• +91 7550302005
  • reach@consultkriba.com

Month: June 2017

Indian economy

India has one of the fastest growing economies in the limelight of global landscape. Indian economy tops in most of the economic growth contributing sectors. Service sectors such as IT enabled services, BPO & KPO, agriculture sector, Motorcycle division of automobile industry and retail market are the pulsating sectors of Indian economy. According to the World Federation of Exchanges, Bombay Stock Exchange and National Stock Exchange of India ranks 11th and 12th in the world respectively.

 

India

Snapshot of Indian Economy:

India has the strongest GDP growth among G20 countries according to Organisation for Economic Co-operation and Development (OECD). India’s tech start-ups hub ranks third largest in the world in a report by NASSCOM. Indian constellation of billionaires is the third largest and ultra-high net worth of households is the fourth largest in the world. RBI data reports that India’s foreign exchange reserves have grown from US$ 360 billion in March 2016 to US$ 366.781 billion in March 2017. The inflation rate is historically low at the rate of 2.6 % in May 2017. The Ease of Doing Business Index for India ranks Ludhiana, Hyderabad, Bhubaneshwar, Gurgaon, Ahmedabad, New Delhi, Jaipur, Guwahati, Ranchi, Mumbai, Indore, Noida, Bengaluru, Patna, Chennai, Kochi, and Kolkata, as the top 17 cities to flourish for entrepreneurs.

Indian export market:

Export – led growth hypothesis (ELGH) indicate that Indian GDP has grown with an averaging about 7 percent per annum since 1995 following economic reforms in 1991. India’s export constitutes approx. 1.6% of the total global exports. In line with Ministry of Commerce report, India’s merchandise export registered a 17.48 % year-on-year growth, with US$ 24.49 billion as on Feb 2017. The country has seen a rise in exports by 8.32 % in May 2017. Petroleum, engineering, textiles, and gems & jewelry sectors have shown strong performance in exports during the month. Gujarat, Maharashtra, Tamil Nadu, Telangana, Andhra Pradesh are leading states in exporting from India. Each Indian state is known for their regional fine products in the global market. On the contrary, between 2011 and 2016 India suffered bear market in its traditionally prowess exports such as readymade garments, gems and jewelry, and agricultural products, Cars, diamonds, maize, trousers, make-up and skincare items, handbag, and cotton sweaters.

India’s main export partners are U.S.A, UAE, Hong Kong, China, U.K., Singapore, Germany, Vietnam, Bangladesh, and Belgium. The data on the top 25 importing countries of Indian products can be accessed through Indian Trade portal.

Indian exports

Government initiatives:

The Government of India has taken a number of initiatives to boost Exports. Ministry of Commerce is officially in charge of trade activities in the country. The government has established institutions to initiate and promote exports, train, and render benefits to exporters. Export promotion schemes are as follows:

Merchandise Exports / Service Exports from India Scheme (MEIS / SEIS):

MEIS and SEIS are aimed to boost India’s exports. Exports of notified goods/ products to notified markets are granted freely transferable duty credit scrips on realized FOB value of exports in free foreign exchange at a specified rate (2-5%).  Exports of notified goods shall be entitled to MEIS benefit provided the FOB value up to INR 25, 000 per consignment, through courier or foreign post office using e-commerce. Visit MEIS for more details.  Service providers of notified services are eligible for freely transferable duty credit scrip @ 5% of net foreign exchange earned as per Appendix 3E of FTP 2015-2020.

Duty Exemption and Remission Schemes:

These schemes enable duty-free imports of inputs with the export obligation for export production. The schemes are Advance authorization scheme, advance authorization for the annual requirement, duty-free import authorization (DFIA) scheme, duty drawback of customs/central excise duties/service tax and a rebate of service tax through all industry rates.

Zero duty EPCG scheme, Post Export EPCG duty scrip scheme, EOU/EHTP/STP & BTP SCHEMES, Towns of Export Excellence (TEE), Rebate of duty on “export goods” and “material” used in manufacturing of such goods, Export of goods under Bond i.e. without payment of excise duty, Market Access Initiative (MAI) Scheme, Marketing Development Assistance (MDA) Scheme, Status Holder Scheme are the available EPCG schemes.

Other exports promotion initiatives are Export Processing Zone, Free Trade Zone, and Special Economic Zones. The main objectives of these initiatives are to attract foreign investments, to promote technology and infrastructure for economic growth, to promote export-oriented activities, ease of importing goods for exporting and to achieve export-led growth.

