Sourcing from India
From searching for suppliers to having products shipped, buyers looking to diversify their sourcing within India can find step-by-step support in this guide. In a free, downloadable PDF format, each guide provides information on:
✓ Key export statistics top trading partners and principal exports ✓ Manufacturing centers major production centers, special economic zones and export processing zones ✓ Trade services trade offices, services and resources ✓ Banking & finance major commercial banks and loan availability ✓ Paying for your purchase preferred payment methods ✓ Export documentation step-by-step export procedure ✓ Settling trade disputes tips to avoid and handle trade disputes
View the complete eBook online by clicking the tabs below. You may also download your free PDF copy here.
Sourcing from India: Getting oriented
Getting oriented highlights international airports, central business districts and common office hours in India for readers.
Sourcing from India: Key export statistics
This section discusses key industries and products of India. It is part of the Developing Country Sourcing’s Sourcing from India series to empower buyers looking to enter new supplier markets in Asia.
Since India liberalized its economy in the early 1990s, it has been growing at an average rate of over 7 percent each year. Today, India is the seventh largest Asian economy following the US, China, Japan, Germany, the UK and France. It also has the fourth-largest gross domestic product (GDP) in the world at $8 trillion and the world’s second largest labor force at 502.1 million people, according to the CIA Factbook. India’s economy relies on its manufacturing sectors – oil and gas refining, auto, plastic, textiles and steel production – and also its agriculture and services sectors.
Gems and jewelry
With $36.3 billion in exports in 2014-2015, precious gems and jewelry continue to be an important industry for India, according to the Gem and Jewellery Export Promotion Council.
Diamonds and gold are considered the two most important products of the gems and jewelry sector. Diamond processing (cutting and polishing diamonds) is also a major industry in India. According to the India Brand Equity Foundation (IBEF), the country’s success in the gems and jewelry market can be attributed to highly skilled and low cost labor, excellence in jewelry and diamond polishing and technologically advanced diamond cutting units.
Some of the top gemstone-producing states in India include:
- Andhra Pradesh (mining and minerals)
- Chhattisgarh (diamonds)
- Jammu & Kashmir (blue sapphires)
- Karnataka (rubies)
- Kerala (chrysoberyl)
- Madhya Pradesh (diamonds)
- Orissa (gemstones)
- Rajasthan (emeralds)
- Tamil Nadu (gemstones)
Surat is considered an important diamond-processing hub that exports approximately 80 percent of the diamonds produced and has over 3,500 diamond-processing centers, according to Dun & Bradstreet India.
Textiles & garments
India is one of the world’s largest sources of textiles and garments, with an abundance of skilled workers and raw materials like cotton, silk, wool and jute. The textile sector is the second largest employment sector (behind agriculture) – directly employing over 45 million people, according to IBEF.
India is the world’s second-largest producer of cotton behind China. The country produced 6.2 million tons of cotton in 2015-2016, according to government statistics. The states of Gujarat, Maharashtra and Telangana lead the nation in cotton production combining for nearly 70 percent of the total production in the country.
The textile sector has also seen an increase in foreign direct investment over the past few years, according to IBEF. From April 2000 to September 2015, foreign direct investment was estimated at $1.8 billion dollars. Government initiatives such as providing venture capital to start-ups, developing the technical textiles sector and improving textile-processing units have also helped promote the industry.
Sourcing from India: Manufacturing centers
This section discusses key manufacturing centers in Laos. It is part of the Developing Country Sourcing’s Sourcing from Laos series to empower buyers looking to enter new supplier markets in Asia.
India is comprised of 29 states and 7 union territories. The state of Rajasthan, with a total land area of 342,239 square kilometers, is the largest state in India based on land area. Situated at the border dividing India and Pakistan, its capital city is Jaipur. Handicrafts made in Rajasthan are famous the world over.
Madhya Pradesh is India’s second largest state at 308,000 square kilometers. Its capitol is located in the center of the country, Madhya Pradesh is one of the fastest growing states in India, with a gross state domestic product (GSDP) that reached $84.3 billion in the 2014-2015 year, according to the Indian Brand Equity Foundation.
Maharashtra, with Mumbai as its capital, is India’s third largest state. It is bordered by Karnataka and Goa in the south, Madhya Pradesh in the north, Andhra Pradesh in the southeast and the Arabian Sea in the west.
