Global Export Marketing Framework and Strategy

What is Export Marketing?

• An attempt to explore foreign markets: Export marketing is all about stepping beyond national borders to tap into foreign markets targeting not only foreigners but also domestic diaspora. Example: Patanjali or Haldiram products entering the UAE / USA markets to reach Indian expats. 

• A strategy to establish brand: Marketing across borders with a purpose of establishing brand, popularizing it and creating demand for goods, rather than mere selling / re-selling. Example: Amul exporting dairy products to over 40 countries to become a global brand. 

• A Continuous Strategic Effort: Export marketing blends domestic and international marketing strategies focusing on long-term commitment. Example: Infosys combining Indian talent with global consulting strategies to cater to international clients. 

• Facing New Market Challenges: Export marketing is highly challenging as it involves dealing with different customers, their tastes and preferences, understanding them and their perception, experiencing that country's trade policy and competitors, government obligations, regulatory authorities and many more. Example: When Tata Motors launched the Nano in international markets like Sri Lanka, it struggled due to different consumer expectations and preferences for more premium, feature-rich cars. 

• A dream and a vision: Over and above, export marketing is a desire to spread wings and taste the land of the other end. Example: Zomato venturing into UAE and South Africa to build a worldwide footprint. 

Features of Export Marketing

Following are some of the explicit features of export marketing:

1. Systematic Process: Export marketing is a systematic process that begins with a market study to understand customer needs, preferences, and demand in the target country. Based on this, companies focus on product designing to suit local tastes, followed by product approval and development in compliance with international conformities such as quality and safety standards. Next comes branding to create recognition and trust, along with thoughtful packaging that appeals to foreign consumers and meets regulatory norms. Effective pricing strategies are then planned to stay competitive while ensuring profitability. This is followed by promotion through various channels to generate interest, and finally, setting up a reliable distribution network to ensure timely delivery of products. Example, Amul, when exporting its dairy products to the U.S. and Gulf countries, conducted thorough market research to identify demand among Indian expatriates. It then designed products like paneer and ghee in ready-to-use formats, ensured they met FDA standards (international conformity), used familiar branding, attractive packaging, competitive pricing, and promoted them in Indian stores abroad—backed by a strong distribution network to ensure availability. 

2. Customer Centric: Export marketing is customer-centric, meaning it revolves around understanding and satisfying the needs of international customers. It starts with studying what they want—their preferences, cultural values, and buying habits. Then, businesses focus on a particular market rather than trying to target everyone. The goal is to meet their specific needs by offering suitable products or services. It's also important to connect and engage with customers through localized communication and responsive service. Finally, the aim is to retain them by building trust, offering consistent quality, and maintaining strong after-sales support. Example: Royal Enfield, when entering the U.S. and European markets, focused on customers who loved classic, retro-style bikes. They studied biker communities, adapted models like the Interceptor 650 to suit international road standards, and engaged with local riders through events and clubs. This helped them not just attract, but also retain a loyal global customer base.

3. Global Framework: Export marketing operates within a global framework, where businesses must navigate international rules and relationships. Countries often offer Most Favored Nation (MFN) status to trading partners, ensuring non-discriminatory trade practices. Exporters must understand agreements and trade pacts like ASEAN, NAFTA, or India’s FTAs, which can ease market entry. At the same time, they face restrictions, tariff barriers (like import duties), and non-tariff barriers (like complex customs procedures or quality checks). Organizations like the World Trade Organization (WTO) help create fair trade rules and resolve disputes, but exporters still need to plan carefully to avoid losses. Example: Sun Pharma, while exporting medicines globally, had to comply with U.S. FDA regulations (a non-tariff barrier) and navigate patent laws under WTO rules. Trade agreements between India and other countries helped it reduce duties and expand in regulated markets like the U.S. and Europe.

4. Export Documentation: Export marketing involves detailed documentation, which is essential for smooth international trade. It starts with verifying the relevant trade agreement between countries to understand tariffs and conditions. Exporters must prepare a commercial invoice stating product details and prices, and a shipping bill to get customs clearance. In certain countries, a consular invoice authenticated by the destination country's embassy is required. Rules of Origin and a Certificate of Origin confirm where the goods were made, which affects duty rates. Logistics documents like the airway bill (for air shipments) or bill of lading (for sea shipments) ensure cargo movement. Additionally, a Letter of Undertaking (LUT) is filed to export without paying GST upfront, and a Letter of Credit (LC) provides a guarantee of payment from the importer’s bank. 

5. Economies of Scale: Export marketing helps businesses achieve economies of scale by allowing them to produce in larger quantities and spread costs over a broader market. When companies expand globally, they often evolve into multinational companies (MNCs) with operations and customers across various countries. This leads to the development of global contacts—including buyers, suppliers, and partners—which opens new opportunities. Competing internationally builds global competency, pushing firms to adopt better practices, innovate, and improve quality. To support this expansion, businesses also strengthen their logistics and supply chain networks for efficient global delivery. Example: Infosys, by serving clients worldwide, leverages export marketing to scale its IT services, build global client relationships, enhance technical expertise, and manage an efficient international delivery system—lowering per-unit costs while increasing profits.

6. Bridges the gap: Export marketing bridges the gap between surplus and demand by connecting producers to international buyers. It helps businesses identify what the target market lacks, produce what they want, and sell what’s available in surplus. This benefits both exporters—by reducing unsold stock—and importers—by fulfilling their market needs. India exports surplus rice and wheat to countries in Africa and the Middle East, where food production is limited. By identifying this demand, Indian exporters bridge the food supply gap while also earning valuable foreign exchange. 

7. Three Sided Competition: Export marketing involves three-sided competition, where exporters compete not only with other suppliers from their own country, but also with local suppliers in the importing country, and international suppliers from third countries. This makes the global market highly competitive and demands better quality, pricing, service, and innovation to stay ahead. Example: When Indian textile exporters sell to the U.S., they face competition from other Indian exporters, U.S.-based manufacturers, and low-cost producers from countries like Bangladesh and Vietnam, all targeting the same market.

8. Risk: Export marketing comes with various risks that businesses must be prepared for. Economic risks include inflation or recession in the target country. Political risks involve sudden policy changes, instability, or sanctions. Marine risks cover damages during shipping, such as accidents or piracy. There's also demand-supply risk, where sudden changes in market trends can lead to losses. Financial risks include delayed payments or buyer defaults, and foreign exchange (FOREX) risks arise from currency value fluctuations, which can impact profit margins. Example: During the Russia-Ukraine conflict, many Indian exporters faced political and FOREX risks, as payment routes were blocked and the value of local currencies fluctuated sharply, affecting trade settlements and profits.

9. Cultural Sensitivity: Export marketing involves understanding local customs, traditions and consumer behavior which is primary and key to successful marketing abroad. Example: When McDonald's entered India, it had to completely revamp its menu to respect Indian cultural and religious sentiments. It removed beef and pork from the menu and introduced items like the McAloo Tikki Burger and Paneer Wraps to cater to vegetarian customers. This cultural adaptation helped McDonald's gain acceptance and build a strong presence in the Indian fast-food market, something it couldn’t have achieved with a standard global menu. Similarly, KFC in China offers rice dishes alongside fried chicken to suit local tastes.  

10. Legal and Regulatory Compliance:
    Export allows traders to follow legal requirements of both home and target countries, including product standards, safety laws and environmental norms. Example: Indian pharma companies must comply with USFDA rules when exporting to the U.S. 

11. Use of Technology and E-commerce:
    Digital platforms enable small businesses to reach global customers more easily and manage marketing, payments, and logistics online.
    Example: Many Indian handicraft sellers use Amazon Global to export directly to the U.S. and Europe.

12. After-Sales Service & Customer Support:
    Good service helps retain international customers and build long-term business relationships. This happens through regular client servicing, follow ups, active responses, service centers, query centers, logistical assistance, etc.
    Example: Hyundai provides warranty and service support in multiple countries to maintain customer satisfaction.

13. Sustainability and Ethical Practices:
    Modern export markets often favor companies that follow eco-friendly and ethical practices in sourcing, production, and labour, considering the 17 Sustainable Developmental Goals.
    Example: FabIndia promotes sustainable and ethical fashion, which appeals to eco-conscious global consumers.

Macro Importance of Export Marketing - Towards the nation

Below are some of the advantages of Export Marketing for a nation, though it may vary from time to time, location to location and situation to situation.

i. FOREX Earnings
Export marketing helps a nation earn foreign exchange by selling goods and services abroad, which strengthens the country’s currency reserves and economic stability.

ii. International Relations
Exports promote diplomatic and trade relations between countries, fostering mutual cooperation, cultural exchange, and geopolitical goodwill.

iii. Growth in Economies of Scale
By accessing global markets, producers can increase output, reduce per-unit costs, and benefit from economies of scale, making production more efficient.

iv. Recognition in Global Market
Consistent exports enhance a nation’s reputation for quality and reliability, building its brand value and credibility on the international stage.

v. Access to non-producible products
Export earnings can be used to import goods that the country cannot produce due to geographical or technological limitations, ensuring resource availability.

vi. Improves Current Account Deficit (CAD)
Increased exports help reduce the current account deficit by balancing trade, as export inflows counteract high import expenditures.

vii. Employment generation
Export-driven industries create jobs across various sectors like manufacturing, logistics, and services, contributing to lower unemployment.

viii. Facilitates Research and Development
To meet global standards and competition, businesses invest more in innovation and R&D, improving product quality and efficiency.

ix. Improves Standard of Living
Exports drive economic growth, increase income levels, and provide access to a variety of goods, which collectively enhance citizens’ quality of life.

x. Emerging Business Opportunities
Engaging in export marketing opens doors for new markets, partnerships, and investment opportunities, boosting entrepreneurial growth.

Micro Importance of Export Marketing - Towards the Exporter

i. Facilitates innovation through R&D
To meet global competition and customer demands, firms invest in research and development, leading to innovative products and improved technologies.

ii. Goodwill and Reputation
Consistently delivering quality exports builds a strong brand image, credibility, and trust in international markets, enhancing the firm’s global reputation.

iii. High efficiency
Export operations push firms to optimize processes, reduce waste, and improve productivity to stay competitive and meet international standards.

iv. Honor Export Obligations
Firms engaged in exports can fulfill government-set export obligations (e.g., under schemes like EPCG), ensuring compliance and benefits eligibility.

v. Increased Profits
Access to international markets allows firms to tap into higher demand and better pricing, which boosts overall revenue and profitability.

vi. Liberal Imports (EPCG, IRMAC, etc.)
Exporters enjoy easier import policies and duty concessions under schemes like EPCG (Export Promotion Capital Goods), reducing input costs.

vii. Large Economies of Scale
By producing in larger quantities for global demand, firms lower average costs and improve margins through economies of scale.

viii. Proper resource utilization
Export marketing encourages optimal use of resources—capital, labor, and materials—ensuring better productivity and minimal idle capacity.

ix. Retain old and existing brands
Expanding into global markets revitalizes established brands and sustains their market presence by reaching new customer segments.

x. Spread of market risks
Exporting diversifies customer bases across countries, reducing dependence on any single market and minimizing business risk from local downturns.

xi. Tax Benefits and incentives (DBK, GST, Tax Holiday)
Exporters receive financial support through tax refunds (like Duty Drawback—DBK), GST exemptions, and tax holidays, improving their cost-effectiveness.

Internal Factors Influencing Export Marketing

Here are some of the firm specific / internal factors inducing export marketing. When these factors are met, one starts the business of export marketing.

