Ever thought of taking your business across borders? Well, I must say, it might seem to be a very intimidating thing to export products from India, but trust me, it simply can be done and may just unleash unbelievable opportunities for you.
Indian exports have reached $447 billion in 2022, so the world is simply waiting with open arms for all the spices, fabrics, and even tech services made in India.
Sure, international markets, paperwork, and shipping might look like a headache to start with, but knowledge is your stress reliever.
This blog breaks everything down into easy and manageable steps on how to start an export business in India which help you get started on your export journey.
Is Exporting Profitable in India?
Starting an export business in India offers tremendous growth potential, supported by robust economic fundamentals.
In FY 2022-23, merchandise exports from India were at a record of $447 billion, and, as per projections, may amount to USD 35-40 trillion by 2047, primarily accounting for pharmaceutical, textile, and technology products.
With low production costs with a huge, skilled labour force Indian products endearing in the global marketplace. Varied export incentives are being offered by the government, for instance, Merchandise Exports from India Scheme and Export Promotion Capital Goods, while trade agreements like India-UAE CEPA and India-Australia ECTA make exports competitive globally through reduced tariffs.
Altogether, an increasingly fast-growing export sector, conducive policies, and an expanding global market render promising for short-term and long-term export business growth in India.
How to Start an Export Business in India: Step by Step Guide
Export business has its complexities and multiplicities, though having it in a list form would help you in journaling your progress. Here are the steps one needs to follow in order to set up an export business in India:
1. Choose Business Form
Decide on the form of your business: individual ownership company, partnership, LLP (Limited Liability Partnership), or private limited company. It would depend on your short-term as well as long-term goals.
An individual ownership company is a very simple process but involves unlimited liability. Partner-owned businesses share the problems but bear unlimited liability. An LLP can offer partners with limited liability.
A private limited company is preferred by large-scale businesses and bears limited liability while offering a proper, structured environment. After you have decided upon the structure, register your business with the MCA or the Registrar of Firms.
2. Obtaining PAN Number
All Indian businesses require a permanent account number from the Income Tax Department.
It is an essential document for tax filing purposes, the opening of a bank account, and other monetary transactions; it can also be applied through the website.
3. Obtain IEC (Import Export Code) number
Import Export Code (IEC) is a prerequisite for any type of import export business, whereby you can apply by submitting an online application to the DGFT with details such as the nature of business and PAN number. Within 7-10 days, it issues the IEC.
4. Exports Registration with Export Promotion Councils & Obtaining RCMC
Register with the appropriate Export Promotion Council (EPC) depending on the product category such as APEDA for agriculture products. This will help you to get all export benefits.
RCMC from the council is an essential step in availing of the benefits available under India’s Foreign Trade Policy.
5. Open a current account
Open a current bank account in your business name with a bank authorized to handle foreign exchange transactions. All export-related financial activity, including the receipt of foreign currency payments, will be processed through this account.
6. Pricing and Sampling
Set competitive pricing on your product in line with production and shipping costs, taxes, and customs duty. Gather knowledge of market trends and currency fluctuations.
Offering product samples can also help build trust and show customers the quality of your products, possibly leading to bigger orders.
7. Identify Overseas Markets and Buyers
Research your markets to get an idea of countries that require your products. Network through international trade fairs and B2B portals like Alibaba and IndiaMART. Use digital platforms and social media platforms to increase visibility to global buyers.
8. Logistics and Shipping
Partner with reliable freight forwarders to handle transport and customs clearance. To simplify these processes, consider using logistics management software.
Ensure all key export documents, including the bill of lading and commercial invoice, are available, and are aware if there are any specific additional documents required for your product.
9. Export Duties and Taxation
Be clear about export duties and GST exemptions applicable. Avail the government incentives-like duty drawbacks and Merchandise Exports from India Scheme (MEIS)-to save costs.
