Advantages of Export Trade in India

Advantages of Export Trade in India

24 January, 2024

Every country aspires to maximise its foreign reserve inflow. Increasing the export volume is crucial to achieve this. And this is why India encourages export businesses with various benefits and schemes. Export, which involves selling Indian goods and services in international markets, is highly beneficial for entrepreneurs. It can lead to long-lasting business relationships and financial growth.

To understand what is export trade in India, let’s find out how to start one.

Starting an export trade

Here are the commonly followed steps for starting an export business in India –

  • Registering the business:

    The export business must be set up in the form of a proprietorship, partnership, limited liability partnership, company, etc., and its name and logo must be finalised. The business must then be registered with the concerned authority.

  • Opening a bank account:

    The export business will need a current account in a bank. It must be with a bank authorised to deal in foreign exchange. Additionally, your bank must provide export-related receipt and payment services, including export bill collection, export advances, letter of credit advising and confirmation, etc.

  • Documentation:

    An export business must furnish various documents to continue its operations. A Permanent Account Number is mandatory for the business, while an Import Export Code (IEC) is mandatory to carry out import and export business. Registration cum Membership Certificate (RCMC) is required for export/import businesses, as well as for availing the concessions and benefits of export trade. It is issued by Export Promotion Councils, FIEOs, Commodity Boards or other authorities. It is also wise to obtain policy cover from the Export Credit Guarantee Corporation (ECGC) to mitigate payment risks.

  • Operational preparations:

    The exporter must finalise the product and ensure that it is not part of any prohibited list. Market analysis must be done, and the buyers must be identified. Pricing must be decided after considering the post-dispatch expenses. Besides, the basis of the sale must be agreed upon with the buyer, viz., Free on Board (FOB), Cost, Insurance and Freight (CIF), Cost and Freight (C&F), etc.

  • Sale and dispatch:

    On receipt of an export order, the exporter must ensure stringent quality checks, as many countries have these checks in place on their import arrivals. The pre-shipment and post-shipment finance must be arranged with the bank. Labelling, packaging and marking must be done as per customer specifications, and active transit insurance must be in place. Exporters can outsource the post-shipment and arrival formalities to agents and wait for the final payment settlement for the export order.

Advantage of exporting

There are many benefits of export trade that you can enjoy. They include –

  • Better price:

    An exporter can command a higher markup on the product because of its uniqueness as well as currency differences. Export sales made in high-value currencies like the Euro and US dollar result in high revenue in rupee terms.

  • Wider market:

    With export, your product reaches out to a wider market. Your target audience increases, which can very easily result in higher sales volume.

  • Export benefit schemes:

    The government offers a variety of export-related schemes to promote exports. In 2020, the government approved a production-linked incentive scheme for ten high-potential sectors. Interest equalisation schemes for MSMEs, market access initiative schemes, GST refunds for exporters, duty drawback schemes, etc., are some of the many schemes that are on offer from time to time.

Export on your mind?

If you are planning to start an export business, get in touch with HDFC Bank at the earliest. Apart from the export-specific banking services, its expert assistance and guidance will make your export journey streamlined and successful.

​​​​​​​​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. HDFC Bank recognises the challenges entrepreneurs face while acquiring capital. Thus, HDFC Bank has created MyBusiness, a one-stop solution that gives you easy access to loans, digital solutions and provides you with the essential knowledge you need to run your business. With HDFC Bank MyBusiness, you can scale up, expand your operations, and nurture your business. Short Term Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.

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