Introduction to Export / Import : Assessing export readiness of your firm Dr. Vijaya Katti

1. For Niryat Bandhu Scheme (Session on 17.5.2016) Introduction to Export / Import : Assessing export readiness of your firm Dr. Vijaya Katti Chairperson (MDPs) Indian Institute of Foreign Trade New Delhi

2. Coverage • What is meant by exports? • Legal definition • Why to export? Who can export? • International trade scenario and India’s position in global trade • Product specific specialties • Demand of pattern of specific export market specific products • Global market and possibilities of exports • How to assess your export readiness?

3. What is meant by export? - Legal definition

4. Concept of Export • The term export derives from the conceptual meaning as to ship the goods and services out of the port of a country. • The seller of such goods and services is referred to as an “exporter” who is based in the country of export whereas the overseas based buyer is referred to as an “importer”. • In International Trade, “export” refers to selling goods and services produced in the home country to other markets. • In very simple terms, export may be defined as the selling of goods to a foreign country. However, As per Secion2(e) of the India Foreign Trade (Development & Regulations) Act (1992), the term export may be defined as ‘an act of taking out of India any goods by land, sea or air and with proper transaction of money”.

5. Why Export- Reasons for Export • There are many good reasons for exporting. Some of the motives of export are given below: • The first and the primary reason for export is to earn foreign exchange. The foreign exchange not only brings profit for the exporter but also improves the economic condition of the country. • Secondly, companies that export their goods are believed to be more reliable than their counterpart domestic companies assuming that exporting company has survived the test in meeting international standards. • Thirdly, free exchange of ideas and cultural knowledge opens up immense business and trade opportunities for a company. • Fourthly, as one starts visiting customers to sell one’s goods, he has an opportunity to start exploring for newer customers, state-of-the-art machines and vendors in foreign lands. • Fifthly, by exporting goods, an exporter also becomes safe from offset lack of demand for seasonal products. • Lastly, international trade keeps an exporter more competitive and less vulnerable to the market as the exporter may have a business boom in one area while simultaneously witnessing a bust in a different area.

6. Who can export? • Any one who wants to do something different • Anyone who wants to enter in a profit zone • Anyone who has assessed his readiness to enter in new field & try his luck • Anyone who is willing to take risk • Anyone who is constantly updating himself on global business environment

7. Planning for Export • The organization should plan well before exporting as to what product to be exported, where to be exported etc. The organization should also evaluate the export potential of a company. The main objective of a typical export plan should be to identify: • The objectives of exporting • Lists of activities to undertake to achieve those objectives • Mechanism for review and • Activities to help focus on goals

8. Contd.. • Successful exporters agree that your ability to become an accomplished international traders depends largely on how you Adopt appropriate export development strategy Make every penny count Target new business areas Identify and focus on markets, which consume products having the same competitive profile as the products you can supply Have some idea of impact of the FTAs, WTO standards, SPS Measures, Intellectual Property Rights, domestic regulations on the products of interest Dig out every penny due to you from the system, by making best use of available opportunities, policies and schemes

9. Contd.. • Information on the above subject is spread across numerous websites and documents produced by the Trade Ministries of various countries (For FTA, GSP, Customs duty), DGFT, Customs, RBI, Central Excise, Banks, WTO, Other international bodies. • You do not need to understand everything available, but how do you know what to miss. Information Overload makes impossible demand on your resources and time.

10. Contd.. • The course you have enrolled provides straight answers to innumerable questions asked by the exporters as they launched, developed and grew their business. It is a one stop access to information scattered across 100s of websites, manuals, and schemes : and covers basic essentials for starting your business endeavor.

11. International Trade Scenario • Global growth declined in the first half of 2015, reflecting a further slowdown in emerging markets and a weaker recovery in advanced economies. • It is now projected at 3.1 percent for 2015 as a whole, slightly lower than in 2014, and 0.2 percentage point below the forecasts in the July 2015 World Economic Outlook (WEO) Update. • Prospects across the main countries and regionsremain uneven. Relative to last year, growth in advanced economies is expected to pick up slightly, while it is projected to decline in emerging market and developingeconomies. • With declining commodity prices, depreciating emerging market currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies.

12. Contd.. • Global activity is projected to gather some pace in 2016. In advanced economies, the modest recovery that started in 2014 is projected to strengthen further. • In emerging market and developing economies, the outlook is projected to improve: in particular, growth in countries in economic distress in 2015 (including Brazil, Russia, and some countries in Latin America and in the Middle East), while remaining weak or negative, is projected to be higher next year, more than offsetting the expected gradual slowdown in China.