EPCs, Institutions, and FIEO:

Export promotion councils and commodity boards are non-profit organizations financially supported by the Government of India. These councils perform both advisory and executive functions to promote the exports of a specific group of products, projects, and services. EPCs play an important role in projecting India as a reliable supplier. They also monitor and encourage the exporters to adhere to the international standards and specifications. EPCs educates the exporters to take advantage of the trends and opportunities in the international markets for the respective goods and services. They are the first point of contact for the exporters regarding any info related to their products. The exporters must become members of the concerned EPCs and commodity boards to avail the benefits. The EPCs will in turn issue RCMC (Registration Cum Membership Certificate) depending on the details furnished by the exporter. There are 27 Export Promotion Councils including commodity boards in India.

Institutions and Advisory boards: 

Indian Institute of Foreign Trade (IIFT) provides consultancy to export enterprise, conduct training, commodity studies, overseas market surveys. IIFT conducts “Niryat Bandhu @ Your Desktop”, an online certificate program launched by DGFT. Most proficient and experienced faculties are handling each segment of exports procedure. The program is to mentor new and potential exporters.

Indian Institute of Packaging (IIP) is set up by the government of India with the purpose of maintaining packaging standards to be compatible with those of developed countries.

Export Inspection Council (EIC) is responsible for the enforcement of quality control and compulsory pre-shipment inspection of various exportable goods. Five export agencies across the country are under the technical and administrative control of EIC.

Indian Council of Arbitration (ICA) is the apex body for promoting and encouraging amicable settlement of trade dispute.

India Trade Promotion Organization (ITPO) is the premier trade promotion agency to promote exports through trade fairs and exhibitions. ITPO also provides assistance to State Governments in setting up Regional Trade Promotion Centres (RTPC) in the State’s capital and major cities.

ECGC and EXIM Bank:

Export Credit Guarantee Corporation of India offers insurance to cover the risk of exporting on credit. ECGC provides

  • a range of insurance covers to Indian exporters against the risk of non – realization of export proceeds due to commercial or political risks
  • different types of credit insurance covers to banks and other financial institutions to enable them to extend credit facilities to exporters
  • Export Factoring facility for MSME sector which is a package of financial products consisting of working capital financing, credit risk protection, maintenance of sales ledger and collection of export receivables from the buyer located in the overseas country.

There are different policies available to suit the requirement and credit worthiness of an export order.

EXIM Bank of India is a premier financial institution to enhance and to empower the Indian exporters to extend the trade to a new horizon. EXIM Bank offers financial services, marketing advisory services, research and analysis, Export advisory services and term deposit scheme. They launched export facilitation portal, Exim Mitra for trade related and financial product information.

Foreign trade policy and Trade Agreements:

The government of India formulates the foreign trade policies based on facilitating or controlling foreign trade, economic reforms and globalization. Foreign trade policy 2015-2020 is currently followed FTP to promote the exports. These policies are to encourage exporters through incentives, facilitating the technological and infrastructural up-gradation through imports of goods and equipment, activating Indian embassies as key players in the export strategy.  The main objectives of FTP are to double the contribution percentage on the global trade and stir the economic growth by generating employment.

Trade Agreements:

India has signed different trade agreements with neighboring and developing countries to promote and ease the international trade.  There are 20 trade agreements that are currently in force. They are PTA between India and Afghanistan, India-Africa trade agreement, Asia Pacific Trade Agreement, CECA between India and ASEAN, Agreement on trade, commerce and transit between India and Bhutan, PTA between India and Chile, CEPA between India and Japan, CEPA between India and Republic of Korea, CECA between India  and Malaysia, PTA between India and MERCOSUR, Agreement of Cooperation with Nepal to control Unauthorized Trade, Agreement on South Asia Free Trade Agreement, Treaty of Transit between India and Nepal, Agreement on SAARC Preferential Trade Agreement, Revised Treaty of Trade between Government of India and Government of Nepal, CECA between India and Singapore, Free Trade Agreement between India and Sri Lanka, India – Thailand Free Trade Agreement.

India’s performance in global stage:

Indian products have a good value in the International market. But the credit just doesn’t go to the products alone. India’s geographical location, its climatic condition, vast English-speaking and young population, Entrepreneurial mindset, its ability to reach faster to the global screen are also key strengths of the Indian exports. Indian exports have grown, so as the imports. Indian products are known for the value addition and niche. The majority of the exporters go extra mile for their importers to protect the interest of their buyers. Amidst global demand, uncertainties in the political realm of the developed countries, economic recovery, Government initiatives are real fuel to the Indian export growth.

