Online outreach: A single policy tweak could spell e-commerce export success

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, Turkiye 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. 

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The consequences are visible. India’s e-commerce exports in 2024 stood at just $5 billion, while China’s reached $374 billion (85% of India’s overall merchandise exports). Domestic and international e-commerce platforms operating in China seamlessly aggregate local producers, hold inventory and serve consumers across the US and Europe. In contrast, Indian artisans, manufacturers and farmers are left to navigate fragmented logistics and limitations of scale, leading to limited viability. 

Consider Jaipur’s textiles or Moradabad’s brassware, both of which are in demand globally. Without large platforms aggregating and exporting these goods, small producers face prohibitive costs and market opacity. What could have been an engine of empowerment has become a bottleneck. 

Politically connected trader lobbies have been opposing e-commerce export reforms. They argue that inventory-holding platforms might exploit information asymmetries to buy cheaply in India, resell abroad at a premium and monopolize margins. They further argue that excess export inventory would flood domestic markets. While these concerns are not baseless, outright prohibition is a counter-productive overcorrection. Risks of exploitation can be addressed through smart safeguards rather than throttling export growth opportunities. A pragmatic reform could open global markets while ensuring fairness.

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Export-only inventory: Permit FDI-backed platforms to hold inventory for exports, with strict separation from domestic operations.

Inclusive sourcing: Mandate sourcing only from sellers listed on domestic marketplaces to ensure small producers and artisans are the primary beneficiaries.

Transparent pricing: Require platforms to disclose export markups, giving sellers a view of international demand and prices.

Order-linked purchases: Allow platforms to purchase domestically only against confirmed international orders, minimizing the risk of speculative merchandise stocking.

Such a framework would empower a Varanasi weaver or Kutch artisan to plug into global supply chains without the fear of being displaced in India’s local markets. Estimates suggest that local e-commerce exporters account for less than 10% of the country’s e-commerce sellers. 

E-commerce exports could prove transformative. The projections of a McKinsey study show that such shipments could rise to $250–300 billion by 2030 with the right policies. This would not only boost overall merchandise exports, but also generate $10–15 billion annually in tax revenues (PwC India), helping fund infrastructure and social programmes. 

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Beyond economics, there is a geopolitical urgency. Global supply chains are being redrawn amid US-China tensions. Nations like Vietnam, Mexico and Bangladesh are stepping into spaces vacated by Chinese exporters. If India does not act decisively, it risks missing this window to embed itself in these shifting supply networks. 

India’s Foreign Trade Policy of 2023 identified e-commerce exports as a priority. But recognition should be backed by reforms. Today’s policy framework benefits a narrow set of politically influential domestic lobbies, while millions of potential exporters—artisans, farmers and small businesses—are left out of the global market. 

Every additional year of hesitation further entrenches China’s dominance. Chinese exporters are expanding to the Global South and no longer reliant just on rich-country markets. So the question is not whether India should allow the holding of inventory for exports, but how quickly it can do so.

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E-commerce is no longer an optional channel, it is a major component of global trade. India must decide whether to cling to outdated measures that serve vested interest groups or embrace bold reforms that expand export opportunities. Allowing FDI-backed platforms to hold inventory for exports under a clear regulatory framework would democratize access to global markets and drive economic growth. 

The country’s choice is stark: reform now, or remain a spectator while others shape the future of global trade.

The author is a strategy and public policy professional. His X handle is @prasannakarthik