13. The World Economy in Recent Months • Growth in advanced economies in the first half of 2015 remained modest. • For most emerging market economies, external conditions are becoming more difficult. • Financial market volatility rose sharply during the summer, with declining commodity prices and downward pressure on many emerging market currencies. • Capital inflows have slowed, and the lift off of U.S. policy rates from the zero lower bound is likely to herald some further tightening of external financial conditions. • And while the growth slowdown in China is so far broadly in line with forecasts, its cross-border repercussions appear larger than previously envisaged.

14. Global Outlook for 2015-16 • Global growth is projected to decline from 3.4 percent in 2014 to 3.1 percent in 2015, before picking up to 3.6 percent in 2016. • India is projected to remain strong. These developments more than offset the projected continuation of the slowdown in China.

15. Global Outlook for the Medium Term • Global growth is forecast to increase beyond 2016, entirely reflecting a further pickup in growth in emerging market and developing economies. • This pickup reflects two factors. • The first is the assumption of a gradual return to trend rates of growth in countries and regions under stress or growing well below potential in 2015–16 (for example, Brazil and the rest of Latin America, Russia, and parts of the Middle East). • The second factor is the gradual increase in theglobal weight of fast-growing countries such as Chinaand India, which further increases their importance asdrivers of global growth.

16. Contd.. • Elsewhere in emerging and developing Asia, India’s growth is expected to strengthen from 7.3 percent this year and last year to 7.5 percent next year. • In India, inflation is expected to decline further in 2015, reflecting the fall in global oil and agricultural commodity prices.

17. Policies to Foster Growth and Manage Vulnerabilities in Emerging Market and Developing Economies • In India, near-term growth prospects remain favorable, and the decrease in the current account deficit has lowered external vulnerabilities. • The faster-than expected decline in inflation has created space for considering modest cuts in the nominal policy rate, but the real policy rate needs to remain tight for inflation to decline to the inflation target in the medium term, given upside risks to inflation. • Several years of downgraded medium-term growth prospects suggest that it is also time for major emerging market economies to turn to important structural reforms to raise productivity and growth in a lasting way. Although the slowing in estimated total factor productivity growth in major emerging market economies is partly a natural implication of recent progress in convergence.

18. Condt.. • The concern is that potential output growth has become too dependent on factor accumulation in some economies. • The structural reform agenda naturally differs across countries, but it includes removing infrastructure bottlenecks in the power sector (India, Indonesia, South Africa); easing limits on trade and investment and improving business conditions (Brazil, Indonesia, Russia); and implementing reforms to education, labor, and product markets to raise competitiveness and productivity (Brazil, China, India, South Africa) and government services delivery (South Africa).

19. India’s Position in Global Trade

20. India's Top 10 Export Destinations Values in US$ Million Sorted on year 2014-2015 Source : Export Import Data Bank, Ministry of Commerce & Industry, Govt. of India

21. India's Top 10 Import Destinations Values in US$ Million Sorted on year 2014-2015 Source : Export Import Data Bank, Ministry of Commerce & Industry, Govt. of India

22. Top 10 Commodities of India's Exports Values in US$ Million Sorted on year 2014-2015 Source : Export Import Data Bank, Ministry of Commerce & Industry, Govt. of India

23. Top 10 Commodities of India's Imports Values in US $ Million Sorted on year 2014-2015 Source : Export Import Data Bank, Ministry of Commerce & Industry, Govt. of India

24. Direction Of India’s Foreign Trade • The group of countries to which India Exports are :- • Organisation for Economic Co-operation & Development (OECD) comprising of USA, Canada, European Union (EU), Australia and Japan. • Organisation of Petroleum Exporting Countries (OPEC) which includes Kuwait, Iran, Iraq, Saudi Arabia and others. • Eastern Europe which includes Romania, Russia and others. • Developing Nations which includes China, Hong Kong, South Korea, Singapore and Malaysia.

25. INDIA’S FOREIGN TRADE (MERCHANDISE) : November, 2015 • EXPORTS & IMPORTS : (US $ Million) (PROVISIONAL) Source : Ministry of Commerce & Industry, Govt. of India

26. Sectoral dominance of SSIs in Indian Exports • The share of SSI Sector in Indian Exports is an impressive 40%. India has Revealed Comparative Advantage in most of the products exported by SSI sector. • Following table indicates that SSI contribute to more than 70% of Indian exports in leather, Readymade Garments, Wool products, and Sports goods.

28. Informal exporting-Export through an elaborate system of sub-contracting • A large category of Indian Exporters acts as a small link in exporting chain, which works on an elaborate system of subcontracting. • In most cases such firms have no idea of ultimate buyers (of their products) or their preferences as they generally sell to a middlemen at throwaway prices. • Such trends are confirmed by the large enrolment of merchant exporters in most export promotion councils.