10. Secure Payment Terms and Comply with Export Procedure
Offer secure payment terms, for instance, a Letter of Credit (LC) or advance payments to reduce financial risks.
Ensure compliance with the export procedure by submitting all the necessary documents required for customs clearance, and possibly seeking services from customs brokers.
India's Export Business Loans: A Comprehensive Overview
An export business in India also needs financing support and there are many forms of loans that exist for entrepreneurs. The following are some of the loan options available to you:
1. Term Loans
Description: Long-term loans from banks and financial institutions, which can be repaid over 3 to 10 years.
Usage: Used for procuring equipment, machinery or real estate.
2. Working Capital Loans
Description: Short-term loans for day-to-day operational expenses.
Usage: Helpful to manage the cash flow, purchase inventory, and pay overhead costs.
3. Export Credit
Description: Loans meant primarily for exporters. Such loans are provided by the Export-Import Bank of India.
Usage: Helps meet the pre-shipment as well as post-shipment finance requirements of exporters.
4. Government Scheme as well as Subsidy
Merchandise Exports from India Scheme (MEIS): Provides incentives to the exporter to increase trade of merchandise.
Interest Equalization Scheme: This scheme provides interest subsidy on pre-shipment and post-shipment credit in respect of specific sector.
5. MSME Loans
Description: MSME loans, preferably at lower interest rates and minimal documentation.
Usage: For extremely small businesses so that they can expand their export operations.
6. Collateral Free Loan
Description: Pradhan Mantri Mudra Yojana, no collateral
Usage: Mostly for small businesses that may not have too much to show in the way of assets
7. Trade Finance
Description: Financial instruments that can be used to hedge international trade credit risk.
Usage: Allows for guaranteed payments from a foreign customer while minimizing currency risks.
8. Crowdfunding and Peer-to-Peer Lending
Description: Online platforms that help businesses raise funds from a variety of investors and lenders.
Usage: Suitable for new entrepreneurs and small companies that require flexible access to capital.
9. Angel Investors and Venture Capital
Description: Raised by a sole proprietor or an enterprise with an equity stake in the venture.
Usage: A business intending to establish itself as a fast-growing opportunity, but still deficient in capital can avail of this source of finance.
Few Tips Before you Get the Loans:
- Prepare a solid business plan: present the business model with clear information about your target market and financial projections.
- Good credit history: you will be in a better position to get loans if you are quite a few notches above the average credit score.
- All relevant documents: your identity proof, financial statements, or tax returns, ready.
- Explore various options: Compare interest rates and terms between several lenders to determine which one works best for your needs.
How Much Would it Cost to Start an Export Business in India?
An export business in India would incur the following variable costs based on the scale of operations and the kind of products:
- Business registration would be between ₹5,000 to ₹30,000.
- Import Export Code within the cost between ₹500 to ₹1,000, and licenses range between ₹10,000 to ₹50,000.
- Office space would be between ₹5,000 to ₹20,000 every month and warehousing would be between ₹10,000 to ₹50,000 per month.
- The operational cost would include an inventory level that falls between ₹50,000 and ₹10,00,000. Then, it would be followed by staff salary that fall between ₹15,000 to ₹50,000 for every employee monthly.
- Subsequently, utility costs would range between ₹5,000 – ₹20,000 a month.
- Marketing would have website development, which will be between ₹10,000 to ₹50,000. The monthly promotions would be between ₹5,000 to ₹50,000.
- Logistics would start with freight at ₹10,000, and packaging will range from ₹5,000 to ₹20,000.
- Lastly, the additional cost also includes insurance that is between ₹5,000 to ₹15,000 per year and professional fees that include a range between ₹10,000 to ₹50,000.
- It may cost as much as ₹2,00,000 for small scale, ₹5,00,000 to ₹20,00,000 for medium-scale and more than ₹20,00,000 for large scale. It is all based upon the type of business a person would want to commit to. Proper planning and research are needed to address these costs.
