory-based foreign platform sales—as non-tariff trade barriers. In some quarters, reversing those restrictions has become a bargaining chip in the broader trade deal discussions.

From Amazon’s perspective, export-only access is a diplomatic compromise: the company would gain new latitude in global markets without encroaching on domestic retail competition. That nuance likely makes the proposal more palatable to Indian policymakers wary of disrupting small retail sectors. Still, Amazon and Flipkart have previously lobbied for direct procurement powers, and this export carve-out may reflect a negotiated midpoint.

Financially, the change could unlock revenue growth for Amazon’s cross-border businesses—and strengthen India’s export base. The export entity model would allow centralized logistics, better scale efficiencies, and standardization of global compliance. Over time, Amazon could extend this approach to integrate export incentives (such as duty drawbacks, GST refunds) into seller workflows, improving the competitiveness of their overseas offerings.

Resistance from Retailers, Legal and Competition Risks

Not every stakeholder is comfortable with reopening FDI rules in this direction. Over 30 Indian retail and farmer organizations have formally urged the government to reject Amazon’s request, warning that direct procurement for exports would tilt the playing field. They argue that Amazon’s deep pockets and scale could enable predatory pricing, undercutting small local merchants. Their concerns emphasize that even export-only adjustments can bleed into domestic competition if enforcement is lax.

The regulatory backdrop is also complicated by past findings against Amazon. India’s antitrust authority previously determined that Amazon had violated competition laws by privileging select sellers—an allegation the company disputes. Skeptics worry that relaxing procurement restrictions, even in the export domain, might add new avenues for dominance or preferential treatment. The government will need to build strong guardrails, such as rigorous audits, traceability, and demarcation between export and domestic inventories.

Additionally, implementing the proposal demands cooperation across multiple agencies—Commerce, Finance, Customs, and the Reserve Bank. Harmonization of FDI rules, export incentives, and foreign exchange controls will be essential. The DGFT draft also flags strict reporting, segregation of inventories, escrow-based settlements, and periodic audits of export entities as safeguards.

Implications for Amazon, Sellers, and Indian Exports

If enacted, the reform could mark a breakthrough for Amazon’s ambitions in India’s export sphere. Amazon would be positioned to streamline cross-border flows, reduce friction for sellers, and expand its global footprint from India. Sellers on the platform would gain a more turnkey path to overseas markets without having to individually manage compliance, logistics, or customs operations.

Smaller sellers, especially those in Tier-2 and Tier-3 cities, stand to gain improved access—if the system is designed to include low-barrier onboarding and transparent rules. The new export entity could absorb much of the burdens of global trade for sellers who lack capacity or experience. Over time, this could stimulate export participation and generate foreign exchange for India.

For India’s macro trade agenda, enhancing e-commerce exports aligns with goals of diversifying exports beyond traditional goods. The policy would help integrate digital commerce into export strategy, possibly boosting India’s position in global supply chains. If Amazon’s export goals materialize, it could spark innovation, logistics investment, and competition in adjacent sectors.

However, much depends on the details and enforcement. The draft’s success hinges on critical oversight: strict separation of export vs domestic inventories, real-time traceability, independent audits, and enforcement against misuse. Should these guardrails fail, the risks are real: Amazon could gain indirect advantages in domestic markets, raise incumbency hurdles, or tilt competition in subtle ways.

As the government deliberates, stakeholders across retail, tech, and trade are watching closely. A favorable outcome would represent a turning point in India’s FDI regime for digital commerce—possibly a significant strategic win for Amazon. But the balancing act is delicate: enabling export flexibility while protecting the ecosystems of small retailers will be the test.

(Adapted from Reuters.com)

Categories: Economy & Finance, Regulations & Legal, Strategy