1. Global Strategic Vision: A practical thought is first required to be generated in the minds of the exporter. There should be meticulous plans and strategies with immense research so that a company can set itself global.

2. Finance & Profits: A firm should scan it's financial standing first and think about entering new markets. Availability and existence of finance matters. The firm should aim for profits as a reward for investing the finance.

3. Market Knowledge and Information: A firm intending to step into international business must possess high level knowledge about external markets. They should understand international needs and mould themselves accordingly.

4. Quality & Innovation: A potential firm should focus on quality and innovation. Focus can be made on acquiring patents through WIPO platform so as to develop a bright image in international eyes.

5. Promptness: A firm wanting to export should first value and understand time. Orders must not only by dispatched on time but even other services must be taken well care of.

6. Technological Ability: Knowledge and application of cutting-edge technology is essential before stepping into export business. A firm should have enormous focus and hold on technology being applied at work.

7. Stable Operations: Entering into international zone is also a derivative of operational stability. Right from getting materials for processing and production to arranging for the best supply chain is key area in getting a good business done.

8. Product Life Cycle: A firm wanting to preserve its old and existing product may try supplying and rebuild its life in overseas market. Apparently, such products can be settled at par in developing and under-developed nations.

9. Filling the Gap: A potential exporter should have the ability to produce and sell that item which can bridge the gap of demand and supply. Eg. OIL 

10. Research & Development: Research and development is that element which can take a firm one step close to overseas business. Proper R & D can lead to innovation thereby pushing the firm to stand class apart from international competitors.

External Factors driving Export Marketing

An export business gets affected by several factors which are not an integral part of the business. Such factors may create a threat, opportunity or even a challenge for an exporter. Some of the external factors are listed below:

1. International Agreements: Agreements among various nations stands to be a very important factor in identifying successful markets. An exporter would choose those nations first with which his country holds a bilateral or a multilateral agreement.

2. Cooperation: Various nations can form close association and work together with common objectives which can become a positive factor for a potential exporter. An exporter may find it challenging to enter markets of those countries with which his nation holds no association.

3. International Barriers: Another external factor influencing export business are the tariff and non-tariff barriers imposed on specific non-member nations on certain trade.

4. Potential Growth: Analysis and study can make an exporter understand about potential growth and scope of trade in overseas market. Based on this analysis, the exporter can take a step ahead in promoting his goods overseas.

5. World Trade Organization: WTO is a supranational with membership of 164 nations. Due to this, they enjoy the status of Most Preferred Nation (MFN). This leads to reduction in import rates for member nations / MFNs thereby promoting import as well export. Well, another motivating and an influencing factor for a potential exporter to step into international markets.

6. Resources: Export business also depends on appropriate availability of physical, natural, financial and human resources. An opportunity can be grabbed if all these resources are well available with a potential exporter.

7. Benefits: One of the most important factors that motivate organizations to trade abroad are the various benefits been made available to exporters. In order to generate higher outward trade, Government bodies extend benefits and subsidies to exporters for their willful contribution towards the nation's forex. Benefits such as refund / waiver of GST on production, waiver of import duties on import of capital goods for manufacturing exportable goods, access and initiative schemes for merchants and services providers and duty credits. 

Risks and Challenges in Export Marketing

Commercial Risk

Commercial risk in export business refers to the potential financial and operational challenges and uncertainties that exporters face when conducting international trade. These risks can arise at various stages of the export process, from negotiating contracts and securing payments to shipping goods and receiving payment from overseas buyers. Understanding and mitigating commercial risks is crucial for the success and sustainability of an export business.

• Payment Risk: One of the primary commercial risks in international trade is the risk of non-payment or delayed payment by the foreign buyer. Exporters may face challenges in ensuring that they receive payment for the goods or services they export. Factors contributing to payment risk include economic instability in the buyer's country, currency exchange rate fluctuations, and the creditworthiness of the buyer.

• Credit Risk: Credit risk involves assessing the financial stability and creditworthiness of foreign buyers. Exporters need to evaluate the buyer's ability to pay for the goods or services. Extending credit terms without conducting proper due diligence can lead to non-payment and financial losses.

Political Risk

Political risk in export business refers to the potential adverse impact of political factors and events in foreign countries on an exporter's operations, investments, and profitability. These political risks can be unpredictable and can arise due to changes in a host country's government policies, regulations, or political stability. Understanding and managing political risk is crucial for exporters engaged in international trade. 

• Expropriation: Expropriation occurs when a foreign government seizes the assets or investments of foreign companies, including those of exporters. This can happen for various reasons, such as nationalization, confiscation, or forced takeover, often with or without compensation to the affected entities.

Case 1: In 2012, the Indian government retrospectively amended its tax laws to claim capital gains tax from Vodafone on a 2007 offshore transaction where Vodafone acquired Hutchison's stake in India. The Supreme Court had ruled in Vodafone’s favor, but the government amended the law to override the judgment and demand ₹11,000+ crore in taxes. However, in 2021, India passed a law to withdraw the retrospective tax demands and refund amounts collected, acknowledging the negative impact on investor confidence. 

Case 2: In 1973, the Indian government passed the Coal Mines (Nationalization) Act, taking over all privately owned coal mines. Private companies lost control of their mining assets; compensation was paid, but it was a classic case of direct expropriation for national interest. 

Case 3: In 1969 and 1980, the Indian government nationalized 14 and 6 major private banks respectively. Private owners lost control and ownership of banks. This was a strategic expropriation to extend banking services to rural and priority sectors.

• Changes in Government: Political risk can stem from changes in government leadership, elections, or political instability in the host country. New governments may introduce policies that affect trade, foreign investments, or market access, potentially harming exporters.

Case 1: India - In May 2014, the Bharatiya Janata Party (BJP), led by Narendra Modi, came to power with a strong mandate, replacing the Congress-led UPA government. The positive outcomes for exporters and investors were 1. "Make in India" and "Ease of Doing Business" initiatives boosted manufacturing and exports, 2. Foreign Direct Investment (FDI) rules were liberalized across sectors, 3. Exporters gained from improvements in infrastructure, digitization and logistics, 4. India improved its global image as a stable and pro-business economy, 5. A strong focus and enormous investment towards national security and defense, 6. Better foreign relations through a strong Ministry of External Affairs, etc. However, Sudden policy changes, such as demonetization in 2016, disrupted supply chains and small exporters temporarily, GST implementation (2017) disrupted tax understanding among businesses which prove beneficial in the long run and Withdrawal from RCEP (2020) was seen as a protectionist move, limiting Indian exporters’ access to a major Asian trade bloc. Even schemes like Aatmanirbhar Bharat, proved to be pro - protectionist in nature guiding citizens to to apply the principle of 'vocal for local'.

Case 2: Bangladesh - Leading up to the January 2024 general elections, Bangladesh experienced widespread political unrest, including violent protests, strikes (hartals), and confrontations between the ruling Awami League and the opposition BNP (Bangladesh Nationalist Party). 1. The instability disrupted logistics and supply chains, delaying export shipments—especially from the Ready-Made Garment (RMG) sector, which contributes over 80% of Bangladesh’s export earnings, 2. Global brands (e.g., H&M, Walmart) expressed concern over security risks and delivery reliability, with some temporarily reducing sourcing from Bangladesh, 3. Investors hesitated to commit new funds due to fears of policy uncertainty and civil unrest, 4. Exporters faced port delays, increased insurance costs, and order cancellations due to missed deadlines.

Case 3: Zimbabwe - Zimbabwe experienced one of the worst cases of hyperinflation in modern history during the late 2000s, largely due to political instability under Robert Mugabe’s rule. Political decisions, land reforms, and economic mismanagement contributed to the crisis, with inflation spiraling out of control, and the currency reaching trillions of Zimbabwean dollars. Some of its impact on trade and investments were

1. At its peak, inflation reached a mind-boggling 89.7 sextillion percent (that's 89.7 billion percent monthly!), rendering the Zimbabwean dollar almost worthless.

2. Exporters struggled as price instability made it nearly impossible to set competitive export prices. The value of payments made in Zimbabwean dollars fluctuated drastically, leading to trade uncertainty.

3. Foreign investments fled the country due to fear of currency devaluation and the inability to repatriate earnings or profits.

4. Zimbabwe’s gold, tobacco, and agricultural exports (key foreign earners) faced disruptions due to hyperinflation and a lack of liquidity in foreign exchange markets.

5. Trade partners refused to deal in Zimbabwean dollars, and companies resorted to using foreign currencies like U.S. dollars for transactions, especially in the informal sector.

6. The exporters' margins were wiped out because of rapidly escalating costs and supply chain breakdowns.

7. At its peak, the Zimbabwean dollar reached a staggering $100 trillion bill, which was essentially worthless for international trade, forcing the government to abandon the local currency in 2009 and move to multi-currency usage (U.S. dollar, South African rand, etc.).

Case 4: Pakistan - In April 2022, Prime Minister Imran Khan was ousted via a no-confidence vote. This triggered a period of political instability with frequent leadership changes, protests, and delayed elections (finally held in 2024 under controversial circumstances). Some major impact on trade and investments were

1. Foreign investors, including those in the China-Pakistan Economic Corridor (CPEC), faced delays, policy uncertainty, and contract renegotiations.

2. Exporters and importers suffered due to currency devaluation, rising tariffs, and frequent changes in trade policy.

3. For example, Indian exporters (especially pharma and textiles directly and through third party) were restricted due to volatile bilateral trade policies, with trade suspended and partially resumed multiple times.

4. International companies like Telenor considered exiting due to regulatory unpredictability.

• Sanctions and Embargoes: Political risk can arise from international sanctions or embargoes imposed by the exporter's home country or international organizations against the host country. These restrictions can limit trade and financial transactions. 

Case 1: Russia - Following Russia’s invasion of Ukraine, Western countries imposed severe sanctions, disrupting trade and financial transactions, especially in energy, technology, and defense sectors. Russian exporters faced difficulties accessing international markets, and foreign companies exited the country due to risk. The list of countries that have imposed sanctions on Russia are the United States of America (7,000 +), European Union, United Kingdom, Canada and Switzerland.

Case 2: North Korea - North Korea faces strict UN and US sanctions due to its nuclear weapons program, limiting trade and access to international markets. Exporters are restricted from selling luxury goods, machinery, and oil products to the country, causing severe economic isolation. The list of countries that have imposed sanctions on North Korea are United Nations, United States of America, European Union and China.

Case 3: Venezuela - US sanctions targeting Venezuela’s oil industry and financial system have devastated the country’s economy. Exporters and foreign investors have pulled out, and Venezuela’s trade, especially in oil, has been severely restricted. The list of countries that have imposed sanctions on Venezuela are United States of America, European Union and Canada.

• Civil Unrest and Political Violence: Political instability, protests, civil unrest, and political violence in the host country can disrupt business operations, supply chains, and the safety of personnel. Example: After the military coup in Myanmar, mass protests and violent crackdowns created widespread instability, disrupting business operations, halting exports, and prompting foreign companies to exit the market. 

• Bribery and Corruption: In some countries, corrupt practices and demands for bribes may be prevalent. Exporters may face political risk if they choose not to engage in corrupt practices, as this could lead to unfavorable treatment by local authorities. Countries notable for being involved in corrupt trade practices are Nigeria, Brazil, Mexico, Venezuela, Kenya, etc.

• Trade Barriers: Governments can impose trade barriers such as tariffs, quotas, import restrictions, and non-tariff barriers (e.g., technical regulations, product standards) that hinder or disrupt exports. These measures may be introduced as protectionist policies, political responses, or in response to international conflicts. Example: In May 2025, the United States implemented several significant tariff measures under the "America First" trade policy, impacting global trade dynamics like 10% universal tariff on all imports, 25% on steel, aluminum and automobiles, 25% tariff on countries importing Venezuelan oil, 30% tariff to China. 