Which Export Business is Most Profitable in India?
The foremost exportable sectors of India are pharmaceuticals, textiles, machinery, electronics, and agricultural products.
- Pharmaceutical: It is also popularly known to be the pharmacy of the world. India’s pharmaceutical exports reached $11.7 billion with a major market base in the U.S., Europe, and Africa.
- Textiles: The industry of textiles, with an export figure of approximately $9 billion, continues to hold a prominent position, taking into account that India is a country built on its rich heritage in fabrics and modern innovation.
- Machinery: Machinery exports amount to $13.6 billion and are shipped to over 200 countries to the US and UAE.
- Agriculture: India’s Basmati rice exports were worth $10.1 billion with full satisfaction of requirements from the Middle East and Asia.
Strategies to Find Buyer for Your Exports
1. E-commerce Platforms and B2B Networks:
- International Trade Directories: Platforms such as Alibaba, GlobalSources, and TradeKey provide extensive networks connecting buyers and suppliers.
- Industry-Specific Platforms: Explore platforms customized for your particular product or sector.
- Social Media: Utilize LinkedIn, Facebook, and Twitter to engage with potential buyers and industry professionals.
2. Trade Exhibitions and Shows:
- Global Trade Fairs: Participate in industry-specific trade exhibitions in your desired markets to present your products and meet potential buyers in person.
- Networking Events: These gatherings offer opportunities to connect with industry professionals and potential clients.
3. Export Promotion Organizations (EPOs):
- Government Support: EPOs in India can offer valuable support, including market analysis, buyer identification, and trade promotion initiatives.
4. Diplomatic Missions and Consulates:
- Market Insights: Embassies and consulates can provide information on market conditions, trade regulations, and potential buyers in their respective nations.
5. Direct Outreach:
- Identify Potential Buyers: Research businesses in your target markets that may have an interest in your products.
- Cold Calling and Email Outreach: Reach out directly to potential buyers through phone calls or emails, introducing your products and services.
6. Export Intermediaries and Distributors:
- Local Expertise: Collaborate with local export agents or distributors who possess established networks in your target markets.
7. Online Marketing:
- Optimize Your Website: Ensure your website is user-friendly, informative, and search engine optimized.
- Content Marketing: Develop valuable content such as blog posts, articles, and videos to attract potential buyers.
- Search Engine Optimization (SEO): Utilize relevant keywords and optimize your website to enhance search engine rankings.
Pay-Per-Click (PPC) Advertising: Consider utilizing platforms like Google Ads to target specific keywords and reach potential customers.
Remember to conduct comprehensive market research to comprehend the needs and preferences of buyers in your target markets. Establishing trust and relationships is essential in the export industry.
Suggested Read: When planning your export routes, consider using automated route planners. These tools can help you optimize your shipping routes, reduce costs, and improve efficiency.
Final Thoughts
Going through these steps laid out in the blog, from identifying your market and products to acquiring the right licenses and financing. Don’t be afraid to ask for a helping hand or advice whenever you need it. Stay curious, flexible, and willing to learn. The export landscape is constantly moving, and there is always something new to find out.
So gear up, motivate yourselves, and get ready to leave a mark in international markets! Your dream of running a successful export business has just stepped closer within reach, and determination combined with the proper strategy will help you contribute to the booming export sector of India and grow professionally.
FAQs
How can I acquire an IEC (Importer Exporter Code)?
To receive an IEC, fill out an online application, pay a small charge, and attach the relevant papers to the application.
What about export-related quality requirements and certifications?
Quality standards for exports are guaranteed by a number of inspection certificates and quality control techniques, such as ISO 9000, Agmark Certification, ISI Certification, In-Process Quality Control (IPQC) inspection, and self-Certification Scheme.
How can I connect with overseas partners and buyers through networking?
The greatest ways to network with possible overseas partners and buyers are to meet people, go to events and webinars, and use internet marketing.
