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India’s evolving e-commerce regulations reflect a strategic balancing act: nurturing domestic businesses while managing international trade expectations, particularly from the United States. Recent discussions highlight how India’s framework imposes key restrictions on foreign e-commerce players, igniting broader debates about non-tariff barriers and market access.

India’s Marketplace Model for Foreign Firms

India mandates that foreign e-commerce companies — such as those from the U.S. — operate strictly as marketplaces, not as direct sellers. They can provide platforms for other merchants to list and sell products, but cannot hold inventory or sell their own goods directly. In contrast, Indian competitors are allowed to produce, own, and sell goods on their platforms, creating an inherent structural advantage for domestic firms.

From Washington’s perspective, these rules amount to a “non-tariff barrier” — an obstacle that does not involve traditional tariffs but still limits free trade. Such barriers, combined with restrictions on foreign direct investment (FDI) in multi-brand retail, have long frustrated U.S. companies seeking deeper access to India’s growing consumer market.

A Longstanding Tension Since 2006

As Arvind Singhal, Chair of the retail consultancy Technopak Advisors, pointed out, the U.S. has been lobbying to open up India’s retail market since 2006. However, India has consistently and successfully resisted these efforts, protecting its domestic retail and manufacturing sectors from full-scale foreign competition.

This resistance is rooted in multiple factors:

Job Protection: Traditional retail, often organized through small shops and family-owned businesses, remains a significant source of employment in India.

Economic Nationalism: Ensuring Indian businesses retain market dominance aligns with broader political narratives of self-reliance and economic sovereignty.

Strategic Autonomy: Limiting foreign control over key consumer sectors helps maintain economic leverage, especially amid volatile global trade dynamics.


Regulatory Hurdles Beyond Inventory Restrictions

Adding another layer of complexity, U.S. retailers operating in India face stringent product inspections by the Bureau of Indian Standards (BIS). Frequent scrutiny not only increases compliance costs but also slows market entry and product rollout. Industry insiders acknowledge that these inspections, while framed around quality assurance, create significant friction for foreign players.

While some view these measures as legitimate efforts to ensure quality and consumer protection, others interpret them as regulatory barriers designed to safeguard domestic interests under the guise of technical standards.

India’s Trade-Offs

India’s approach reflects a deliberate trade-off between short-term market liberalization and long-term domestic development:

Pros: Protecting local businesses, promoting indigenous brands, creating employment, and encouraging homegrown innovation.

Cons: Potentially slowing foreign investment, straining bilateral trade relations, and risking retaliatory measures from trade partners like the U.S.


Critically, India’s strategy also signals a larger shift seen globally — where strategic sectors are increasingly shielded from unrestricted foreign access, even at the cost of occasional diplomatic friction. This mirrors broader trends of economic protectionism that have gained momentum worldwide over the past decade.

India’s e-commerce policies underscore its intent to manage globalization on its own terms. While the U.S. continues to push for greater access, India’s cautious, protection-oriented approach suggests that economic self-reliance will remain a cornerstone of its trade and investment policies. Going forward, the challenge for India will be balancing domestic priorities with its aspirations for deeper integration into global value chains — without alienating key economic partners.