India is one of the fastest-growing economies in the world. One of the primary fuels for this rapid growth is India's robust import-export industry. According to the Economic Survey of India, "India's GDP is projected to grow by 8–8.5% in 2022-23, supported by widespread vaccine coverage, supply-side reforms, easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending". Further, India's total exports are expected to grow by 16.5%, surpassing pre-pandemic levels, while imports are expected to grow by 29.4%. Moreover, India has the third-largest startup ecosystem globally, after the US and China. Overall, the import-export sector has always played a significant role in India’s economy. When the economy opened up in the early 90s, ushering in an era of liberalization and globalization, the import-export arena got a huge thrust and grew exponentially since. With India’s strong import-export footprint, the entire world holds immense potential in terms of being a valuable import-export marketplace.
The MoCI has proposed an Rs. 10,000 crore investment for projects to develop 700 districts of India as import-export hubs, as part of a new proposed foreign trade policy. State governments would add about Rs. 5000–6000 crore to this import-export initiative, depending on each state's plan.
With import-export businesses holding such significance in the Indian economy, here are some things Indian transporters need to know:
What does India import the most?
India mainly imports mineral fuels, oils, waxes, and bituminous substances. This category forms 27% of India's total imports.
Second on the list are pearls, precious and semi-precious stones, and jewelry, which form 14% of India's total imports.
Third on the list are electrical machinery and equipment, which form 10% of India's total imports.
Fourth are nuclear reactors, boilers, machinery, and mechanical appliances, forming 8% of India's total imports.
Fifth are organic chemicals, forming 4% of India's total imports.
The main countries India imports materials from and their share in India's total imports are:
From April to September 2021, India exported goods worth over $197 billion, with monthly exports remaining consistently over $30 billion. In July 2021, exports crossed $35.43 billion, the highest ever monthly export, with a 49.85% increase compared to July 2020 and 35.05% over July 2019.
The top 10 categories of items India exports are:
The top 10 countries that purchase India’s exports and their primary purchases are:
The import-export businesses in India are major revenue drivers for the country. There are some guidelines you need to follow to start an import-export business in India. There are also multiple import-export agencies that you would need permits and certifications from. Below we list the steps you can follow when you plan how to start an import-export company in India:
If you plan to begin exporting from India, there are processes and procedures you would need to carry out, regulations to follow, documentation to maintain, etc. Here is an outline of the steps you can follow to start an export business:
India has regulations around which goods and commodities you can export from the country and in what form. Go through the rules and finalize which products you plan to export.
After finalizing the products, you need to select the markets to export the products. The markets you choose need to make business sense for you and should not be black-listed or banned by India. Moreover, these countries would have their import regulations that you would be required to meet, so take that into account as well.
To begin an export business, you first need to create a company. It could be a sole proprietary company or a partnership, but it has to be a legal entity with an official name and logo.
Anybody planning to open an import-export business in India or their company must have a valid PAN. Submit the required documentation to the Income-tax department and obtain a PAN for the company. The procedure is mainly online and has been simplified considerably over the years.
To deal in foreign exchange, your company would need to have a current official account with a recognized bank. Reach out to your preferred bank, provide the required documents, and open a current account.
According to India's current Foreign Policy, it is essential for companies engaging in the import-export business to have a valid importer exporter code number. To obtain this number, you need to file an application online, pay an application fee, and submit the required documents along with your application.
To be authorized to export goods from India, a company needs to have a valid Registration-cum-Membership Certificate from the Export Promotions Council, the FIEO, Commodity Boards, or other concerned authorities, depending on the nature of goods you plan to export.
Now that you have finalized what you are exporting and where you want to export, start identifying your potential buyers who would buy the goods from you and sell them ahead. You can use various networking sources and online resources for this. You would also need to decide and advertise your pricing accordingly, accounting for the duties, taxes, currency exchange rate, etc., in local currencies.
Foreign buyers would usually insist on receiving samples to verify your products' quality and ensure they would be getting what they have agreed to and would be paying for. The Government of India's Foreign Trade Policy defines the limits and rules around sending out customized samples of freely exportable goods. Go through the rules, and then you can send out your samples to your potential buyers accordingly.
Along with sending samples, you would need to provide your potential buyers with product pricing, mostly in their local currency. To calculate your pricing, you need to account for your costs, product costs, exchange rates, taxes in India and export countries, duties, overheads, shipping costs, etc. It would be best to research the international prices to offer a competitive rate. If you export to different countries, each country would have a different price due to the different costs and rates. Calculate your costing and pricing thoroughly.
Running an import-export business carries considerable risk, especially payment risk. However, you can cover this by purchasing a policy that suits your needs from the Export Credit Guarantee Corporation (ECGC). With this, whenever a buyer places an order with you without making an advance payment or opens a line of credit with you, you can obtain a credit limit for your transaction with the buyer from the ECGC to protect you if the buyer defaults.
Many goods and commodities get imported to India each year, and engaging in the import-export business in India can be quite a profitable venture. To begin importing goods to India, you need to follow some rules and procedures, maintain specific required documentation, etc. Here is an outline of the steps you need to follow to begin an import business in India:
Examine rules and regulations laid out by the government for the goods and commodities allowed to be imported into India and in what form. Based on that, you can decide the goods and their conditions.
Every country has regulations on what can get exported from their territory and in what form. Also, each country would have its specialties and expertise. Based on this information, you can decide what countries you would be importing your goods and commodities from.
To import goods and commodities into the country, you first need to establish a legal entity. It could be a sole proprietary company or a partnership, but it should be legally recognized with its unique name and logo.
Once your import-export company is legally established, apply to the Income-tax Department and obtain a valid PAN for your company. The process is mainly online and can be efficiently executed.
The next step to start an import-export business is to open a valid bank account with your preferred bank for your company. Reach out to your bank, provide the required documents, and open a current bank account.
In line with the rules laid out by the current Foreign Policy of India, you need to obtain the Importer-Exporter Code (IEC) number. You would need to send in your application online, along with the supporting documents, and pay the application fee online for this.
To begin your import-export business, you need to obtain a Registration-cum-Membership Certificate from the Export Promotion Councils, the FIEO or Commodity Boards, or the concerned authorities, depending on the nature of the goods and commodities you plan to import.
It would be best if you have the requisite sanctions from the government before you begin importing goods. You would need to submit an application along with the supporting documents to the Controller of Imports to get your permissions, including the receipt indicating payment of licensing fee, a certificate from a recognized CA indicating the total value of goods imported, and a verification certificate for income tax. Furthermore, you need to obtain an import quota certificate that mentions the import's maximum quantity from the concerned authorities.
You need to apply to the Exchange Control Department (ECD) of the Reserve Bank of India to secure the release of the required foreign exchange. This application has to be forwarded to the RBI via your bank. You would need foreign exchange to carry out your import transactions.
While you get your license and documentation ready, you also need to scout the market to locate your sellers and order your samples from those sellers. This would help you determine the territories you would ultimately be trading with.
You can place your order directly to your seller or go via a broker or an agent. If you are planning to import canalized items, you would need to go via the canalizing agency as you cannot import such items directly per the Foreign Policy of India.
By ticking off each of the steps mentioned above, you can begin your import-export business with ease in India. A fast-developing country like India requires the best resources to fuel its growth, and import-export plays a fundamental role in this process.
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