opportunities for Indian Exporters

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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.

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