U.S. trade negotiators are pressing India to ease restrictions that prevent online marketplaces like Amazon India and Walmart-owned Flipkart from selling their own products, a move that could significantly alter the country’s e-commerce landscape.
Under current Indian rules, foreign-owned e-commerce platforms are prohibited from holding inventory, forcing companies like Amazon and Flipkart to rely on third-party sellers. Domestic players such as Ajio, BigBasket, and Nykaa, however, can stock and sell their own merchandise. If the U.S. push for regulatory changes succeeds, it could blur this distinction and intensify competition between global and homegrown retailers.
According to people familiar with the discussions, U.S. negotiators have argued that allowing foreign-owned platforms to hold inventory would create a “level playing field” with their Indian counterparts, a point they say is key to ensuring fair competition in the country’s booming online retail sector.
“Both sides are exploring ways to address the issue of greater market access for e-commerce companies, mainly U.S.-based firms Amazon and Walmart-owned Flipkart,” stated by one of the people familiar with this matter.
The United States has reportedly slapped a 50% tariff on Indian goods, its steepest yet combining a 25% reciprocal duty with an additional 25% penalty linked to India’s imports of Russian oil.
Washington’s push for allowing inventory-based e-commerce operations is part of broader discussions on regulatory transparency in areas like digital trade, cloud computing, and logistics. The talks are currently paused amid the U.S. government shutdown but are expected to pick up once federal operations resume, the sources said, as per Mint.
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Reflecting on the mutual benefit, one of the people stated, “the Indian side is discussing the issue with its U.S. counterparts to resolve it in a mutually beneficial manner. They are assessing its implications on the policy framework, and any decision will be taken keeping the country’s best interests in mind.”
The development coincides with New Delhi’s ongoing review of its long-delayed comprehensive e-commerce policy, which aims to set clearer rules on data governance, market competition, and consumer protection while ensuring fair conditions for both domestic and foreign companies operating in India’s digital marketplace.
“Due to the lapse in appropriations in the U.S. government, we are unable to respond to routine press inquiries,” as per a spokesperson for the U.S. Embassy in New Delhi in an emailed response statement.
Indian trade groups, including the Confederation of All India Traders (CAIT), have long accused Amazon and Flipkart of skirting regulations that bar foreign-owned platforms from holding inventory, arguing that such practices give them an unfair edge over smaller local retailers.
“The U.S. demand to allow an inventory model in India’s e-commerce sector raises serious concerns,” said a top official of CAIT. “Such a framework could indirectly allow foreign e-commerce companies to participate in retail trading, which goes against the spirit of India’s FDI policy. This may also affect small traders and disturb the balance of competition in the domestic market,” the official said, quoted by the publication.
India’s current rules, outlined in Press Note 3 issued on March 29, 2016, prohibit foreign-funded e-commerce companies from running inventory-based retail operations. The policy permits 100% foreign direct investment under the automatic route only in the marketplace model, a framework designed to curb price manipulation and safeguard small traders from being edged out by deep-pocketed global players.
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India’s long-awaited e-commerce policy meant to strengthen oversight on data governance, market competition, and consumer protection has been slowed by pushback from global tech and retail giants over foreign investment limits, data localization mandates, and heavy compliance demands.
According to people familiar with the matter, the government may now pause the policy rollout as it reconsiders its strategy amid shifting global trade dynamics and broader geopolitical uncertainty.
Negotiations on the India-U.S. Bilateral Trade Agreement (BTA) resumed on Sept. 16 after a month-long pause, following disagreements over India’s resistance to opening its agriculture, dairy, and genetically modified crop sectors to American products. Both governments aim to wrap up the talks by November.
Despite the policy hurdles, trade between the two nations continues to grow. India’s exports to the U.S. climbed 18% to $40.35 billion between April and August of FY26, compared with $34.21 billion a year earlier. Imports from the U.S. also increased 8.5%, rising from $19.91 billion to $21.61 billion, pushing total bilateral trade up 14.5% to $61.96 billion during the same period.
India is reportedly weighing a pilot initiative that would let foreign-funded e-commerce platforms purchase goods from domestic suppliers, maintain inventories, and sell directly to international customers. According to earlier Mint report, the trial is likely to begin with the United Kingdom under the new free trade pact. If implemented, the program would allow such companies to export products while temporarily sidestepping India’s current rule that limits them to a marketplace-only model.