In today’s interconnected world, finding the right market for your product is critical to sustained growth and success.
With a vibrant economy, vast manufacturing capacity and a young, tech-savvy workforce, India is emerging as an ideal hub for export-oriented businesses. The country is steadily gaining pace on the global trade trajectory, offering a unique mix of advantages, from cost-effective production to a wide range of sectors ripe for export.
Already well-established in global exports of goods such as coffee, tea, spices and jewellery, the company has expanded into manufacturing over the past decade, becoming the number one manufacturing exporter with its ‘Make in India’ initiative. standing on the front lines. In 2023-24, the country recorded exports of goods and services of $776.68 billion.
With a coastline of 7,516 km, well-supported by 229 ports, India is an ideal destination for companies looking to tap into international markets, especially at a time when government incentives, strategic trade agreements, and increased focus on export growth are increasing. It is poised to become a major destination. Import and export conditions.
“Furthermore, the average travel time at major ports has decreased from 93.59 hours in 2013-14 to 48.06 hours in 2023-24, a difference of 48.65%. Among the measures: building new berths, terminals and parking facilities at ports; These included mechanization, modernization and optimization of existing berths and terminals, streamlining processes through digitization and expanding hinterland connectivity through rail and road,” said Invest India Vice-President, Infrastructure. said Karan Sethi, President.
Government incentives boost export-oriented businesses in India
In its efforts to enhance exports, the Indian government is following a three-pronged approach.
Promotion and strengthening of domestic manufacturing industries Simplification of export processes for ease of doing business Liberalization and reform of trade policies to facilitate global trade
The Production-Linked Incentive (PLI) scheme launched in 2020 will be a prime example of the government’s efforts to diversify and accelerate domestic manufacturing capacity. The plan focuses on big-ticket export goods such as electronics, communications equipment, processed foods, pharmaceuticals and automobiles, with $26 billion in dedicated spending to boost the country’s export and manufacturing potential.
Under this plan, over 6.78 billion jobs are reported to be created while the export value of goods is reported to be Rs 3.2 billion, thereby increasing the potential for future movement of the country. The overall picture is shown.
Another important government initiative that is playing a transformative role is the Foreign Trade Policy 2023-28. This is a policy document based on a continuation of long-standing plans to promote exports. As a policy document, it responds nimbly to trade requirements based on trust and partnership with exporters.
Ease of doing export business in India
An essential driver of India’s export momentum in recent years has been the advances taken to simplify the process of exporting goods and the efforts made to enhance market access for Indian manufacturers.
For example, the Interest Rate Equalization Scheme (IES), launched in 2015, provides subsidies to exporters at interest rates ranging from 3% to 5% on interest paid on pre-shipment and post-shipment export credits. provide. Exporters receive loans from banks at reduced interest rates, after which the government repays the difference. Moreover, the scheme is available to exporters of all MSME goods as well as exporters of the 416 items registered under the scheme. The IES was recently extended till August 2024 with an additional allocation of Rs 2,500 crore.
Meanwhile, the Market Access Initiative (MAI) scheme introduced in 2018 is supporting MSMEs and businesses towards export promotion efforts in newly discovered markets, thereby acting as a catalyst for export growth. The scheme provides financial support for market access efforts such as marketing, market research, promotion and branding in the new country while handling the costs associated with complying with the laws and regulations of the country into which the goods are imported. The purpose is
Benefits for Indian exporters
Recognizing the fact that export liberalization is as much a trade policy reform as it is democratic access to raw materials and compliance support, the Government of India has provided duty-free import of the following products under the Advance Authorization System (AAS): Allowed. Raw materials needed to make export products.
When a company imports raw materials to produce export goods, it can import such resources with zero import taxes. Additionally, the 2019 amendments to the Foreign Trade Policy introduced the Duty Free Import Authorization (DFIA) system, which grants tax exemptions for imports of raw materials, and comes into effect once the export process of goods manufactured from raw materials is completed.
In addition, exporters with a “Letter of Contract (LUT)” bond can export goods that are exempt from GST. Exporters who pay IGST (Integrated GST) on their goods can claim a refund at the preferential GST rate of 0.1% if they export the goods and purchase the exported goods from domestic vendors.
Sectors offering the biggest export opportunities in India
India is actively working to move away from traditional exports such as iron ore and agricultural products. The main drivers of growth in merchandise exports in 2023-24 included electronic products, pharmaceuticals and medicines, engineering products, iron ore, cotton yarn and textile products and cosmetics, handloom products, and ceramic and glass products.