Transportation Risk

Transportation risk in export business refers to the potential challenges and uncertainties associated with the movement of goods from the exporter's location to the destination in a foreign market. This risk can impact the timely delivery of products, their condition upon arrival, and the overall cost of transportation. Some of the forms of transportation risks are:

• Delays in Transit: Delays can occur at various stages of the transportation process, such as loading, unloading, customs clearance, and during transit. These delays can be caused by factors such as congestion at ports, transportation strikes, adverse weather conditions, or infrastructure issues. Delays can lead to missed delivery deadlines and financial losses.

• Damage or Loss of Goods: The physical condition of goods during transportation is a significant concern. Exported products may be exposed to rough handling, theft, accidents, or damage due to environmental factors like temperature fluctuations or moisture. Inadequate packaging or improper handling can contribute to the risk of goods being damaged or lost.

• Container and Equipment Shortages: Transportation risk can arise from shortages of shipping containers or specialized equipment required for certain types of goods. These shortages can lead to delays in booking cargo space and increased transportation costs.

• Port Congestion: Congestion at ports and terminals can disrupt the flow of goods. Exporters may face delays in cargo loading and unloading, vessel berthing, and customs inspections due to overcrowded ports.

Legal Risk

Legal risk in export business refers to the potential challenges, liabilities, and uncertainties related to compliance with international trade laws, regulations, contracts, and legal requirements when conducting cross-border transactions. Exporters must navigate a complex web of legal issues to ensure their operations are in accordance with the laws of both their home country and the destination market.

• Contractual Risks: Exporters often enter into contracts with foreign buyers. Legal risks can arise from misunderstandings, disputes, or breaches of contract. Contracts should be drafted carefully to clearly define terms, responsibilities, and dispute resolution mechanisms.

• Intellectual Property (IP) Protection: Exporters must protect their intellectual property rights (e.g., trademarks, patents, copyrights) in foreign markets. Violations of IP rights, such as trademark infringement, can result in legal actions and reputational damage.

Exchange Rate Risk

Exchange rate risk in export business, also known as currency risk or foreign exchange risk, refers to the potential financial losses or uncertainties that exporters face due to fluctuations in exchange rates between their home currency and the foreign currency used for international trade transactions. This risk can impact the profitability and competitiveness of export operations. 

Natural Calamities Risk

Natural calamities risk in business, often referred to as natural disaster risk, refers to the potential adverse impacts that natural disasters, such as earthquakes, hurricanes, floods, wildfires, tornadoes, tsunamis, and droughts, can have on a company's operations, assets, and overall business continuity. These events are often unpredictable and can lead to significant financial losses, disruptions, and even the closure of businesses. 

Challenges in the Indian Export Sector

Every country maintaining external affair is bound to face challenges related to trade as an outcome of demand, quality or even geopolitics. Here are some of the challenges faced by Indian exports during export marketing.

• Recession in Global Markets - During recession, consumer spending falls. Therefore imports decrease. Interest rates are cut. Therefore, exchange rate depreciates making exports cheaper and imports more expensive. This reduction in the exchange rate improves the current account deficit of a nation, if seen wisely. Great Depression from 2007 to 2009 affected financial institutions and automobile industry in the US, which in turn affected Indian trade and finances. COVID-19 Crisis has affected Indian exporters in carrying out trade at full capacity. Massive amount of SMEs and Labour Intensive Based Industries have been affected due to the lockdown. This is due to closure of international markets in order to contain the deadly virus. 

• Protectionist Measures - Imposing heavy duties on imports to protect domestic industries is kind of Protectionist Measure. Such steps are taken by the Govt of a nation to protect its economy from international technology makers, patent creators, sci-fi knowledge so as to gain more control during a crisis like situation. USA, Europe, Canada, Latin America has exercised this to protect domestic jobs, national security, infant industries, health, safety and environmental standards and unfair competition. Post Great Depression 2009, USA announced the biggest bailout package “Buy American Clause” where firms getting financial assistance from the Government would buy American and not import. This affected Indian exporters, thereby collapsing Indian trade and Balance of Payment.

At present amidst the COVID Crisis, Indian Hon'ble Prime Minister remarkably announced “Aatmanirbhar Bharat” with an aim to go local and support Indian firms and industries. It aimed to create a sense of selfless belongingness towards raising demand for Indian products, thereby sidelining imported goods.  

•  Reduction in Export Incentives - Over a period of time, there has been a slight reduction in export incentives by the Indian Government like reduction in DBK rates, withdrawal of tax holidays which demotivates potential exporters. The increased paper, admin and clerical work also tends to stress out medium and small-scale exporters. Link to check: All Industry Duty Drawback Rates Schedule (Revised) applicable w.e.f. 4th February 2020: CBIC Notification No. 7/2020 dated 28th January 2020 

• Competition from China - China is a massive producer and a lot of goods enter Indian market with the “Made in China” logo. Besides, a lot of goods are dumped in global markets at considerably low prices which is a blow to the Indian manufacturers and exporters. Analysis of export price indices shows that Indian exporters face competitive pressures from countries with lower production costs, i.e. China, Taiwan and Vietnam which adds pressure to the Indian exporters to maintain competitive pricing while ensuring quality standards.  

• Load of Product Standards - An obligation to comply with foreign country requirements depending on quality, safety, sentiments, etc. which has to be adhered if you want to sell in that particular country. Standards ensure that products are qualitative, safe, environment friendly, etc. 

For eg. European Union nations require CE mark on electronic items to enter their market. 

Halal Certification is necessary to get trade permission in 117 countries. 

Food Safety and Standards Authority of India (FSSAI) regulates the import of food articles into India. 

International Standard Organization (ISO), a harmonized system accepted globally. 

China Compulsory Certification (CCC) is required for trading 19 categories of 130 products including electric fuses to auto parts. Required even for domestic trade. 

What's in India? 

According to the Bureau of Indian Standards (BIS) there are around 19,000 listed standards. Of these, 5,119 Indian Standards have been harmonized with international standards. The BIS has signed 21 Memorandums of Understanding (MoU) pertaining to the standardization and conformity assessment with their national counterparts in other countries as well as with the International Organization for Standardization (ISO). The BIS has also signed two Mutual Recognition Arrangements (MRA) with Pakistan and Sri Lanka.

• Problem of Anti-dumping Duties - Duty imposed on inward goods priced below the fair market value of similar goods in the domestic market is called Anti-Dumping Duty. It's intention is to protect local organizations from getting hit by the cheap exports made by the certain nations.

Eg. USA imposed 62.5% ATD on Flat Panel Display (FPD) Screens being imported from Japan in 1991. 

USA imposed 500% ATD on selected steel imports from China to protect their domestic steel industry in 2015.

India has imposed ATD ranging from USD 13.07 per ton to USD 173.1 per ton on certain steel products imported from China, Vietnam and Korea in 2020.

Israel imposed ATD on imports of low voltage copper cables from Turkey ranging from 9 to 14% in 2019.  

• Marine Attacks - Marine attacks claim to be another threat to potential exporters globally. The Geneva Convention defines piracy as “an illegal act of violence, detention or depreciation through the use of a ship”. Piracy takes place in strategic areas. Attacks by pirates in the Somalia region of the Aden Gulf and Socotra Passage for ransom has always been on high focus. This also escalates insurance and security cost. Similarly, attacks on the Gulf of Guinea on crude tankers by mafias for robbing crude or even destroying vessels. Such attacks have been reducing over a period of time from 445 in 2010 to 162 in 2019. As per reports, Malacca Strait (Sumatra), South China Sea, Gulf of Aden (Yemen - Somalia), Gulf of Guinea (Nigeria - Benin) are most affected sea routes.

• Cases:

1. In late January 2024, the Indian Navy's INS Sumitra, operating under Operation Sankalp, successfully rescued 19 Pakistani sailors from Somali pirates in the southern Arabian Sea, approximately 850 nautical miles west of Kochi. The pirates had hijacked the Iranian-flagged fishing vessel FV Al Naeemi, taking the Pakistani crew hostage. Responding swiftly, INS Sumitra intercepted the vessel, deployed warning shots, and utilized aerial surveillance with an Advanced Light Helicopter to compel the pirates to surrender. Marine Commandos (MARCOS) boarded the ship, disarmed the pirates, and secured the release of all crew members without any injuries. This operation followed a similar rescue mission by INS Sumitra just a day earlier, where 17 Iranian sailors were freed from another hijacked vessel. 

2. As per UN Reports (2005), MV Feisty Gas, A Hong Kong based liquefied petroleum gas tanker was seized by Somali pirates and was released after payment of USD 315000 to a pirate representative in Mombasa, Kenya.

3. Indian Vessel MV Safina al Birsarat, in 2016 was hijacked in the Somalian region but turned out to be a failed attempt by the pirates. The US Navy Vessel came for rescue and the pirates surrendered. Reports say they were imprisoned for 7 years. 

• Negative Attitude of Overseas Buyer (Acceptability Issues) - Indian Human Resources are highly valued but not all the products exported. Going global requires following international norms and quality standards along with serving domestic needs. Innovation, R&D, Strategic Partnership, Discipline, Think Global - Act Local concept, etc. should be followed by marketers and manufacturers so that hey can face off the unfavorable attitude of overseas buyers. 

Cases:

1. Jindal Steel and Power exited from Bolivia from Mining operations after a fight with the Govt. (2007)

2. Arcelor Mittal which employed over 20000 employee in France for running blast furnace announced shutting down of its furnace due to its in-competitiveness created a rage in France. (2012)

3. Haldiram Snacks were banned in USA claiming that they contain pesticides and bacteria, which is permissible in India. (2015)

4. Nestle Maggie was banned and rejected by consumers after confirming higher than permissible levels of lead and mono sodium glutamate in it. (2015)

5. Other Indian brands banned abroad includes Dabur Chyawanprash (Canada), Alto and Tata Nano, Kinder Surprise (USA), Bhakarwadi (un--branded), Desi Ghee (USA)

• Excess Documentation - Usually, an international supply involves a huge number of documentation which holds high significance. Every stage of consignment need to be documented so as to have clear evidence and proof of outwards, dispatch, transit, insurance, finance and taxes. In India, three major documents are required. A survey by the Federation of Indian Export Organizations (FIEO) found that exporters spend an average of 10-15 hours per week on paperwork and compliance-related activities. Administrative burdens increase costs and time to market.

(1) Bill of Lading (2) Commercial Invoice (3) Shipping Bill

• Regulations

Documents - Indian exporters are required to dispatch all export related documents through an authorized dealer. Documents can be sent directly only if RBI approval is obtained and advance payment is received.

Realization - An exporter cannot receive payment directory from the importer through cheque, draft, cash without RBI permit. Payments are routed only through authorized dealers like Financial Institutions or Banks.

Payment Period - Bills are to be realized within 6 months. Certain exporters are allowed to to extend credit beyond 6 months for eg. Units of SEZ, Sale of Capital Goods, etc. 

GR Procedure - GR Form (Guaranteed Remittance) is a mean of exchange control imposed by the RBI which states that export proceeds should be realized within 6 months from the shipment of goods.

SOFTEX - Indian exporters registered under STP, SEZ must file SOFTEX form to value the software exports. 