29. Most of the Indian garments/Leather/Handicraft/Low Technology Engineering items are produced in Small and Informal Sector. Over half the Gems and Jewellery industry in India is concentrated in the Unorganised Sector and follows a subcontracting model known as Job Lot Method.

30. The emerging Indian Export structure – new players in the game • A number of factors contribute to the growing competitiveness of many Indian export sectors. • These include: Rise of Indian Mini MNCs, Global exposure to a large number of Indian Companies through Export Operations, Easy access to Global Capital and Conducive regulatory environment. • Indian Mini MNCs and International MNCs play the role of Anchor companies helping the entire sector into raising productivity and competitiveness.

31. Rich heritage of various states – Natural endowment : Product Specific specialties

32. Export Potential of Select StatesGujarat • One of India's most industrialized states, Gujarat maintains a variety of industries, the principal ones being general and electrical engineering and the manufacture of textiles, vegetable oils, chemicals, soda ash, and cement. New industries include the production of fertilizers and petrochemicals. • Major resources produced by the state include cotton, peanuts, dates, sugarcane, and petrol. The state is rich in calcite, gypsum, manganese, lignite, bauxite, limestone, agate, feldspar and quartz sand and successful mining of these minerals is done in their specified areas. • Gujarat produces about 91% of India’s required amount of628+9 soda ash and gives the country about 66% of its national requirement of salt. Chemical Industries in Gujarat count for more than 35% of Indian Chemicals production.

33. Maharashtra • Maharashtra has had a long History in textiles and Mumbai was the original home of India's textile mills. • Sugar industry has made considerable progress specially in the co-operative sector. Maharashtra is well known for the development of co-operative sugar industry whereby the farmers acquire a share in the sugar mills. • Pharmaceuticals, petrochemicals, heavy chemicals, electronics, automobiles, engineering, food processing, and plastics are some of the major industries in the state. Maharashtra is renowned for the production of three-wheelers, jeeps, commercial vehicles and cars, synthetic fibers, cold rolled products and industrial alcohol. • Industrial development in the state is largely concentrated in the, Pune Metropolitan Area , Nashik, Aurangabad and Nagpur. The six important industries in the state are cotton textiles, chemicals, machinery, electricals, transport and metallurgy. Pune is emerging as one of the largest automobile hubs in the country.

34. Karnataka • Karnataka evolved as the manufacturing hub for some of the largest public sector industries of India after independence. Hindustan Aeronautics Limited which is dedicated to research and development activities for indigenous fighter aircraft for the Indian Air Force employs over 9,500 employees making it one of the largest public sector employers in Karnataka. • Other heavy industries such as National Aerospace Laboratories, Bharat Heavy Electricals Limited, Indian Telephone Industries, Bharat Earth Movers Limited (BEML), Bharat Electronics Limited. • The Karnataka state has many sugar factories in northern region and also edible oil processing units. There are many pharmaceutical factories and textile processing units in state of Karnataka. The steel producing units of Kirloskar,Jindal, Kalyani groups are located in the state. • There is petroleum refinery, Mangalore Refinery and Petrochemicals Limited ( MRPL ) at Katipalla in Dakshina Kannada district.There is also fertiliser factory MCF near New Mangalore port.There are many roof tile and Beedi manufacturing firms in coastal districts of the state.

35. Contd.. • Karnataka's net state domestic product is of $47 billion. • Between 1992–2002, Karnataka attracted the fourth highest total Foreign Direct Investment approvals in India, to the tune of Rs.21,566 million. • Karnataka accounts for one third of India's Information technology exports. • Agriculture in Karnataka, like most of India, employs 80% of the population. Agriculture and its allied activities account for 49% of the state's income. • Uttara Kanara and Dakshina Kanara are cultivated with rice and sugarcane. • Coffee and Tea are also grown on the slopes of the Western Ghats in the district of Kodagu, Chikmagalur and Hassan. • Karnataka produces 70% of India's coffee, of which about 50% is exported. • The black soil in the northwest of the state, is hospitable for the growth of cotton, onion, course cereal, sunflower and peanuts.

36. Contd.. • The forests of the Malnad region produce timber, bamboo and sandalwood. • Karnataka is the only exporter of sandalwood in the country. • Most of the world's sandalwood oil is produced in Karnataka. • All of India's gold comes from the Kolar district of Karnataka. • Bangalore, the capital of Karnataka, is home to several public sector undertaking aircraft companies, such as Hindustan Aeronautics Limited (HAL), HMT Hindustan Machine Tools, Bharat Heavy Electronics Limited (BHEL), National Aeronautics Limited and also Indian Space Research Organization (ISRO).

