A Policy Tweak Could Spell E-commerce Export Success

The easing of inventory curbs on FDI-backed platforms would help small businesses export more

- PRASANNA KARTHIK

Merchandise exports are crucial for India's economic trajectory. Yet, in 2024-25, these stood at just $437.42 billion, a mere 0.08% rise from the previous year, even as global trade expanded 3.7%. At a time when India is aspiring for a $5 trillion economy, such sluggish growth is a red flag. Policy reforms aimed at increasing India's share in global e-commerce exports is a key area for the government to focus on.

E-commerce is an underleveraged export opportunity. But Indian policies stifle this potential. Since 2018, India has prohibited foreign direct investment (FDI)-backed e-commerce platforms from holding inventory. The restriction was designed to shield domestic traders from intense competition in local markets by limiting platforms to act only as intermediaries.

While this logic holds domestically, it shouldn't be applied to exports. When Indian arms of globally interlinked e-commerce entities export goods, they compete with exporters in China, Türkiye, or Vietnam. By not allowing them to hold inventory for exports, India is effectively strengthening foreign competitors instead of its own sellers and producers. This is at a time when global e-commerce enterprises are seeking to reduce reliance on China.