• Infrastructure - Availability of infrastructure is a big challenge for exporters. Infrastructure includes port size and capacity, port entry, loading, cranes, transportation, roads for connectivity, e-clearance, digital platforms, etc. Indian government has initiated numerous schemes under “Ease of Doing Business” as per Trade Facilitation Agreement of the WTO.  India has 12 major ports and 200 plus minor ports administered by Central and State Government of India. India is expected to have 2500 MMTPA (Million Metric Tonnes Per Annum) of cargo traffic from current 1500. The project is named Unnati focusing on Operational Efficiency Improvement, Capacity Expansion (Rs. 58884 Cr investment for 20 years to add 712 MMTPA). According to the World Bank's Logistics Performance Index (LPI), India's infrastructure ranking was 44 out of 160 countries in 2020, indicating significant room for improvement. Currently, delays at ports and inadequate road / rail networks is contributing to higher logistics costs. The Logistics Cost and Efficiency Survey by the Ministry of Commerce and Industry estimates that logistics costs in India account for about 13-14% of GDP, which is higher than developed countries. This high cost reduces competitiveness in global markets.

• Trade Blocs - Export business can be badly affected due to external trade blocs where the exporter's country is not a member. India is not a member of certain powerful associations such as NAFTA, CEFTA, ASEAN, EU, GCC, OPEC, etc. which can create hurdles for Indian exporters to enter into those markets. The Ministry of Commerce and Industry of India has various Foreign Trade Territorial Divisions to deal with bilateral relations with various such international associations like NAFTA, EU, Africa, ASEAN, WANA (West Asia and North Africa), etc.

• Finance - Reports suggest that access to affordable working capital finance remains a challenge for many Indian exporters, particularly SMEs. This further limits the exporter's ability to fulfill large orders or expand operations. However, the Export-Import Bank of India provides export credit finance, but uptake and availability vary across sectors and regions. This varying credit availability affects exporter's ability to offer competitive credit terms to overseas buyers, inviting contractual loss. 

Global Trade Routes and Infrastructure 

Some of the global trade routes and trade infrastructure is discussed below:

1. The Suez Canal (Egypt)

• Route: It is a 193 km long, with a width of around 700 feet and a depth of close to 79 feet. It connects the Mediterranean Sea to the Red Sea, facilitating trade between Europe and Asia.

• Time & Distance Savings: Reduces voyage distance by approximately 7,000 km compared to the route around the Cape of Good Hope, South Africa saving about 10–12 days in transit time. An average cargo liner departing from Mumbai, India takes about 20 to 22 days to reach United Kingdom to London via Suez Canal. 

• Costs: Transit fees to making use of Suez Canal depends on the gross and net tonnage of the container ship including mooring, pilotage and disbursement. A ship with 5,000 tonnage carrying heading north may be charged around $ 85,000 on an average. In May 2025, Egypt's Suez Canal Authority announced a 15% discount on transit fees for container ships weighing at least 130,000 metric tons to attract traffic back to the canal.

• Infrastructure: The canal has implemented (VTMS) Vessel Traffic Management System using GPS and AIS (Automatic Identification System) and tracks real time movement of ships facilitating safe navigation of ships. The region is managed by the (SCA) Suez Canal Authorities which regularly carries out dredging using cutter suction dredgers trailing suction hopping dredgers. It features a dual-lane expansion completed in 2015, allowing for two-way traffic and reducing waiting time by up to 18 hours. Close to 22,000 ships pass through the Suez Canal every year making an average of 60 ships per day. 

2. Panama Canal (Panama)

• Route: The 82 km Panama Canal is a man-made waterway in Central America that connects the Atlantic Ocean (via the Caribbean Sea) with the Pacific Ocean. It is a key maritime shortcut, reducing the distance for ships traveling between the U.S. East and West Coasts by around 20,000 km.  

• Time & Distance Savings: Ships can cross the canal in 8 to 10 hours and saves up to 20,000 km compared to the route around South America's Cape Horn, reducing transit times by several weeks. 

• Costs: Tolls are based on vessel size and cargo type. The tariff starts with $1,72,000 (ballast) for 2,500 TEU to $1,042,000 (laden) for 12,000 TEU with additional transit expenses like Towage, Line handlers, Locomotive wires (Panamax locks only), Security fee and Transit Vessels Inspection. 

• Infrastructure: The Panama Canal’s infrastructure is a remarkable feat of engineering, built to overcome the elevation of the Panamanian isthmus using a system of massive locks and artificial lakes. Unlike the sea-level Suez Canal, it relies on a series of lock chambers that raise and lower ships about 26 meters using water from Gatun Lake. Its 2016 expansion added a new set of wider, deeper locks known as the Neo-Panamax locks enabling it to accommodate today’s largest cargo vessels and significantly boosting global trade efficiency. 

3. Northern Sea Route (NSR) – Arctic Passage

• Route: Runs along Russia's Arctic coast from the Barents Sea to the Bering Strait, offering a shorter path between Europe and Asia.

• Time & Distance Savings: Reduces sailing distance from Murmansk to Yokohama by approximately 7,070 nautical miles compared to the Suez Canal route, saving up to 10 days in transit time.

• Costs: While there are no canal tolls, ships may incur costs for icebreaker assistance and specialized vessel requirements.

• Infrastructure: Russia is investing in developing Arctic ports and deploying nuclear-powered icebreakers to support increased traffic.

• Challenges: Navigation is limited to a few months during summer due to ice conditions, and the route poses environmental and safety concerns.

4. China–Pakistan Economic Corridor (CPEC)

• Route: Connects China's Xinjiang province to Pakistan's Gwadar Port, enhancing trade between China, the Middle East, and Africa.

• Time & Distance Savings: Provides China with direct access to the Arabian Sea, reducing reliance on longer sea routes through the Strait of Malacca.

• Costs: Part of China's Belt and Road Initiative, with investments totaling around $46 billion.

• Infrastructure: Includes highways, railways, and energy projects to facilitate trade and economic development.

• Challenges: Security concerns and geopolitical tensions, particularly regarding the route passing through disputed regions.

5. International North South Transport Corridor (INSTC)

The INSTC is a 7,200 km multimodal transit network connecting the Indian Ocean to Northern Europe via Iran and Russia. Initiated in 2000 by India, Iran and Russia, the corridor facilitates the movement of goods through a combination of sea, rail and road routes. Over time, membership has expanded to include 13 countries, such as Azerbaijan, Armenia, Kazakhstan and others.

Importance for India

• Diversification of Trade Routes: The INSTC offers India an alternative to traditional routes like the Suez Canal, reducing dependence on vulnerable chokepoints and enhancing trade security.
  
  

• Enhanced Connectivity with Central Asia: The corridor provides India with improved access to Central Asian markets, fostering trade and cooperation in various sectors.
  
  

• Energy Security: The INSTC facilitates India's access to energy resources in Russia and Central Asia, potentially decreasing reliance on the Middle East.
  
  

• Strengthening Ties with Iran: India's investment in Iran's Chabahar Port and participation in the INSTC enhance bilateral relations and trade opportunities.

Challenges

• Limited International Funding: The INSTC lacks significant financial backing from major institutions, posing challenges to infrastructure development.
  
  

• Sanctions on Iran: U.S. sanctions on Iran have deterred global companies from investing in infrastructure projects within the country.
  
  

• Security Concerns: The presence of terrorist organizations in Central Asia poses a significant security threat along the corridor.
  
  

• Infrastructure Disparities: Uneven development of infrastructure across member states, particularly in Iran, creates bottlenecks and hinders seamless movement of goods.

Trade Barriers

• A Government induced restriction on free flow of international trade.

• A kind of protectionist measure to sustain domestic manufacturers.

• Can be a retaliation by a nation against another nation for defaulting foreign policy objectives.

• Involves imposition of duties on tradable goods and services making imports expensive.

• Can leads to Trade War like situation, if not controlled.

• Generally, higher income countries tend to have less trade barriers compared to lower income countries.

• Creates revenue for the importing country which can be used for economic development.

• Countries like Bahamas, Gabon, Chad, Bermuda impose maximum barriers.

• Countries like Singapore, Macao, Hong Kong, Switzerland impose least barriers.

Types of Trade Barriers

Let us understand the meaning and types of tariff and non tariff barriers.

Tariff Barriers

Tariff barriers involve taxes on imported goods, typically aimed at generating government revenue and protecting domestic industries by making foreign products more expensive. There are various types of tariffs, such as ad valorem (a percentage of the item's value), specific tariffs (a fixed amount per unit), and compound tariffs (a mix of both). These taxes increase the cost of imported goods, encouraging consumers to opt for domestic products, thereby shielding local industries from foreign competition. 

Non-Tariff

Non-tariff barriers (NTBs) are trade restrictions that don’t involve direct taxes but still inhibit imports. NTBs include quotas, which limit the quantity of imports, licensing requirements, and strict health, safety, or technical standards that foreign goods must meet. Additionally, subsidies provided to domestic industries can give them an unfair advantage over international competitors. NTBs also include complex customs procedures that delay the entry of foreign goods. While tariffs are transparent and easy to measure, NTBs are more subtle and often harder to quantify, yet they can be equally effective in restricting trade. As global trade agreements limit the use of tariffs, many countries increasingly rely on NTBs to protect their domestic markets. However, both tariff and non-tariff barriers can strain international trade relationships, potentially leading to trade disputes or even trade wars. 

Tariff Barriers

1. Specific Duty: A duty of specific amount that depends on weight, volume, surface, etc. It shows tax to be imposed on quantitative basis. Eg. Import duty of 150% on import of Grape Wine bottles of 1 Ltr (other than Sparkling Wine) from USA levied by India.

2. Ad Valorem Duty: A duty levied on the assessed value of the product. Duty depends on the sum total of set of item being imported. In short, higher the value - higher the tax. Eg. 30% Import Duty on import of SUV automobile from Japan levied by India. 

3. Compound Duty: Inclusion of both specific and ad valorem duty. For Eg. Specific Duty of Rs. 100 per kilogram of Copper plus 5% ad-valorem duty.

4. Seasonal Duty: Duty varies with change in the price of the commodities is called Seasonal Duty. Also called as Sliding Scale Duty. Mainly applicable to agricultural produce due to the volatility in its price. Eg. Increase in the price of onion powder derived by dried onion may head to a strategic increase or decrease in its import duty.

5. Countervailing Duty: Its a kind of Additional Customs Duty or Special Additional Duty over and above the Basic Customs Duty. Imposed by the government in cases where exports (of the exporting country) are subsidised due to which imports (of the importing country) become reatively cheaper. As a protectionist measure to safeguard the domestic manufacturers and to equalize the price, CVD is imposed. Eg. Basic Customs Duty @ 5%, Additional Customs Duty @ 12.5% and Special Additional Customs Duty @ 4% levied by India on import of Refined Copper.

6. Revenue Tariff: A tariff designed to provide revenue to the controlling government is called revenue tariff. Generally, imposed on consumer goods and luxury goods which posses high demand. 

7. Safeguard Duty: Duty imposed to safeguard the domestic industries from heavy imports. A high duty is imposed so as to discourage imports or to make imports equalize or expensive than domestic product.

8. Anti Dumping Duty: Duty levied on goods dumped by foreign exporters. Exercised from time to time through notice applicable on certain products dumped by certain countries. Eg. India levying 3.12$ per USB Flash Drive being dumped by China / Taiwan (2015-2020).

9. Customs Handling Fees: Indian Government charges 1% of value of goods towards custom handling / landing charge in addition to BCD.

10. Social Welfare Surcharge (India): Started in 2018 in the place of Education Cess levied at 10% of the value of goods over and above BCD and ACD.