37. Contd.. • A number of "IT Parks" have been set up by the Karnataka State Electronics Development Corporation Limited including Bangalore's "Electronics City" and IT parks in Mangalore, Mysore and Hubli. • Bangalore is also home to prestigious higher institutes of learning such as the Indian Institute of Science (IISc) and the Indian Institute of Management (IIM Bangalore). • Hubli-Dharwad is the second largest city in Karnataka and is one of the 49 Metropolitan clusters selected by McKinsey & Company as growth hotspots in India. • The University of Agricultural Sciences and the Karnataka Universities are internationally acclaimed Universities for the quality of research and teaching. • Mysore is the third largest and a very important city in Karnataka. • Being tagged as 'the Heritage City', tourism is a major economic driver and while it is among the top tourist attractions in India, it is said to rank next only to Madame Tussauds in London in the list of most-visited tourist attractions receiving more than 3 million tourists per year.

38. Contd.. • Mangalore is one of the biggest business centre in Karnataka. • It is the best city to do business, after the capital Bangalore. • It is the 13th best business destination in India. • One of the largest SEZ's in India, the ONGC MSEZ is in Mangalore, which is currently the fastest growing non-metro in the south. • Mangalore is one among the only 5 cities in the country to have both a Major Port and an International Airport. • Mangalore is one of the top 10 emerging cities of India for outsourcing. • Udupi the temple city is contributing towards the higher education with large number of professional colleges in Manipal. • It is also the home of the famous software company Robosoft Technologies.

39. Andhra Pradesh • As of June 2013, the state had 39 operational special economic zones (SEZs). There are 272 Industrial estates and industrial development areas in the State, covering an area of 14700 hectares. The State Government is in the process of developing Industrial Parks at different places, for specific groups of industries like Visakhaatnam Export Processing Zone. • Food parks, one each in the 2 regions of Coastal Andhra (value added rice products, dairy, horticultural, marine etc.); and in Rayalseema region (processing of vegetables, edible oils and export oriented industry). Agri Export Zones for the following produce are proposed at the places mentioned against them: • Red Chilli – Guntur district, • Mangoes – Krishna district, • Mango pulp and fresh vegetables – Chittoor

40. Tamil Nadu • One of the global electrical equipment public sector company BHEL has manufacturing plants at Tiruchirappalli and Ranipet. The Tamil Nadu state government owns the Tamil Nadu Newsprint and Papers (TNPL), the world's biggest bagasse-based paper mills in Karur as well as the world's sixth largest manufacturer of watches together with TATA, under the brand name of "Titan".40 percent of all wind-generated electricity in India is created by windmills in Tamil Nadu. Danish wind power company NEG Micon has established its manufacturing unit in Chennai. Tamil Nadu is a leading producer of cement in India and with manufacturing units located at Karur, Tiruchirappalli, Coimbatore and Ariyalur. High-density PolyEthylene (HDPE) mono filament yarn and associated products are manufactured in Karur. • Coimbatore is also referred to as "the Pump City" as it supplies two thirds of India's requirements of motors and pumps. The city is one of the largest exporters of jewellery, wet grinders, poultry and auto components and the term "Coimbatore Wet Grinder" has been given a Geographical indication.

41. West Bengal • Economy of West Bengal, a state in eastern India, is primarily dependent on agriculture and medium-sized industry, although services and heavy industries play an increasingly significant role in the economy of the state. • State industries are mostly localised in the Kolkata region, the mineral-rich western highlands, and Haldia port region. There are up to 10,000 registered factories in the state and the West Bengal state government has opened Shilpa bandhu, a single window agency in order to provide investors with all kinds of assistance in establishing and running industrial units. • Calcutta is noted as one of the major centre for industries including the jute industry. There are numerous steel plants in the state apart from the alloy steel plant at Durgapur. The centre has established a number of industries in the areas of tea, sugar, chemicals and fertilisers. • Natural resources like tea and jute in and nearby parts has made West Bengal a major centre for the jute and tea industries. The state's share of total industrial output in India was 9.8% in 1980–81, declining to 5% by 1997–98. However, the service sector has grown at a rate higher than the national rate.

42. Madhya Pradesh • The Matang truck was completely developed and manufactured by Vehicle Factory Jabalpur. • Madhya Pradesh has 6 Ordnance Factories, 4 of which are located at Jabalpur (Vehicle Factory, Grey Iron Foundry, Gun Carriage Factory, Ordnance Factory Khamaria) and one each at Katni and Itarsi. The factories are run by the Ordnance Factories Board, and manufacture a variety of products for the Indian Armed Forces.

