Starting an export business in India can be an exciting and potentially lucrative entrepreneurial journey. With a growing economy and policy reforms aimed at easing exports, India offers immense opportunities for companies looking to enter the international market.
However, exporting also comes with its own unique set of challenges and prerequisites. As an exporter, you need to manage various trade regulations, licensing requirements, logistics issues and buyer relationships. Proper planning and preparation is crucial before taking the plunge.
This comprehensive guide covers all the key steps and considerations involved in starting an export business in India.
Why Start an Export Business in India?
India is steadily climbing the global export ladder. According to official statistics, India’s merchandise and services exports crossed $670 billion in 2021-22. The country now accounts for 2.1% of total world exports.
Some compelling reasons to start an export venture in India include:
- Government Support: Multiple export promotion programs like tax incentives, simplified procedures, trade agreements etc.
- High Global Demand: Indian products see strong overseas appetite in areas like food processing, engineering goods, petroleum products and more.
- Cost Competitiveness: India’s large talent pool and business-friendly environment help exporters price their goods competitively.
- Wide Range of Export Categories: You can export merchandise goods, software/IT services, engineering services and much more.
Small and medium businesses can especially benefit from the expanding export ecosystem in India.
Step-by-Step Process to Start an Export Business
Follow this step-by-step process to start an export business in India:
Choose the Right Business Structure
Your first step is deciding the right legal structure for your export venture. Following are some popular options:
- Sole Proprietorship: Easy to set up but the proprietor has unlimited liability.
- Partnership Firm: Shared ownership between partners. Liability depends on the type of partnership.
- Private Limited Company: More credibility and limited liability but involves complex compliance requirements.
- One Person Company (OPC): Useful for a single promoter who wants limited liability.
Choose a structure that aligns with your resources, expertise and business goals.
Obtain Necessary Registrations and Accounts
To legally conduct exports from India, you must obtain these three registrations:
- Import Export Code (IEC): The 10-digit IEC code, issued by the Directorate General of Foreign Trade, is mandatory for any company planning to import or export goods and services. Apply online here.
- Permanent Account Number (PAN): PAN establishes the identity of an individual or entity. Apply for it online here.
- GST Registration: If your annual turnover exceeds ₹40 lakh, GST registration becomes mandatory. It allows you to claim input tax credit. Apply on the GST Portal here.
You will also need to set up a current or capital account in an authorized foreign exchange bank to receive foreign payments.
Register with Relevant Export Promotion Council
Export Promotion Councils or EPCs are industry bodies that promote and mentor various export sectors. Depending on your product, it is recommended to register your company with the relevant EPC.
For example, the Apparel Export Promotion Council offers useful benefits like buyer sourcing assistance, subsidies for international exhibitions etc. Some major EPCs in India include:
- Agricultural and Processed Food Products Export Development Authority (APEDA)
- Council for Leather Exports (CLE)
- Services Export Promotion Council (SEPC)
- Gem and Jewellery Export Promotion Council (GJEPC)
Check the full list here and the registration process.
Conduct Thorough Market Research
One of the most crucial steps in starting an export venture is identifying the right export product through meticulous market research and planning.
As an exporter, you need to zero in on product categories that have proven international demand and suit your strengths and capacity as a company. Broadly, your market research should cover:
1. Industry Research
- Global and domestic demand trends
- Growth projections
- Competitor analysis
- Analysis of policies, regulations and import duties
2. Country Research
- High potential target countries
- Cultural preferences and tastes
- Necessary certifications
- Logistics costs and ease of shipping
- Payment terms and history
3. Buyer Persona Research
- Ideal customer demographics and priorities
- Communication and negotiation expectations
Multiple free and paid tools like TradeMap, Export Potential Map and Google Trends can aid your research. Reach out to established exporters, trade associations, Indian embassies, and foreign importers to gather on-ground intelligence.
Choose the Right Products or Services
Now comes the most exciting part – selecting the products or services to export!
Keep these tips in mind when deciding your export basket:
- Leverage your existing strengths: If you manufacture apparel, stick to exporting garments instead of experimenting with new domains.
- Evaluate profitability: Assess expected profit margins, export incentives, and taxes on each product to choose the most lucrative options.
- Assess export readiness: Before export orders come in, test your production capacity, quality control and if you can still service domestic clients.
- Seek necessary certifications: Certain products like food, medical devices etc. need mandatory quality, safety and origin certifications.
Some examples of popular export products from India:
- Food and agro products
- Gems and jewelry
- Engineering equipment
- Electric machinery
- Vehicles and components
- Apparel
- Handicrafts
- Leather goods
- IT and business process services
Build Partnerships with International Buyers
The next step involves partnering with foreign companies or distributors to sell your offerings in overseas markets.
Some tips for finding buyers:
- Exhibit at international trade fairs: Big fairs like India International Leather Fair (IILF) and India International Security Expo (IISE) offer exposure to thousands of trade visitors.
- Get overseas leads from EPCs: Many councils share importer queries and meeting invites as a member benefit.
- Explore ecommerce export marketplaces: Platforms like Amazon Global Exports, ShopClues and IndiaMART connect exporters with global wholesalers and buyers.
- Advertise online: Build an export website and run targeted promotions on Google and social media.
- Leverage your existing contacts: Network with other exporters and foreign business visitors to find leads.
When negotiating and communicating with prospective partners, be reliable, responsive, transparent about your capabilities and open to site visits or in-person meetings.
Understand Logistics, Shipping and Regulations
Exporting goods internationally involves managing complex shipping preparations and trade regulations:
Export Logistics
- Packaging and labeling: Products must withstand long distances and conform to foreign labeling norms.
- Shipping modes: Choose cost-effective shipping via sea, air or rail routes. Also, determine suitable international freight forwarders.
- Insurance: Evaluate Marine Cargo Open Insurance Policies offered by companies like ECGC Limited to protect shipments from damage, theft etc.
- Documentation: Paperwork like Bill of Lading, Invoice and Packaging List are needed at each step of the export process. Maintain meticulous records.
Navigating Regulations
- EXIM policy: India’s Export-Import Policy regulates outbound trade flows. Understand banned items, quantity restrictions etc.
- Customs procedures: File Bill of Entry before goods leave Indian ports and handle assessment processes.
- Compliance: Follow all export guidelines related to ITC refunds, free trade agreements (FTAs), export incentives, income tax provisions etc.
Incoterms
Incoterms or International Commercial Terms like CIF, CIP, and DAP govern the transportation and responsibilities of exporters and importers during shipment. Study Incoterms to finalize suitable terms with your partner.
Arrange Finance for Your Business
Export ventures need sufficient capital and financing options throughout their journey – right from product procurement to realizing payments from buyers.
Some ways to fund your business:
- Bootstrapping: Self-finance from personal savings and loans from friends and family.
- Bank credit: Overdraft facilities, foreign currency loans, credit cards and bill discounting from leading banks like HDFC Bank, ICICI Bank etc. Many banks offer specialized export business loans.
- Government aid: Subsidized loans and grants from institutions like SIDBI, Exim Bank, ECGC Ltd. Benefit from schemes like Market Access Initiative (MAI) Scheme.
- Equity financing: Attract funding from external investors and export angel networks in exchange for shares in your company.
Conclusion
India’s growth into a global manufacturing and services powerhouse directly translates into immense possibilities for budding exporters. With diligent planning around target sectors, products, certifications, market research and working capital – exporting can be a profitable small business idea.
While global expansions come with inherent risks, various government agencies also provide mentoring and logistical support. So conduct adequate due diligence, start small and scale up prudently.
Equipped with passion and persistence, your Indian company can be a serious contender in international markets!