11. GST (India): IGST is applicable on goods imported to India over and above BCD, ACD and SWS.

12. NOTE: As per Geneva Convention, 1952, import of sample goods are exempt from import duties. For duty free clearance, the supply should be free of charge where value of individual sample should not exceed INR 5000/- and aggregate value should not exceed INR 60,000/- per year or 15 units of samples in a year. However, the Prototypes of engineering goods can be imported even if the value is more than INR 5000/-. 

Non - Tariff Barriers

1. Trade License: Various countries impose licenses to certain imports. In short, an importer requires to hold a license issued by an official authority to import certain goods. In India, restricted goods require license which is valid for 24 months (capital goods) and 18 months (raw material components) which is renewable. Products like precious - semi precious stones, seeds, plants, pharma, chemicals, insecticides, reserved for SSI, canalized items and prohibited items.

2.  Embargo and Sanctions: A situation where a country or a group of countries officially limit or ban trade (impose sanction) and trade related activities with a specific country. Highly strategic, political and economical. Eg. The USA has imposed a sanction against Cuba (Human Rights Abuse), Iran (Human Rights Abuse, Terrorism and Nuclear Program), Cuba (Human Rights Abuse), Sudan (Human Rights Abuse, Terrorism and Civil War), North Korea (Human Rights Abuse and Nuclear Program) and Syria (Human Rights Abuse and Civil War)

3. Quota System: A quota is a government-imposed restriction on trade that limits the number or monetary value of goods that a country can import or export during a particular period. Eg. Indian government fixed an import quota of 7 Lakh Tonnes of pulses for the period from 1st April 2020 to 31st March, 2021. 

         Types of Quotas:

• Tariff Quota - Import of commodity up to certain quantity is allowed  to be imported duty free or low rate. But imports beyond this quantity  is subject to higher duties.

• Unilateral Quota - Limit is placed on importation of a commodity for a given period without any negotiations with foreign government.

• Bilateral Quota - Limits or quotas are set between the exporting and importing country through a mutual agreement.

• Mixed Quota - Producers are required to utilize certain proportion of domestic raw materials along with imported parts and materials to produce finished goods. (Domestic Content Requirements)

4. Product Standards: Specific standards are set by importing country which has to be followed by the exporters of the exporting country. Standards are designed to ensure safety, quality, compatibility and consistency. Eg. FSSAI, ISI, CE, etc. Also, special packaging standards laid by SASO and EU for gaining access to goods in their regions.

5. Product Labeling: A lot of countries impose specific guidelines for labeling on the packaging. It can be inclusion of regional language, kind of ink used to mark and label, non use of codes, etc. India requires information and declaration for importing packaged food. Information like trade name, descending order of ingredients composition by volume/weight, name and address of manufacturer, net weight, batch number, month and year of manufacture and packaging and expiry, maximum retail price, vegetarian/non-vegetarian symbol and coloring material used. Declaration like name and address of the importer, name of the product and quantity printed in English or Hindi, either on the package or in an additional wrapper. Products which undergo further process and not for end consumer need not have to follow these guidelines. 

6. Packaging Requirements: Certain nations require specific type of packaging (product packaging and protective packaging) of goods including material, design, reusability, etc. Eg. EU insist on recyclable materials in packaging. Also, excessive amount of SVHC is not legal to be traded in EU markets.

7. Consular Formalities: Certain importing countries require documentation and procedures certified by its embassy in the exporting country declaring volume, description and duties on the goods which makes clearance process easy in the importing country. Absence of such formalities may lead to delay in clearance or even rejection of goods at the customs frontier. 

8. Health and Safety Regulations: Many nations impose Health and Safety Standards with respect to various classes of products. It may be regulations related to contents in the product and it's packaging so as to not prove unhealthy or unsafe.

9. Environmental Regulations: Environment safety is a major concern with growing trade. Several nations impose standards with respect to environment safety so as the product carry a safe disposable action. 

10. Trade Blocs: Various trade agreements tend to create a blockage for other non-member nations by making entry in those markets difficult. 

11. State Trading Organizations: Certain products in certain nations are traded only by the Government agencies and not openly by private players. Such situation creates a blockage for potential importers and exporters.

12. FOREX: Constant fluctuation of foreign exchange rate also becomes a treat to exporters and importers carrying a risk of tremendous loss due to currency devaluation.

Global Relations

Economic integration is the unification of trade and economic policies between various nations, through the partial or full abolition of tariff and non-tariff barriers on trade. This involves various stages right from a trade agreement to a complete economic union. Every Trade Agreement between nations is backed by a strategy. A strategy to build strong political relations along with bridging gap of goods, services, capital and labor. When nations get into terms of agreement, there is a smooth functioning of trade practices, hence contributing to economic development.

In simple terms, trade becomes easy and less complicated between nations when they integrate with a certain objective. This can prove beneficial to traders with regards to stabilized demand and supply and even the government with respect to relations. Lets understand stages of Economic Integration with global examples.

I. Preferential Trade Agreement

A Preferential Trade Agreement (PTA) is the first stage of economic integration between countries. It provides preferential access to specific products by reducing tariffs for participating nations, fostering easier trade compared to non-member countries. PTAs can be bilateral, involving two countries, or multilateral, involving multiple nations. While tariffs are not completely eliminated, they are significantly reduced to encourage trade among member countries. This arrangement allows member states to benefit from enhanced market access and improved competitiveness, often serving as a stepping stone toward deeper economic cooperation, such as free trade agreements. 

Examples

1. Economic Cooperation Organization (ECO): Eurasian # intergovernmental # 1985 # development # trade promotion # investment # AFG-AZB-IRN-KZK-KYR-PAK-TJK-TUR-TKM-UZB

2. SAARC Preferential Trading Arrangement (SAPTA): South Asian # 1993 # trade liberalization # cooperation # BGD-BUT-IND-MAL-NPL-PAK-SRL

3. India-MERCOSUR PTA: A significant agreement between India and the South American trade bloc MERCOSUR (Argentina, Brazil, Paraguay, Uruguay), aimed at reducing tariffs on various products​.

4. ASEAN Preferential Trading Arrangement: Established in 1977, this agreement focuses on increasing trade among Southeast Asian nations through tariff reductions and other measures like harmonizing policies for trade development​.

5. CARICOM-Dominican Republic PTA: This agreement between Caribbean nations and the Dominican Republic facilitates trade liberalization in goods and services and promotes investment​.

II. Free Trade Area

A Free Trade Area (FTA) is an arrangement among member nations to eliminate barriers to trade, allowing for the free movement of goods and services between them. In an FTA, member countries agree to remove tariffs, quotas, and other trade restrictions on products traded within the group, thereby facilitating easier access to each other’s markets. However, tariffs are still imposed on goods from non-member nations, which helps to protect the economies of member countries from external competition.

Examples

1. Caribbean Community (CARICOM): 15 Caribbean nations # promote economic integration # sharing benefits equally # bilateral agreements with AUSTRALIA, INDIA, JAPAN, MEXICO, SOUTH KOREA, USA, VIETNAM, etc.

2. China with SRI LANKA, HONG KONG, NEW ZEALAND, SINGAPORE, etc.

3. India with SINGAPORE, MALAYSIA, THAILAND, SRI LANKA, etc.

4. NAFTA: 1994 # CANADA-MEXICO-USA

5. Gulf Cooperation Council (GCC): 1981 # BAHRAIN-KUWAIT-OMAN-QATAR-SAUDI ARAB-UAE

6. Asia Pacific Trade Agreement (APTA): 1975 # BANGLADESH # CHINA # INDIA # LAOS # MONGOLIA # SOUTH KOREA # SRI LANKA

7. European Free Trade Association, Andean Community, Central European FTA, etc.

III. Economic Partnership

An Economic Partnership is a trade agreement aimed at enhancing economic cooperation and increasing trade between countries or regions by reducing barriers like tariffs and quotas. Unlike traditional free trade agreements, economic partnerships cover a wider range of topics, including services, investment, and sustainable development. The main goal here is to create a favorable trade and investment environment which is achieved by allowing member countries to trade goods and services at reduced or zero tariffs, benefiting consumers and businesses. Further, they extend technical assistance to help developing countries to strengthen their economies. In the contemporary times, economic partnerships also address social and environmental issues, promoting sustainable practices and ensuring that economic growth is inclusive. They may include provisions for labor rights and environmental protection.

Example

1.  Japan - Mexico Economic Partnership Agreement

2.  Trans Pacific Strategic Economic Partnership Agreement

3.  Comprehensive Economic Partnership Agreement between India and Japan

4.  Comprehensive Economic Partnership Agreement between India and Korea

5.  Comprehensive Economic Cooperation Agreement between India and Malaysia

6.  Comprehensive Economic Partnership Agreement between India and Singapore

Lets understand something about Trans Pacific Partnership 

(Note: USA withdrew it's signatory in 2017)

Relationship between Trans Pacific Partnership (TPP), Regional Comprehensive Economic Partnership (RCEP), Asia Pacific Economic Cooperation (APEC) and Association of South East Asian Nations (ASEAN)

IV. Common Market

A Common Market is an advanced form of economic integration where member nations not only enjoy free trade of goods and services but also implement common external tariffs and product regulations. This arrangement facilitates the free movement of factors of production, such as labor and capital, among member countries. By increasing competition and specialization, a common market leads to a more efficient allocation of resources, enhancing overall economic productivity. However, it can also result in concerns about the erosion of national identities, as seen in the context of Brexit, where the UK’s departure from the European Union was partly driven by fears of losing sovereignty and cultural identity in the face of deeper integration 

Examples:

1. ASEAN Economic Community, MERCOSUR, Central American Common Market, European Single Market, Eurasian Economic Space.

2. European Single Market agreement between the EU and (with certain limitations) Iceland, Lichtenstein, Norway and Switzerland guarantees the free movement of goods, capital, services and labor.

V. Monetary Union

A Monetary Union is an agreement among member countries to adopt a shared currency, which may not necessarily entail complete economic integration. This arrangement can take various forms, including formal unions with common policies or informal agreements without strict regulations. By using a single currency, a monetary union eliminates foreign exchange risks and conversion costs, making trade and investment easier among member nations. Additionally, it facilitates price comparison and enhances transparency, contributing to crisis resistance by allowing for a more coordinated monetary policy. The most notable example of a monetary union is the Eurozone, where multiple European nations share the euro as their currency​.

Example:

1. EURO used by Belgium, Cyprus, Ireland, Italy, Germany, France, Malta, Portugal, Spain, etc.

2. Indian Rupee used by India, Nepal and Bhutan. Even Maldives, Zimbabwe and Qatar to some extent.

3. US Dollar used by USA, Samoa, Puerto Rico, Ecuador, Virgin Islands, etc.

4. CFA Franc used by Benin, Togo, Chad, Republic of Congo, Gabon, Central African Republic, etc.

VI. Fiscal Union

A Fiscal Union is an agreement between member states to coordinate their fiscal policies, which includes taxation and government spending. This type of union allows countries to share financial resources and manage public finances collectively, promoting economic stability and growth across the member nations. In a fiscal union, there is often a central authority that oversees fiscal policies, ensuring compliance and cohesion among member states. Some of the features of a fiscal union typically include a common budgetary framework, coordinated tax policies and mechanisms for financial transfers among member countries to support economic stability, particularly in times of economic distress. By pooling financial resources, a fiscal union can help mitigate economic disparities and foster solidarity among member states. 

