India’s New E-commerce Model Aims to Enhance Trade with the UK
The Indian government is poised to initiate a pioneering plan, predominantly with the UK, identified as a key partner in its recent free trade agreement. The proposal allows foreign-funded e-commerce entities to procure goods in India and subsequently export them directly to the UK, effectively sidestepping the existing constraint that limits them to marketplace-only operations, as indicated by two informed sources.
This transformative policy is designed to embrace an inventory-based business model, with the overarching aim of amplifying foreign direct investment (FDI). India projects a target of $100 billion in FDI by fiscal year 2026, while simultaneously diversifying its export portfolio, remarked those familiar with the developments.
Gujarat has been earmarked as the primary location for a pilot project that would permit e-commerce companies to possess and sell products directly to UK consumers, rather than functioning exclusively as online marketplaces, reported the first source.
Currently, India’s FDI regulations restrict foreign-funded e-commerce firms from operating solely as neutral digital marketplace platforms. These entities may facilitate exports through third-party sellers but are prohibited from direct involvement in inventory ownership.
Conversely, purely Indian e-commerce companies retain the privilege to own inventory and engage in sales locally and internationally.
Following the pilot project, there is potential for this inventory-based model to be expanded to the remaining fourteen Free Trade Agreement (FTA) partners India has established agreements with, noted the first source.
This initiative is set against the backdrop of India’s ambitious goal to double its exports with FTA partners while fostering an influx of FDI.
Under the proposed inventory framework, specialized export entities will be tasked with managing stock, facilitating customs clearances, and overseeing packaging on behalf of small enterprises.
“This topic was deliberated at a recent commerce ministry meeting involving key stakeholders, notably the Swadeshi Jagran Manch and representatives from domestic retail sectors. Executives from major e-commerce firms were also present,” stated the second source.
“Concerns from domestic groups, particularly the potential diversion of stored products to local markets instead of their intended export destinations, have been acknowledged. However, the government has instructed the Director General of Foreign Trade (DGFT) to oversee the pilot project,” the source remarked.
The pilot’s implementation will serve to assess its overall efficacy, with a view to rolling out the inventory model for broader e-commerce players once domestic stakeholders express satisfactory confidence.
Inquiries directed toward the ministries of commerce, external affairs, and the British Embassy in New Delhi regarding this initiative have gone unanswered.
This development coincides with ongoing discussions between India and the United States aimed at finalizing a Bilateral Trade Agreement (BTA) by November. Negotiations resumed on September 16 after a hiatus exceeding a month, attributed to India’s firm stance on agricultural imports, dairy products, and genetically modified organisms.
The United States has imposed a 50% tariff on India—the highest rate to date—comprising a 25% reciprocal tariff alongside an additional 25% penalty for purchasing Russian oil.
“For small to medium exporters, this could significantly reduce reliance on intermediaries, streamlining access to consumers in influential markets like the UK. Concurrently, it is imperative that safeguards are instituted to protect domestic retailers,” articulated Vinod Kumar, president of the India SME Forum.
The historic free trade agreement between India and the UK, signed on July 24, culminated years of negotiations and heralds a new chapter in their economic collaboration. The agreement is poised to accelerate bilateral trade and investment, offering extended market access across vital sectors.
The FTA, formally recognized as the Comprehensive Economic and Trade Agreement, aspires to elevate bilateral trade to $120 billion by 2030 by abolishing or markedly reducing customs duties on a plethora of products.
India’s merchandise exports to the UK surged by 12.6% to $14.5 billion in the fiscal year 2024-25, while imports displayed a modest increase of 2.3% to $8.6 billion. The total bilateral trade volume reached $21.34 billion in 2023-24, an increase from $20.36 billion the previous year.
Permitting the inventory model for e-commerce—specifically for export purposes—has the potential to be transformative for Indian brands. Currently, the demand for Indian products is surging across international markets, yet many exporters encounter supply chain inefficiencies, prolonged lead times, and scalability challenges.
The inventory model will facilitate stocking items closer to demand, thereby ensuring expedited delivery, an enhanced customer experience, and improved competitiveness with global counterparts, stated Ravi Saxena, chief executive and founder of Wonderchef.
“For consumer brands like Wonderchef, this creates substantial opportunities to engage international clientele directly, expand into new territories, and fortify brand equity abroad. More significantly, it can propel India up the value chain in global trade, establishing our nation as a reliable provider of high-quality, design-oriented products.”
Previously, reports from Mint on March 13 indicated that American trade negotiators are advocating for equitable conditions for US-based e-commerce giants such as Amazon and Flipkart against Indian conglomerates, including Reliance and Tata.
Moreover, Mint reported on February 13 that India’s proposed comprehensive e-commerce policy, which has garnered considerable international interest from major players like Amazon and Walmart, is currently on hold as nations reevaluate their priorities following a significant regime change in the US.
According to an Invest India report, the nation’s e-commerce sector is predicted to escalate to $325 billion, while its digital economy could reach $800 billion by 2030.
With a staggering 881 million internet users, India ranks as the second-largest online market globally. Projections suggest its burgeoning digital economy could render it the third-largest online retail market by 2030, as per the Invest India report.
The global e-commerce landscape was appraised at approximately $26.8 trillion in 2024, with forecasts estimating growth to $214.5 trillion by 2033, according to Mordor Intelligence.
India currently boasts 15 partners with which it has established free trade agreements (FTAs). In response to inquiries in the Lok Sabha on March 18, Union Minister of State for Commerce Jitin Prasada confirmed that India has executed 14 FTAs with its trading partners.
Trade engagement with these partners amounted to approximately $118 billion in fiscal year 2025. In fiscal year 2024, India’s total exports to the 14 FTA partners reached $122.75 billion.
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