43. Haryana • There are numerous manufacturing companies in the region. These include Hindustan National Glass, Maruti Udyog Limited, Escorts Group, Hero, Alcatel, Sony, Whirlpool India, Bharti Telecom, Liberty Shoes and HMT. In addition there are more than 80,000 small-scale industrial units in the state which cumulatively bring in a substantial income for the state and its people. Yamunanagar district has a paper mill BILT, Haryana has a large production of cars, motorcycles, tractors, sanitary ware, glass container industry, gas stoves and scientific instruments. • Faridabad is another big industrial part of Haryana.It is home to hundreds of large scale companies like Orient fans (C.K.Birla Group), JCB India Limited, Nirigemes, Agri Machinery Group (Escorts Group), Yamaha Motor India Pvt. Ltd., Whirlpool, ABB, Goodyear Tire and Rubber Company, Knorr Bremse India Pvt. Ltd. There are thousands of medium and small scale units as well, like Amrit Enterprises, McAma Industries. • Panipat is a city of textiles and carpets. It is the biggest centre for cheap blankets and carpets in India and has a handloom weaving industry. The pickle "Pachranga International" is also well known. • Rohtak is fast emerging as an industrial town with industries such as Asian Paints, Maruti Udyog, Suzuki Motors decided to make Industrial Model Town, Rohtak their new home.

44. Uttar Pradesh • UP has also witnessed rapid industrialization in the recent past, particularly after the launch of policies of economic liberalization in the country. • There are numerous types of minerals and many industries have come up based upon these minerals. • There are a number of cement plants in Mirzapur in the Vindhya region, a bauxite-based aluminium plant in the Banda region and Sonbhadra region. • In the hilly regions of the state many non-metallic minerals are found which are used as industrial raw materials. Coal deposits are found in the Singrauli region.

45. Punjab • The state has essentially an agrarian economy with a lower industrial output as compared to other states of India. • A prominent feature of the industrial scenario of the Punjab is its small sized industrial units. • There are nearly 194,000 small scale industrial units in the state in addition to 586 large and medium units. Ludhiana is an important centre for industry. • In the 1980s there was a chance of a Hero Honda and Maruti Suzuki plant to be set up in Ludhiana but due to some circumstances of terrorism it was cancelled.

46. Contd.. Important industries • The industrial units in the state are broadly divided into three- • Agro-based industrial units • Machinery units • Chemical units • In addition there are units in : • Textile industry • Sugar industry • Dairy industry

47. Himachal Pradesh • Ecology has been given importance in the state during the last few years. Industries becoming the cause of water or air pollution are not encouraged. Every industrial project has to be passed by the clearance of the Environment Protection Organization before its establishment. • Himachal is facing a number of difficulties in the advancement of industries. Lack of means of dependable transport and poor accessibility was one of the major drawbacks. • Other problems faced by the state were the poor mineral resources, non-availability of infrastructure and communication facilities, shortage of capital and lack of modern skills. • The only plus point of the state was the ample availability of electricity.

48. Rajasthan • Rajasthan is pre-eminent in quarrying and mining in India. The state is the second largest source of cement. It has rich salt deposits at Sambhar, copper mines at Khetri and zinc mines at Dariba and Zawar. This is a chart of output of major minerals of Rajasthan.

49. Contd.. • As an area-wise largest state in India, Rajasthan is surrounded by Punjab on the north and north-east, Haryana and Uttar Pradesh on ease and Gujarat on the south-west. This Indian state is a leading producer of gold, silver, sandstone, limestone, marble, rock phosphate, copper and lignite. Offering several opportunities in organic and contract farming, Rajasthan is also the second largest producer of cement in India. • It is interesting to know that the world's largest centre for gemstone cutting and polishing is situated in Jaipur.

50. Contd.. • Having recorded a tourist count of up to 34.59 million, Rajasthan offers numerous opportunities to expand the luxury tourist segment of the country as a whole. • With a 12.83 percent hike in the gross state domestic product (GSDP) of Rajasthan from 2004-05 to 2014-15, Rajasthan has 2.5 percent of its economy contributed by the small industries and the overall industrial sector. • Metals such as copper, zinc, mica, gypsum and lignite are found in abundance in Rajasthan. • Witnessing an extensive production of cotton, the state's textile industry is also growing at a rapid pace. • Other private industries set on the path of success in Rajasthan include caustic soda, sugar, ball bearings, vegetable oil, woollen goods, rugs and cement. The state contributes one tenth of the salt produced in India. • Rajasthan accounts for India's ninety percent mineral reserves.