VII. Customs Union:

A Customs Union is a type of trade bloc that combines a free trade area with a common external tariff applied to non-member countries. This arrangement is formed by countries that agree to adopt a unified external trade policy, which enhances trade by eliminating tariffs among themselves while imposing the same tariffs on goods imported from outside the union. Customs unions not only promote economic efficiency through increased trade and specialization but also foster closer political and cultural ties between the member nations. These unions are typically established through trade agreements or pacts, enabling member countries to negotiate as a single entity on trade matters. 

Example: 

Andean Community, Carribean Community, East African Community, GCC, Israel-Palestine Authority (Al-Shabaka), etc.

VIII. Customs and Monetary Union

A Customs and Monetary Union is an advanced form of economic integration that combines the features of both a customs union and a monetary union. In this arrangement, participating nations not only establish a common foreign trade policy and eliminate tariffs among themselves but also adopt a shared currency. This integration facilitates trade by simplifying transactions and eliminating exchange rate risks among member states, thereby promoting economic stability and growth. 

Example: European Union, Switzerland - Liechtenstein, Economic and Monetary Union of Central Africa, West African Economic and Monetary Union.

IX. Economic Union

An Economic Union is an advanced form of regional integration that encompasses both a common market and a customs union. In this arrangement, member nations not only engage in tariff-free trade and share a common external tariff but also implement unified policies regarding product regulations, the movement of goods, services, and all factors of production. Furthermore, an economic union establishes a common foreign trade policy among its members. The primary objective of creating an economic union is to enhance economic efficiency, promote competitive markets, and strengthen political relationships between member countries. 

Example: CARICOM, GCC, European Union.

X. Economic and Monetary Union

An Economic and Monetary Union is an integrated arrangement that combines aspects of both economic and monetary unions. Member nations typically share a partially unified trade policy, allowing for the free movement of goods, services, and factors of production with minimal barriers. This integration facilitates enhanced economic cooperation and competitiveness among member states. Additionally, a key feature of an EMU is the adoption of a common currency, which helps eliminate exchange rate fluctuations and fosters greater economic stability. 

Example: Euro Area (countries that have adopted EURO as their national currency), Eastern CARICOM and Switzerland - Liechtenstein.

XI. Complete Economic Union

A Complete Economic Union represents the highest level of economic integration among member states, characterized by the harmonization of trade, fiscal, and monetary policies across the entire union. In this arrangement, while each state maintains its own independent government, key decisions regarding monetary policy, domestic and international trade regulations, agriculture, external affairs, and welfare are centralized under a federal government. This structure enables a cohesive economic strategy that aims to maximize efficiency, enhance competitiveness, and ensure balanced economic growth across the union. 

Example: USA

Understanding Trade Blocs

Here is a list of some of the most popular trade blocs. Click on them to get insights.

1. EUROPEAN UNION

2. BRICS

3. CARICOM

4. ASEAN

5. Trans Pacific Partnership

6. MERCOSUR

7. WTO Agreements

Overseas Market Research

Market research is a process of identifying the most appropriate market along with measuring its size and characteristics. Market research is highly required while exploring new markets so as to understand consumer behavior, trend, culture, history, technology, climate, language, politics, barriers, market accessibility, competitors with demand and supply gap. Let's understand why market research is an essential tool in international business. 

1. Identification of customer needs and wants: Market research enables an exporter to know and understand what customers need in overseas market. No exporter can directly sell his products in any foreign market. There need to be a thorough research-based affirmation whether demand can be created in the foreign market or not. The exporter with the help of his mark research agency try to collect information about goods which are highly purchased by consumers in the targeted market and thinks of bringing in variation and innovation. Certain brands which are already popular should also conduct market research before entering new markets so as to understand consumer psychology related to buying and other influencing factors such price, income, competition, brand loyalty, impact of advertising, awareness, etc.

2. Product Decisions: With good research, a potential exporter can think and decide about the best kind f product to be sold in the targeted market. A good example here can Volkswagen cars manufactured in Germany to be exported in India can be successful only they incorporate right side steering. For this, Volkswagen need to know Indian road and driving compliance which is possible only through research. 

3. SWOT Analysis: Analysis of Strengths, Weaknesses, Opportunities and Threats requires internal as well as external research. An exporter primarily need to know what he has and what he can do. This will enable him to understand his strengths and weaknesses. Points like quality certification, massive production, global recognition, optimum pricing can stand as key strengths whereas inadequate marketing team, poor research and development, lack of creativity and innovation can stand as a weakness. Similarly at an external level, a organization need to identify opportunities like deals, orders, increasing demand, trade agreements, economic unions along with threats like political issues, civil wars, rival competition, pandemic situation, global crisis, etc.  

4. Gain Competitive Advantage: Competitive advantage is an advantage that a firm gains over its competitors, allowing it to generate higher sales and retain more customers than its competitors. Market / Product research enables a marketer to excel in those areas which command high demand in market. With research, they can develop advanced products and services thereby gaining competitive advantage. Eg. Nokia attained competitive advantage over then existing brands such as Motorola, LG and Samsung with respect to scale, brand and services. Nokia created amazing product designs outperforming its rivals. Nokia was the one who brought advanced technology in developing nations by its launch of N series.

5. Global Market Intelligence: Conducting research enables a firm to gain high level knowledge about the targeted market. This includes various areas like emerging trends, fashion, competition and even gaining agency and consignee information through which selling units can be established.

6. Consumer Demographics: Understanding consumer demography is a key essential for any potential exporter. It's very important to know population distribution based on gender, age, psychology, habits, status, etc. Based on these points, an exporter can come to know the kind of consumers existing in the market.

7. Measure the effectiveness of Distribution Channels: Researching and gaining information on distribution channel is another responsibility of a potential exporter. An exporter should know the most appropriate channel to deliver his goods in the targeted market. Eg. Apple sells a part of its products in Apple Store creating a unique touch and experience with the consumers and it also depends on indirect / third-party channels like Croma, Reliance Digital, etc. enabling Apple to get a higher reach in the markets. 

8. Effectiveness of Promotional Measures: Research enables a potential exporter to measure the effectiveness of promotional measures to be taken by them. Eg. Mondelez's Cadbury India, through it's consumer research understood that Indians prefer unique gifting options to touch the heart of the receiver. Hence, Cadbury has marketed its products with an emotional appeal tied to gifting during festival occasions. This research output was also the reason why Cadbury launched sale of Toblerone in India in 2012 all because of its unique shape and gifting ability.

9. Develop Packaging: Research also enables an exporter to create better package model, handle and design as per consumer preference. Eg. Dairy products sold by Al Rawabi in India are packed in a reusable plastic tub and bottles so as to ensure safety, durability and comfort handling. 

10. Others: Research also helps a firm to understand trends in the industry, forecast sales, make price related decisions and also generating effective feedback for analysis. 

• Pepsi Co: Pepsi Co India projected the the liking for nachos in India and hence launched Doritos with Indian flavors through a Make in India campaign.

• Royal Enfield: A 500 CC Royal Enfield bike may be priced around $3000 whereas the same in USA or Cambodia or Vietnam or UK may be priced above $5000. Since Royal Enfield bikes are manufactured mainly in India, the increase in price may be for transportation, quality standards, shipment and duties. 

• Harley Davidson: Similarly a US made Harley Davidson Street bike is priced at around $8000 in USA whereas $6500 in India. This can be due to Harley Davidson's manufacturing unit located in India (Bawal, Haryana). PS: HD has decided to discontinue it's sale and manufacturing operations in India due to lack of demand leading to closure of Bawal plant in Haryana. 

• Apple Inc: This company has “Apple Customer Pulse” research group in charge of conducting online surveys enabling them to compile and analyze the data faster with proper administration. This has lead to effective and appealing research programmes with active participants. These survey outcomes have made the company to apply different designs and modifications for their products. Something like having bigger screens to view videos and games more clearly or having a high-end camera to click the quality images in the night without noise or even water resistance. 

• McDonalds: One of the largest fast-food chains in the world has done extensive research to fit in the trend. Focusing on questions like most demanded product, price factor, marketing methods and geographical location for good business. With such research operations, McDonalds have improved their standards and have also pumped in variety of products geographically. 

Determinants of Foreign Market Selection

In reality, there are loads of factors influencing an exporter for selecting the most appropriate market. The exporter cannot simply select any market and dump goods. Every consignment has to be backed by strong analytics so that there is clarity in work. There may be millions of barriers that could hamper the sale of goods in a particular market which can be mitigated, if the exporter has a vigilant and smart team with the best distribution and supply chain management. Let's understand some of the factors playing an important role selecting markets by a potential exporter. We will also look into some real-life cases to get better view. 

1. Market Size: Size of a market calls a potential exporter for business. Bigger the market size, more can be the demand and hence, proves a good marketplace for a potential exporter. For example, India has been a big market where not everything is available. When a new non existing commodity is brought in Indian market, it gets a higher reach in the market due to a huge supply chain and distributorship. In 1983, India's first affordable car, Maruti 800, with 796 cc engine and hatch back was launched through a Joint Venture agreement between Government of India and Suzuki Motor Corporation, Japan. As of 2018, Maruti Suzuki India Limited had a market share of 53% in passenger car market. 

2. Market Growth & Development: An exporter should analyze and estimate whether his product can grow and develop in the targeted market. This happens only after the stage of survival. Many internal and external factors play a role here. A good example can be how Apple entered Indian markets in 2007, survived, grew, expanded, developed and raised it's market share to 75.6% in India's premium smartphone market. 

3. Government Regulations: Every nation has it's set regulations with respect to foreign trade which has to be noticed and followed by a potential exporter while selecting the most appropriate market. Regulations can be related to imposition of quota, sanctions, rules of origin, tariff, additional tariffs, MFN norms, etc. In case of an opportunity, the exporter can grab. But in case of a threat, the exporter may try developing intense marketing and supply chain strategy or try hitting some other market.   

4. Level of Competition: Existence of competition also influence a potential exporter for selecting a market or even a strategy. In case of stiff competition, the potential exporter should apply tactics to gain competitive advantage. Whereas, in case of no competition, the exporters can eat up majority of the market with his product.

5. Physical Infrastructure: Physical infrastructure includes things like accessible roads, waterway services, docking services, transportation services, warehouse and distribution services, exhibit outlets and centers where products can be marketed. Availability of these resources enables a trader to decide about choosing market. Eg. Dubai being a small country has highly developed infrastructure which enables traders to create a strong distribution network and penetrate quality products in to market. 

6. Political, Economic and Operational Risk: Risk factors should always be analyzed before selecting export market. There can be political risks arising due to governmental conflicts eg. North Korea and South Korea, USA and Iran, India and Pakistan, USA and Venezuela, etc. along with economic risk like economic condition of a nation affecting a company or an industry domestically or abroad or credit risk, exchange rate risk and sovereign risk. Eg. Zimbabwe (foreign exchange), Venezuela (oil industry), Greece (debt crisis), etc. Such risks should be mitigated.

7. Adequate Logistics Services: Logistical services include customer order processing, order management, preparing MIS, databases, arrangement for transportation, storage and distribution warehouse and even delivery team so that consignment can reach the target buyer in the right form, in the right time, in the right manner. Availability of quality logistics services can be a factor motivating an exporter to enter a particular market. 

8. Trade Regulations: Simple and lenient trade relation between nations also influence potential exporters to select market. A good example can be of American traders successfully trading with Canada and Mexico because of the Free Trade Agreement and members of the European Union. 

9. Other Points: Factors such as favorable consumer behavior, lower cost of marketing and distribution, preferential treatment through trade blocs, availability of human resource as per international needs, imposition of sanctions, wars and boycotts influence exports in making decisions related to selecting markets.