We cannot ignore the pain points as well. India ranks 130 in ease of doing business according to THE WORLD BANK. The trade deficit shot up to a nearly 30-month high of US$ 13.84 billion because of the increase in gold imports. There is a decline in agricultural output. India needs improvement on many frontiers in ease of doing business. This gives an opportunity to the start-ups. These are the basic information; an Indian exporter should be aware of. There are more to be detailed in the upcoming posts.

Consult Kriba aims to educate and empower Indian exporters to excel in the International trade.

Exports are one of the lucrative business. It can be a part of your business or you are entirely prepared to sell your products/services to international market. It helps in mitigating the risk of economic crisis and cash flow. There are certain things you can do before commencing the legal procedures. There are two types of exporters viz merchant exporter and manufacturer exporter. Following are the chronological steps to get an export order for the merchant exporter.  The manufacturer export will already have their product chosen. So, they can skip the step 1

Step 1: Choosing a product/service:

First of all, Choosing a product is obviously vital to export. The best strategy to choose a product is to do a STEEP analysis based on your SWOT analysis. You are more likely to get success if you choose a product you can emotionally get attached to or the product you love the most. There are various tools and formula to identify the most profitable product to try for exports. Developing your niche will increase your chance of dominating the international market. Value addition is another key to success to find a better market for your product. If you are keen to have list of items exported from India, choose from, http://dgft.gov.in/exim/2000/itchs2017/ITCHS2017.html

Step 2: Choosing the market:

Most of the exporters are keen about selling their products to developed countries like U.S.A, Europe, U.K., Australia, Canada. But there are perks in exporting to other countries. There are more than hundreds of countries actively importing products and goods from other countries. Choose your market using the 7 market analysis tools provided in legacy.intracen.org/marketanalysis/.  Construct your ideal buyer persona before choosing the market. There are buyers of different ranges from small businesses to giant enterprises. The exporter should clearly understand whom can they sell to depending on their capacity. Start with small quantities to get enough experience to achieve big orders.

choose market

Step 3: Constructing a business plan:

Developing a business plan is skipped by most of the entrepreneurs. But this is fundamental if you are keen to grow and establish your business. Business planning helps you to set in the right direction based on factual and not on mere intuition. Intuitions can be tested and justified through your detailed business plan.

The most crucial part of business planning is financial projection and marketing strategy. But if you get these right, you can avoid major pitfalls and mistakes at the early stage. The entrepreneur need not be a business graduate to get it done but requires a common sense and logical understanding. There are free courses available online. The best one I would recommend is Startup India learning program.

Step 4: Learn about export market/Incoterms/FTP/export documents:

Once you have chosen your product and market, it is time to plan and prepare for your export business. The export market works slightly different from the domestic market. It’s important to study both the export trend of the product and import trend of the product to your chosen market. You are competing with 3 types of competitors. Exporters of your product from your country, Exporters of your product from other countries and Other importers/suppliers of the same product in the chosen market.

The market analysis tools are essential to be used in studying the trends. Highlights of FTP 2015-2020 can be accessed through http://dgft.gov.in/exim/2000/highlight2015.pdf. The exporters choose to become a member of various B2B portals. There are about 23 such portals. New portals are exhibited almost on daily basis. It is better to become a free member of these portals to gain some understanding. Knowing Incoterms is extremely important to do exports. The export documents are proforma invoice, packing list, commercial invoice, certificate of origin, shipping bill/bill of entry, ARE-1 form, Mate’s receipt, Exchange declaration form (GR/SDF form), Bill of exchange, sight draft, Inspection Certificate, Bill of Lading, Airway Bill, Insurance certificate, consular invoice,

Step 5: Developing a marketing strategy:

This is a crucial step next to constructing a business plan. The business plan is best suitable for your overall business operation. A detailed marketing strategy will help you get a better result in a comparatively shorter span of time. We are living in the era of Information technology. Almost the whole world is acquainted with the WORLDWIDEWEB. Inbound marketing strategy has taken its important seat in the assembly of marketing strategy. We get information at the snap of our fingertip. Having a solid marketing strategy is very important to earn your buyers trust and increase your visibility in the internet search.

Step 6: Getting your license:

This is the easiest step in the export business procedure. Those interested in EXIM business need to apply to the regional office of the Director General of Foreign Trade (DGFT) for getting Importer-Exporter Code (IEC) Number. IEC number is not mandatory in the case of imports for personal use. Now, IEC can be applied through online just by uploading the necessary documents. Check http://dgft.gov.in/exim/2000/iec_anf/ieconlnapplform.htm.  This step is applicable in the case of first-time exporters. Under GST regime, changes are made to accept PAN card as the license to do exports.