Petroleum products accounted for the largest share (18.8%) of India’s total export value, with export value reaching $20,709.41 million during April-June 2024-25. Industries such as biological and pharmaceutical preparations (5.2%) and communication equipment (4.78%) showed positive growth. On the other hand, the states with the highest proportion of exports were Tamil Nadu (10.78%), Maharashtra (14.66%) and Gujarat (30.18%).
The US is India’s main export destination for smartphones and communications, while the Netherlands is the dominant market for India’s oil and auto fuel exports.
Looking at the statistics, India has already emerged as a dominant player in the global export market, showing impressive growth in various sectors. In the field of agrochemicals, India has achieved remarkable success, particularly in the areas of insecticides, rodenticides and fungicides. By 2023, exports will reach $4.32 billion, with a global market share of 10.85%, up from 5.89% in 2014. The electronics manufacturing sector showed significant progress, reflected in exports of transformers and related components, with exports increasing from $1.08 billion in 2014. From 2014 to 2023, it will increase to $2.85 billion.
Additionally, India has also made remarkable progress in exports of rubber pneumatic tires, reaching $2.66 billion in 2023. Its global market share rose to 3.31%, securing 8th place, a notable jump from 14th place in 2014.
Impact of foreign trade policy on India’s export business
The latest edition of India’s Foreign Trade Policy (FTP), which will come into effect from April 1, 2023, puts emphasis on cross-border e-commerce exports and includes grassroots efforts to increase exports and trade payments in Indian rupees. It is intended to support.
Various measures have been taken to promote and support exports, including reduction in Advance Authorization (AA) application fees for Micro, Medium and Small Enterprises (MSME) exporters. Additionally, the online approval process for various permits required by exporters has been reduced to one day. The government has streamlined the application process for electronic certificates of origin (COO) and export duty exemptions to reduce compliance burdens and facilitate exports. Work with the Districts as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the growth of the grassroots trade ecosystem.
Another key element of India’s strategy to boost exports involves free trade agreements (FTAs) with some of the world’s major economies. It is an agreement between two or more countries or trading blocs in which they agree to reduce or eliminate tariff and non-tariff barriers to substantial trade between them.
India currently has 14 FTAs, including one with four European countries and six preferential agreements with trading partners. Since 2014, India has concluded FTAs with Mauritius, UAE, Sri Lanka, Bhutan, Thailand, Australia, and 10 ASEAN (Association of Southeast Asian Nations) countries. The latest addition to this list is the agreement with the European Free Trade Association (EFTA), which includes Iceland, Liechtenstein, Norway and Switzerland.
There are other agreements called Preferential Trade Agreements (PTA), Comprehensive Economic Cooperation Agreements (CECA), and Comprehensive Economic Partnership Agreements (CEPA). India has CEPA with Japan, South Korea, and UAE, and CECA with Singapore and Malaysia. The country is currently negotiating FTAs with the UK, Oman, and the European Union.
Government support for export expansion
Apart from these initiatives and policy interventions, there are several other initiatives to boost exports and promote Make in India globally. Among the favorable adjuncts to the FTP amendments, the RoDTEP (Relief of Duties and Taxes on Exported Products) regime was added in August 2021. The budget outlay is Rs 15,070 crore with an additional 10% allocated for financial year 2024-25. , The system aims to encourage exports by exempting goods from taxes and surcharges paid on them.
The Star Export House certificate, awarded by the Directorate General of Foreign Trade (DGFT), provides its holder with benefits such as general duty exemption on exports of goods up to Rs 1 million or 2% of average annual export value. Masu. expedited customs clearance, exemption from mandatory bank guarantee clauses for various export promotion schemes, etc.
The Niryat Rin Vikas Yojana (NIRVIK) Scheme 2020-21 provides financial support to small and medium-sized exporters through lower premiums, insurance coverage and streamlined claim resolution procedures. It acts as an insurance coverage guarantee program for exporters and covers up to 90% of principal and interest.
Since the past decade, India has seen a surge in manufacturing and export activity across multiple industries, including electronics, automobiles, textiles and pharmaceuticals, driven by the expansion and diversification of grassroots businesses. Implementation of favorable reforms, rapid absorption of digital solutions, expansion of manufacturing footprint, infrastructure support, etc. are among India’s export capabilities that are determining its future course on the world stage.