India's Foreign Tarde Policy

Foreign Trade policy refers to a nation’s formal practices, laws, regulations and agreements that govern international trade practices, basically imports and exports. Trade policies aim to strengthen the domestic economy, streamlining trade process, enhancing quality, generating public revenue, build reliability and transparency and make the country competitive. 

Highlights of India's Foreign Trade Policy 2023

The Foreign Trade Policy (2023) is a strategic framework that combines established export promotion schemes with adaptability to evolving trade demands. Unveiled by Mr. Piyush Goyal, the Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution, and Textiles, on March 31, 2023, this policy promptly took effect from April 1, 2023. It not only upholds proven export facilitation measures but also demonstrates agility in addressing trade requirements.

The new approach to the policy is based on these four pillars:

• Incentive to Remission

• Export promotion through collaboration-Exporters, States, Districts, and Indian Missions

• Ease of doing business, reduction in transaction cost, focus on e-initiatives, and

• Emerging Areas in E-Commerce, Developing Districts as Export Hubs and streamlining SCOMET policy.

I. Ease of Doing Business, Reduction in Transaction Cost, and e-Initiatives 

1.1 Online approvals without Physical Interface 

• Director General of Foreign Trade (DGFT) has implemented rule-based automatic approval systems using business analytics tools for FTP applications. It has been introduced on pilot basis for Advance Authorization (AA) Extension/Revalidation Applications.

• Reduction in processing time and immediate approval of applications under automatic route for exporters:

1.2 Reduction in user charges for MSMEs under Advance Authorization (AA) and Export Promotion Capital Goods Scheme (EPCG) 

The new FTP aims to reduce the application fee for exporters to get benefit of Advance Authorization and EPCG Schemes. It is projected that 55-60% of exporters especially MSME would benefit out of it.

Fee structure as shown below:

Note: License Value is a conditional data element. This means if a shipment requires an export license, the exporter must report the value designated on the export license matching to the commodity being exported. 

1.3 E-Certificate of Origin

Revamp of the e-Certificate of Origin platform proposed to provide for self-certification of Certificate of Origins as well as automatic approval of Certificate of Origins, where feasible. Initiatives for electronic exchange of Certificate of Origins data with partner countries envisaged.

1.4 Paperless filing of Export Obligation Discharge Applications 

All authorization redemption applications to be paperless. This is in addition to application process for issuance being already paperless. With this, the entire lifecycle of the authorization shall become paperless.

Notes:

1. India has constituted National Committe on Trade Facilitation (NCTF) as pr WTO's Trade Facilitation Agreement aiming on reducing transaction cost and time, reduction in cargo release and time, paperless regulatory environment, transparent and predictable legal measures and improved infrastructure.

2. Export items shall not be withheld for any reason by the Central / State Government. Even if so, an undertaking from exporter would release such consignment.

3. Implementation of Single Window System to facilitate export of perishable agricultural produce through Agriculture and Processed Food Product Export Develpment Authority (APEDA).

4. Training and mentoring for new potential exports across the nation under Niryat Bandhu Scheme.

5. Issue of e-IEC (Importer Exporter Code) by the DGFT to all potential importers and exporters.

6. DGFT has created a common digital platform for application of issuance, renewal, amendment and related processes pertaining to Registration Cum Membership Certificate (RCMC)/ Registration Certificate (RC) issued by Registering Authorities.

7. Issue of e-CoO (Certificate of Origin) by the DGFT. A unique number i.e. UDIN (Unique Document Identification Number) and a QR code is endorsed on every e-CoO for validation and authentication by user agencies.

8. Common digital platform for handling Quality Control and Trade Disputes.

9. DGFT to capture details of realization of export proceeds directly from the Banks through e-BRC (Bank Realization Certificate) via secured electronic mode which will help smooth implementation of export schemes without physical interface.

10. RBI has also developed a comprehensive IT-based system called Export Data Processing and Monitoring System (EDPMS) for monitoring of export of goods and software and facilitating Authorized Dealer (AD) banks to report various returns through a single platform.

11. CBIC has undertaken various initiatives like:

i. 24X7 Customs clearance in 20 seaports and 17 Airports and extended clearance in Inland Container Depot (ICDs) as per the needs of the Trade.

ii. Single Window in Customs

iii. E-Sanchit – Enabling Paperless clearance environment.

iv. Pan-India Implementation of Faceless e-Assessment in imports.

v. TURANT Customs for Faceless, Paperless, and Contactless Customs 

vi. Implementation of electronic messages from Document Clearance to Cargo Movement

vii. Paperless Customs initiatives –Preparation and issuance of electronic documents like Let Export Order (e-LEO) Shipping Bill, e-Gatepass / Out of Charge (e-OOC), etc.,

viii. Contactless customs initiatives such as Turant Suvidha Kendras (TKSs).

ix. Release of ICE-DASH–Indian Customs EoDB Monitoring Dashboard

x. Direct Port Delivery (DPD) on imports and Direct Port Entry (DPE) on exports

xi. Compliance Information Portal (CIP)

xii. End to End automated and simplified procedure for Import of certain specified Goods at Concessional Rate of Duty or for specified end use.

12. The Authorized Economic Operator (AEO) programmes have been implemented by other Customs administrations that give AEO status holders preferential Customs treatment in terms of reduced examination, faster clearances and other benefits. Indian Customs has signed MRA with South Korea, Taiwan, Hong Kong and US Customs to recognize respective AEO Programmes to enable trade to get benefits on reciprocal basis.

13. Marine Products and Sports Goods & Toys sectors to receive duty free entitlements with exemption of basic customs duty. Duty Scrip for Marine Sector being 1% of FOB and that for Sport Goods and Toys is 3% of FOB.

14. Status Holders to be made “partners” in providing mentoring and training in international trade which would be of 6 weeks. Two Star SH shall incorporate 5 trainees, Three Star - 10, Four Star - 20 and Five Star - 50.

II. Export Promotion Initiatives

2.1 Rationalization of Status Holder Export Thresholds

Export performance threshold for Recognition of Exporters as Status Holders rationalized. Enabling more exporters to achieve higher status and reduced transaction cost for exports.

2.2 Merchanting Trade Reform 

An initiative in the new FTP to boost merchanting activities from India. Merchanting trade involving shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary based in India is allowed subject to compliance with RBI guidelines, except for goods/items in the CITES and SCOMET list. 

2.3 Rupee Payment to be accepted under FTP Schemes

A remarkable step towards internationalization of the Indian Rupee. FTP benefits extended for rupee realizations through Special Rupee Vostro Accounts (SVRA) setup as per RBI circular issued on 11 July 2022. The RBI has allowed Germany, Fiji, Botswana, Israel, Guyana, Kenya, Malaysia, Mauritius, Oman, New Zealand, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda and the United Kingdom. Further, around 20 Russian banks have opened the SVRA. The settlement through domestic currency is an additional arrangement to the existing system that uses freely convertible currencies and will work as a complimentary system. It will help to minimize reduce dependence on hard (freely convertible) currency. 

2.4 Towns of Export Excellence

• TEEs are industrial clusters that are recognized based on their export performance. Recognition to these industrial clusters is granted with a view to maximize their potential and enable them to move up the value chain and to tap new markets.

• This scheme gives thrust to cluster-based economic development.

• Four new Towns of Export Excellence (TEE) are being declared in addition to the already existing 39 towns of export excellence.

III. Districts as Export Hubs Initiative 

3.1 States and Districts as Partners in Export Promotion 

The FTP aims to create districts as Export Hubs with an intention to boost India's foreign trade by decentralizing export promotion. It is expected to bring a greater level of awareness and commitment regarding exports at the district level. Various products/services will be identified across districts and shall create institutional mechanisms at the State and District level to strategize exports (State Export Promotion Committee & District Export Promotion Committee). Focus will be on the preparation of District Export Action Plans (DEAPs) outlining the action plan to promote identified products and services in certain target market. This will make States and Districts meaningful stakeholders and active participants. 

3.2 Capacity Building at District level 

Capacity building programmes to be conducted to create new exporters and identification of new markets. Training, handholding, and outreach programs by the DGFT field offices in coordination with District Industries Centers will be extended in order to produce, perform and deploy. Regional Authorities of DGFT working with the States/UTs prepare District specific Export Plans. Export promotion outreach programs in districts to focus on branding, packaging, design and marketing of identified product & services. 

3.3 Infrastructure and Logistics Development Intervention

To address Infrastructure and Logistics bottlenecks impeding exports, several ongoing schemes will be converged to support the FTP. Districts to focus on development of logistics, testing facilities, connectivity for exports and other export-oriented ecosystem. 

IV. E-Commerce Exports

4.1 Facilitation for E-Commerce Exports

All FTP benefits to be extended to e-Commerce exports. Necessary enablement of IT systems in Department of Commerce, Post, CBIC to be undertaken in the six months. To streamline e-Commerce export facilitation - Guidelines being formulated in consultation with other ministries to facilitate further exports under e-Commerce. Special outreach and training activities for small e-commerce exporters Handholding through industry and knowledge partners Value limit for exports through courier is increased to Rs.10,00,000 per consignment. 

4.2 Dak Niryat Facilitation

Dak Ghar Niryat Kendras shall be operationalised throughout the country to work in a hub-and-spoke model with Foreign Post Offices (FPOs) to facilitate cross-border e-Commerce and to enable artisans, weavers, craftsmen, MSMEs in the hinterland and land-locked regions to reach international markets. 

4.3 E-Commerce Export Hubs 

Designated hubs with warehousing facility to be notified, to help e-commerce aggregators for easy stocking, customs clearance and returns processing. Processing facility to be allowed for last mile activities such as labelling, testing, repackaging etc. 

V. Steps to boost manufacturing

• Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been added as an additional scheme eligible to claim benefits under CSP(Common Service Provider) Scheme of Export Promotion capital Goods Scheme (EPCG).

• Dairy sector to be exempted from maintaining Average Export Obligation – to support dairy sector to upgrade the technology. 

• Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to Green Technology products – will now be eligible for reduced Export Obligation requirement under EPCG Scheme.

• Special Advance Authorization Scheme extended to export of Apparel and Clothing sector on self-declaration basis to facilitate prompt execution of export orders – Norms would be fixed within fixed timeframe.

• Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended to 2 star and above status holders in addition to Authorized Economic Operators at present.

• Fruits and Vegetables exporters are being included for double weightage for counting export performance under eligibility criteria for Status House certification. This is in addition to existing MSME sector who also get double weightage.

VI. Special one-time Amnesty Scheme for default in Export Obligations

• Government is strongly committed to reducing litigation and fostering trust-based relationships to help alleviate issues faced by exporters.

• In line with the ‘Vivaad se Vishwaas’ initiative, which sought to settle tax disputes amicably, Government is introducing a special one-time Amnesty Scheme to address non-compliance in Export Obligations by Advance Authorization and EPCG authorization holders.

• All pending cases of default in Export Obligation (EO) of authorizations mentioned can be regularized by the authorization holder on payment of all custom duties exempted in proportion to unfulfilled Export Obligation and maximum interest is capped at 100% of such duties exempted under this scheme. However, no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty.

• Amnesty scheme shall be available for a limited period, up to September 30, 2023.

VII. Emphasis on streamlining SCOMET Licensing Procedure

• The focus of FTP 2023 is on a policy for export of dual use items under Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) consolidated at one place for ease of understanding and compliance by industry.

• SCOMET policy emphasizes India’s export control in line with its International commitments under various export control regimes (Wassenaar arrangement, Australia group, and Missile Technology Control Regime) to control trade in sensitive and dual use items including software and technology.