Step 7: Get in touch with EPC/other government initiatives:

Export promotion councils, Federation of Indian Export Organisations are key government bodies to promote export activities from India. The exporters must be a member of these councils to avail the benefits to doing exports from India. http://www.indiantradeportal.in/vs.jsp?lang=1&id=0,31,223,225 lists the Export promotion councils in India.  The exporter has to register with the concerned export promotion council. For example, in the case of garments, it is essential to obtain a registration-cum-membership Certificate (RCMC) from the Apparel Export Promotion Council (AEPC).

Step 8: Contacting CHA or freight forwarding agents:

Custom house agents/Freight forwarders help you with export documentation and freight procedures. The difference between them is very thin. Logistic is itself an ocean to discuss. The important thing is to have CHA/freight forwarder who will take care of your cargo needs to be shipped safely to your buyer doing the necessary documents.

Export order

Step 9: Pricing strategy:

Pricing has to be done properly to get profit from the sales. There should be a pricing strategy in place to be able to successfully obtain an export order. A merchant exporter should get product and package cost from the manufacturer/trader, freight and related costs from their CHA/freight forwarder. The exporter should also determine their minimum order quantity and product specification to have a good pricing practice.

Step 10: Listing the buyers:

By now, the exporter will have a list of potential importers through various sources such as social media profiles, inquiries through their own website, B2B portals, other government websites, trade opportunities from Indian government e-magazines, importers list from Indian embassies, buyers list from EPCs, importers contacts from trade shows and exhibitions.

Contact buyers

Step 11: Contacting buyers:

The exporters now begin to contact their buyers through emails, Skype calls, WhatsApp, social media, and make your first impression best by providing necessary information. Importers/import agents are usually well-aware of the markets. Your in-depth homework and preparation will give enough confidence to gain their trust. The best practice is, to be honest, tell the truth or else the importer can find out through the missing links. Timely replies and responses will put you ahead of your competitors. Provide your best offer to your buyer on proforma invoice.

Step 12: Sending samples:

Sending samples is not a necessary step unless the buyer asks for one. The best practice is not to assume but be open to ask needed information or provide needed information before committing to sending the samples.

Step 13: Confirming the export order:

You have worked hard/smart enough to get to this point. You deserve a sweet and pat on your shoulder. But before, confirm your order by getting sales contract, purchase order depending on the mutual understanding.  Therefore, both exporter and importer will have to agree to the terms and conditions of the contract such as pricing, documents, freight charges, currency and so on. Finally, the importer sends a purchase order.

Step 14: Executing the export order:

With the export order in hand, the exporter starts manufacturing goods or buying them from other manufacturers. The exporter makes arrangements for quality control and obtains from the inspector of quality control, a certificate confirming the quality of goods, depending upon the requirement.  Exportable goods are then dispatched to ports/airports for transit. After the completion of these formalities, the exporter contacts the clearing and forwarding agent (C&F agent) for storing the goods in warehouses.  The exporter can also store the goods personally.  The forwarding agent presents a document called the Shipping Bill, which is required for allowing shipment by the Customs Authority.

 Step 15: Receiving payment:

After loading the goods into the ship, the captain of the ship issues a receipt known as ‘Mate’s Receipt’ to the ship superintendent of the port.  The superintendent calculates the port charges and gives it to the exporter/C&F agent. When the port payments are made, the C&F agent or exporter gets the Bills of Lading or Airway Bill from the official agent of the shipping company or the airline. The exporter applies to the relevant Chamber of Commerce for obtaining Certificates of Origin, stating that the goods originated from India. This is not a mandatory document in all cases.

The exporter also sends a set of documents to the importer, stating the date of shipment, the name of vessel, etc. Moreover, it is desirable to send certain documents like the Bills of Lading, Custom Invoice, and Packing List to their foreign counterparts.The exporter now presents all the important documents at his bank. This must be done within 21 days after the shipment.The exporter’s bank sends these documents to the importer’s bank.  The importer’s bank should make the payment on or before the due date. In the case of advance payment, the exporter will receive the payment after receiving the purchase order.

Step 16: Follow up with the buyer:

It is essential to keep your buyer/importer informed at each stage. It will help you to build a rapport with the buyer and makes it easy for further orders. Once the buyer receives the goods, ask for the feedback to provide any after sales service if required.

These are only basic steps for doing export business. It is one among 7 segments of Exports and Imports business. If you are looking for a one to one mentoring on exports training, email us to consultkriba@gmail.com or WhatsApp +917550302005.