2024/10/15 11:44 am
Indian Micro, Small, and Medium Enterprises (MSMEs) and traders have a crucial role to play in becoming exporters against the backdrop of the global scenario and the Indian government's vision for 2047. The demand for Indian products and services in the global market is increasing, providing substantial opportunities for MSMEs. Through exports, MSMEs can establish their products on a global platform, leading to business growth and economic stability.
The Indian government is developing the concept of an Atmanirbhar Bharat (Self-Reliant India) by 2047, which places significant emphasis on the development of MSMEs. Through exports, MSMEs can empower local industries to compete globally. Additionally, as the demand for quality products rises globally, MSMEs have the opportunity to improve the quality of their offerings.
Therefore, there is a need to enhance the export capabilities of MSMEs within the framework of India's vision for 2047, which will foster the country’s economic stability and growth. For MSMEs, exports represent a golden opportunity to establish a presence in international markets.
India's economy is on the rise, and the export sector holds great potential. Understanding the processes and government subsidy schemes necessary to become an exporter is vital. In this article, we will explore various government schemes that will be beneficial for aspiring exporters.
1. What is an Exporter?
An exporter is an individual or entity that sells goods or services outside the country. Engaging in the export industry not only fosters business growth but also improves the country’s economic condition by generating foreign exchange. This allows your products to gain a foothold in the global market. However, this process comes with various challenges, requiring adequate knowledge and resources.
2. The Process of Becoming an Exporter
A. Choosing a Business / Product / Service:
Select a suitable product or service for your business. Consider whether this product is popular in the global market. Also, take into account your expertise in the particular product. When choosing a business, it’s essential to consider market trends and consumer preferences.
B. Market Research
Study the demand, competition, consumer preferences, and other critical factors in the international market. Think about which countries you plan to export to. Understanding market trends and needs will enable you to grow your business more effectively, helping you make informed decisions.
C. Open a Bank Account/ Obtain Permanent Account Number
It is necessary to obtain a PAN Card from the Income Tax Department whether you are an Exporter or not. You should select a bank which is authorized to deal with foreign exchanges. The next step is to open a current account with your preferred bank.
D. Obtain Importer-Exporter Code (IEC) Number
As per the Foreign Trade Policy for export/import from India, one needs mandatory IEC. Application for IEC is filed online at www.dgft.gov.in. An online payment of Rs.500 has to be made along with the required documents mentioned in the application form.
E. Export Registration Cum Membership Certificate
You need to register as an exporter. For this, you must obtain a registration certificate from at least one Export Promotion Council/ FIEO/ Commodity Boards/ Authorities. This certificate is necessary for the legality of your business. It will also help you avail of any other benefits or concessions under FTP 2015-20. After completing the registration process, you can formally start your export business.
F. Pricing and Costing
Product pricing is important to sell a maximum quantity at a competitive price to acquire maximum profit. The price should be fixed by taking into account all the operational and manufacturing expenses from sampling to realization of export proceeds based on terms of sale i.e. Free on Board (FOB), Cost, Insurance & Freight etc.
G. Finding Buyer
Participating in trade fairs, buyer-seller meets, exhibitions, and B2B portals are effective tools to find buyers. EPC’s Indian Mission abroad overseas chamber of commerce can also be helpful. Creating a multilingual website with product catalogue, price, payment terms and other related information would also help.
H. Covering Risks through ECGC
International Trade involves payment risks due to buyer/ country insolvency. These risks can be covered by an appropriate Policy from Export Credit Guarantee Corporation Ltd. (ECGC). If the buyer makes a purchase without any advance payment or opening letter of credit, it is advisable to procure a credit limit on the foreign buyers from ECGC to protect against risks of nonpayment.
3. Government Subsidy Schemes
A. Capital Subsidy-
Credit Linked Capital Subsidy Scheme (CLCSS): This scheme aims to facilitate capital for small and medium enterprises. The government provides a subsidy of up to 25% on the infrastructure required for your business. This makes it easier for you to acquire modern equipment and integrate new technologies into your operations.
B. First Time Exporter Scheme-
Market Access Initiative (MAI): This initiative is designed to assist first-time exporters. It provides training to understand various stages of the export process and offers financial support for marketing efforts. This helps your business gain international access.
C. Export Development Scheme-
Niryat Bandhu Scheme: Under this scheme, exporters receive grants for technology enhancement, marketing, and quality control. This can lead to increased global recognition for your products, along with guidance on necessary resources for your export business, including training programs and workshops.
D. Export Credit Guarantee Corporation (ECGC)-
ECGC Export Credit Insurance: ECGC helps exporters face various risks by protecting against non-payment risks. This offers exporters a sense of security in the international market, helping to mitigate financial losses in case of defaults.
4. International Cooperation Schemes
Trade Facilitation Measures: The Indian government implements cooperation schemes to promote international trade. These initiatives give exporters essential information, guidance, and resources to access global markets. They include trade fairs, workshops, and consultancy services, helping you compete on a worldwide level.
5. Trade Exhibitions
India Trade Promotion Organisation (ITPO): The government organizes various international trade exhibitions. Participating in these events allows you to showcase your products on a global platform, allowing you to interact with potential customers. Such exhibitions help you build a significant professional network for your business.
6. Trade and Craft Training
Export Promotion Councils: These councils offer training on various aspects of the export process. Topics covered include export policies, documentation, and international regulations. This training inspires greater confidence in the export process, preparing you to make informed decisions for your business.
7. Documents Required for Export
Exporters need to prepare several essential documents:
8. Methodology for Export
A. Product Preparation
Ensure the quality of your products. Verify that all standards are met, and understand the rules for packing and labelling. This will enhance the acceptability of your products in the global market.
B. Finance
Exporters can access pre-shipment, post-shipment finance, and letters of credit from Commercial Banks at concessional interest rates to complete the export transaction.
C. Marketing and Branding
Determine how to sell your product in the international market. Utilize digital marketing, social media, and other channels. Effectively showcase the benefits and features of your product to increase demand. Position your brand in comparison to your competitors with Unique Selling Propositions (USP)
D. Distribution System
Decide how your products will be distributed. Use international shipping companies to ensure safe delivery to customers. Maintain a well-planned distribution strategy to avoid any bottlenecks, which builds customer trust.
E. Customs Procedure
Obtain a PAN-based Business Identification Number (BIN) from the customs before filing of shipping bill for clearance for clearance of export goods. Shipping bills can be filled through the EDI (Electronic Data Interchange) system and the non-EDI system. In the non-EDI system, the shipping bills are to be filled in the format as prescribed in the Shipping Bill or Bill of Export Regulations, 1991. There are different forms of shipping bills for duty-free goods, export of dutiable goods and export under drawback etc. In EDI systems, declaration in a prescribed format is to be filled through the service centres of Customs. It is processed by the system based on the declarations made by the exporter without any human intervention.
Additional Government Schemes for Exporters
Becoming an exporter is part of a long-term process, but with the right information, the utilization of government schemes, and continuous effort, you can succeed. By leveraging various government subsidy schemes, you can expand your business on a global scale. Preparation, strategic planning, and appropriate guidance are essential.
The write-up was contributed by CE Shreekant Patil.