• Recent policy changes introduced such as general authorizations for export of certain SCOMET items to streamline licensing of these items to make export of SCOMET items globally competitive.

• Focus on simplifying policies to facilitate export of dual-use high-end goods/technology such as UAV/Drones, Cryogenic Tanks, certain chemicals etc.

Directorate General of foreign Trade 

The Directorate General of foreign Trade (DGFT) is the agency of the Ministry of Commerce and Industry of the Government of India, which is responsible for formulation and execution of import and export Policies of India. It was known as Chief Controller of Imports & Exports (CCI&E) until 1991 and has been playing a crucial role in developing trade and trade relations with various nations, thereby improving the economic growth.

Role of DGFT

1. Implementation of Foreign Trade Policy: Foreign Trade Policy are protocols related to import and export of goods approved by the Directorate General of Foreign Trade. The Ministry of Trade and Commerce, Government of India announces the Export-Import (Foreign Trade) Policy which is applicable for a period of 5 years with an aim to encourage exporters in the country so as to maintain favorable balance of payment. The present FTP of 2015-2020  has been made valid up to 31st March, 2021. 

2. Granting of Import Export Code: IEC Code is a must for all import and export businesses in India. It is a unique 10 digit registration code issued by the DGFT which helps in tracking and managing shipments of an exporter or an importer. The IEC Code is integrated with PAN and only one IEC can be issued against one PAN. An exporter or importer can apply for IEC Code or e-IEC online on DGFT’s website.

3. Regulator of Transit of Goods: The DGFT plays a major role in regulating transit of goods to or from India in accordance with the bilateral or multilateral treaties in effect between India and other countries.

4. Redress Quality Complaints and Trade Issues: So as to upkeep the quality of trade services provided by India, Chapter 8 of Foreign Trade Policy lay a mechanism to resolve complaints and trade disputes relating to Foreign Trade by the DGFT, where it looks into complaints received from foreign buyers against Indian exporters as well as complaints of Indian importers against foreign suppliers. Such quality complaints or trade disputes can be filed online on its website.

5. Interaction with Trade and Industry: The DGFT has set up forums to interact and guide exporters and importers. Various strategic decisions related to framing of trade policies are taken by the DGFT in consultation with Ministry of Trade and Commerce, Finance and even exporters and importers. 

6. Publications and Learning Materials: The DGFT also provides learning material under Niryat Bandhu Scheme exclusively targeting students and potential exporters so as to share export import procedural guidelines and information  for boosting interest towards exports. Trade Statistics and Analytics with respect to export, import, performance analysis, GST, etc. is made available. 

7. Facilitates RCMC Function for EPCs: Registration Cum Membership Certificate in DGFT is a membership certificate issued for 5 years by the concerned Export Promotional Councils (EPCs) or Commodity Boards of India. The certificate acts as a proof that the holder is registered with the concerned Export Promotion Council / Board. Having RCMC is mandatory for an exporter seeking benefits under schemes of FTP. This RCMC has to be details has to be furnished to the DGFT.

8. e-BRC System Services: This is electronic Bank Realization Certificate applied by exporter which is created by Bank in XML format which is uploaded in the DGFT server. The DGFT also shares the e-BRC information with various other Government Agencies. 

9. Advance Authorization Scheme: Advance Authorization Scheme allows duty free import of input goods, to be physically incorporated in an export products. In addition to input goods, packaging material, fuel, oil, catalyst which is consumed in the process of production of export product, is also allowed. The quantity of inputs allowed for a given product is based on specific norms defined for that export product, which considers the wastage generated in the manufacturing process. DGFT provides a sector-wise list of Standard Input-Output Norms (SION) under which the exporters may choose to apply. It covers manufacturer exporters or merchant exporters tied to supporting manufacturers.

10. Import Export (SCOMET) Authorization: DGFT provides platform for Import Export Authorization thereby facilitating the import and export of restricted items like Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET).

11. Facilitation of MEIS, SEIS and RoSCTL: DGFT provides access to apply for Merchandize Scheme, Service Scheme and even Rebate of State and Central Levies and Taxes for export of made-up articles and garments. 

Indian Bilateral Relations

The Ministry of External Affairs (MEA), also known as the Foreign Ministry, is the government department responsible for managing a country's foreign relations and diplomacy. In India, the MEA handles:

• International diplomacy and treaties

• Economic and strategic bilateral and multilateral relations

• Passport and visa services

• Support for Indian citizens abroad

• Representation in international organizations (like the UN)

It is headed by the External Affairs Minister and plays a key role in shaping India’s global image and strategic interests. Currently, the Indian MEA is headed by Dr. S Jaishankar.

Here is a summary of some of India's best bilateral relations with the world

India - Saudi Arabia Bilateral Relations

1. Political Relations 

• Diplomatic relations between India and Saudi Arabia were established in 1947, and the relationship has progressively evolved into a strategic partnership.

• The Delhi Declaration of 2006 and the Riyadh Declaration of 2010 were key milestones that formalized and deepened the strategic aspect of the bilateral relationship.

• Prime Minister Narendra Modi's visit to Saudi Arabia in 2016 significantly strengthened cooperation in areas such as politics, security, energy, and investment.

• During the 2019 visit of Crown Prince Mohammed bin Salman to India, both countries signed several MoUs, and Saudi Arabia announced plans to invest $100 billion in India. The visit also marked Saudi Arabia’s decision to join the International Solar Alliance

2. Economic & Commercial Relations

• In October 2019, India and Saudi Arabia established the Strategic Partnership Council (SPC) to institutionalize bilateral cooperation. The SPC is structured around two main pillars: Political-Security-Socio-Cultural and Economic-Investment.

• The first meeting of the Leaders of the SPC was held in September 2023, on the sidelines of the G20 Summit. During the meeting, eight MoUs and MoCs were signed in diverse sectors including energy, banking, investment, desalination, manufacturing, and anti-corruption.

• In the fiscal year 2023–24, bilateral trade reached $42.98 billion, with Indian exports valued at $11.56 billion and imports from Saudi Arabia at $31.42 billion.

• India is currently the second-largest trade partner for Saudi Arabia, while Saudi Arabia is India’s fifth-largest.

3. Strategic and Sectoral Cooperation

• Indian companies have invested approximately $3 billion in Saudi Arabia across sectors such as IT, telecommunications, construction, and pharmaceuticals.

• Saudi investments in India amount to around $10 billion, particularly through the Public Investment Fund (PIF). These investments span retail, agriculture, and healthcare sectors.

• One of the major joint projects is the proposed $44 billion West Coast Refinery and Petrochemicals Project in Maharashtra, a collaboration between Saudi Aramco, ADNOC, and Indian firms.

• Saudi Arabia plays a crucial role in India’s energy security, being the third-largest supplier of crude oil and LPG.

• Both countries are exploring collaborations in renewable energy, especially in solar, wind, and green hydrogen, aligning with Saudi Arabia’s Vision 2030 and India’s clean energy goals.

• Defense cooperation is growing, with joint exercises such as the Al-Mohed Al-Hindi naval drill and ongoing discussions on defense manufacturing partnerships.

• Both nations are actively cooperating in counter-terrorism efforts and are committed to combatting the financing and support of terrorism.

4. People-to-People Ties

• The Haj pilgrimage remains a strong cultural and religious link between the two countries, facilitated through bilateral cooperation.

• India was invited as the Guest of Honour at Saudi Arabia’s National Festival of Heritage and Culture in 2018, highlighting growing cultural engagement.

• The Indian diaspora in Saudi Arabia, numbering around 2.6 million, is the largest expatriate group in the Kingdom and significantly contributes to bilateral relations.

• Overall, the India–Saudi Arabia partnership is comprehensive and multifaceted, covering diplomacy, trade, energy, culture, defense, and people-to-people connections, with a strong commitment to regional and global cooperation.

India - United Arab Emirates Bilateral Relations

1. Political Relations 

• Diplomatic Establishment: India and the UAE established diplomatic relations in 1972, with reciprocal embassies opening in each other's capitals.

• High-Level Visits: The bilateral relationship gained momentum with Prime Minister Narendra Modi's visit to the UAE in 2015, marking the beginning of a new Comprehensive and Strategic Partnership. Since then, there have been multiple high-level visits, including Prime Minister Modi's visits in February 2024, where he addressed the Indian community in Abu Dhabi and inaugurated the BAPS Hindu Mandir, the first in the Middle East.

• UAE Leadership Visits: UAE President HH Sheikh Mohamed Bin Zayed visited India in September 2023 for the G20 Leaders’ Summit and in January 2024 for the Vibrant Gujarat Global Summit. Additionally, Crown Prince HH Sheikh Khaled Bin Zayed visited India in September 2024.

• Ministerial Engagements: Regular ministerial visits from both countries have strengthened bilateral ties, including visits by Indian External Affairs Minister Dr. S. Jaishankar and UAE Deputy Prime Minister and Foreign Minister HH Sheikh Abdullah bin Zayed.

2. Economic & Commercial Relations

• Trade Growth: Bilateral trade reached US$ 84 billion in 2023–24, making the UAE India's third-largest trading partner and second-largest export destination.

• Foreign Direct Investment (FDI): From April 2000 to September 2024, UAE's FDI in India amounted to approximately US$ 22 billion, accounting for 3.1% of India's total inward FDI. The UAE has committed to investing US$ 75 billion in India's infrastructure sector.

• Investment by ADIA: The Abu Dhabi Investment Authority (ADIA), one of the world's largest sovereign wealth funds, invested US$ 1 billion in India's National Infrastructure Investment Fund (NIIF) and opened an office in GIFT City, Gujarat, in October 2024.mei.org.in

• Trade Composition: India's major exports to the UAE include petroleum products, precious metals, gems and jewellery, food items, textiles, and engineering products. Imports from the UAE primarily consist of petroleum and petroleum products, precious metals, chemicals, and wood products.

3. Strategic and Sectoral Cooperation

• Comprehensive Economic Partnership Agreement (CEPA): Signed in 2022, CEPA has significantly boosted trade and economic cooperation between the two nations.

• Investment Protection: The India-UAE Bilateral Investment Treaty (BIT), signed in 2024, aims to provide comprehensive protection and promote mutual investments by ensuring minimum standards of treatment and non-discrimination.

• Infrastructure Development: The UAE has committed to investing US$ 75 billion in India's infrastructure sector, focusing on areas like ports, airports, and smart cities.

• Energy Cooperation: The UAE is a significant energy partner for India, being the 4th largest source of crude oil and the 2nd largest source of LNG and LPG. Both countries are exploring collaborations in renewable energy, including solar energy and grid connectivity.

4. People-to-People Ties

• Indian Diaspora: The UAE is home to a large Indian expatriate community, contributing significantly to the bilateral relationship.

• Cultural Engagement: The inauguration of the BAPS Hindu Mandir in Abu Dhabi in February 2024 symbolizes the deepening cultural and religious ties between the two nations.

Click here to check India's Bilateral Relations with more than 100 countries.

Indian Export Data

All this will stand incomplete if you miss learning about Trade Data. As a tip, I am sharing couple of website site links presented by the Government of India and other International Authorities where you can get latest and most authentic data free of cost. Don't forget to check the following:

1. Top commodities exported and imported by India

2. NIRYAT

3. Export Potential Map

4. India's Trade Monitoring Dashboard

Note: When you check into the above links, don't forget:

1. Select the relevant year you want to.

2. Set the HS (Harmonized System) Code at 2 digits.

3. Select value as US$ to understand figures from global perspective. Eg. US $ 123,456,789,876 will be read as 123 Billions, 456 Lakhs, 789 Thousand and 876 Units. All thanks to the commas!