Maharashtra’s gross state domestic product (GSDP) – the highest GSDP of all states – contributed 13 percent of India’s total gross domestic product (GDP) in 2014-2015, according to IBEF. It also had the highest foreign direct investment (FDI) of all states in India at $264.8 billion from 2014 to 2015.
India has established several foreign trade zones in an effort to encourage export production including Special Economic Zones (SEZ), Export Processing Zones (EPZ), Software Technology Parks (STP) and Export-Oriented Units (EOU).
SEZs are treated as foreign territory, according to The US State Department and therefore operate outside the domain of customs authorities, receive exemptions from industrial licensing requirements, avoid FDI equity caps and enjoy tax breaks and tax holidays.
Export Processing Zones are industrial parks with incentives for foreign investors investing in export-oriented businesses. EPZs were set up to meet the following objectives:
- Creating employment opportunities
- Creating linkages(essentially backward linkages)by increasing demand for local raw materials, semi-finished goods, or packing materials and promoting the growth of ancillary industries
- Developing less advanced regions
- Encouraging technology transfer
- Increasing foreign exchange earnings
- Improving the skills of local labor forces
Special Economic Zones & Export Processing Zones
Export-oriented units are industrial companies located anywhere in India that export the entirety of their production. In return for concentrating exclusively on products for the export market, manufacturing units receive many of the benefits afforded to the EPZs, but with the option of establishing operations in any part of India. In the 2008-2009 year, there were 2,600 functioning EOUs that contributed 20 percent of India’s total exports for the year, according to government statistics.
Sourcing from India: Banking and finance
This section discusses banking & finance in India. It is part of the Developing Country Sourcing’s Sourcing from India series to empower buyers looking to enter new supplier markets in Asia.
Although India’s banking system is considered elaborate and complicated, the sector has been resilient over the past few years while facing high domestic inflation, rupee depreciation, and fiscal uncertainty in Europe and the US.
The Reserve Bank of India (RBI) acts as the central banking institution. It has the sole authority to issue bank notes. It also administers exchange control regulations and the government’s monetary policy, supervises the activities of all banks (local and foreign) and regulates money supply and credit. RBI has 31 regional offices (most located in state capitals) and nine sub-offices.
The banking system in India has three tiers:
- Commercial banks (domestic and foreign)
- Cooperative and special purpose rural banks
- Regional rural banks
Most large Indian banks and financial institutions are in the public sector. The public sector banks continue to dominate the banking industry (cornering over 70 percent of the market) with private banks handling 17 percent of the market and foreign banks at approximately 13 percent, according to a 2013 report by The United States Department of Commerce.
Currently, there are approximately 147 scheduled commercial banks (both domestic and foreign) in India, according to the RBI. The RBI reports that there are a total of 131,694 offices of commercial banks in India as of 2015. Commercial banks provide short-term loans for fixed asset investment. They also provide capital market advisor services through merchant banking subsidiaries, foreign exchange services such as swaps and hedges, investment consultancy, factoring through subsidiaries and personal banking services such as credit cards.
There are currently 46 foreign banks with 325 branches operating in India. There are also 39 foreign banks with representative offices in India, according to RBI statistics.
The following banks have branches and/or offices in India according to the Reserve Bank of India:
- AB Bank Ltd
- The Royal Bank of Scotland N.V.
- Abu Dhabi Commercial Bank Ltd
- American Express Banking Corp.
- Antwerp Diamond Bank N.V.
- Australia and New Zealand Banking Group Ltd
- Bank International Indonesia
- Bank of America
- Bank of Bahrain and Kuwait BSC
- Bank of Ceylon
- Bank of Nova Scotia
- Barclays Bank Plc.
- BNP Paribas
- Credit Agricole Corporate & Investment Bank
- Chinatrust Commercial Bank
- Citibank NA
- Commonwealth Bank of Australia
- Credit Suisse AG
- DBS Bank Ltd
- Deutsche Bank
- FirstRand Bank Ltd
- HSBC Ltd
- Industrial & Commercial Bank of China Ltd
- JP Morgan Chase Bank NA
- JSC VTB Bank
- Krung Thai Bank Public Co. Ltd
- Mashreq Bank PSC
- Mizuho Corporate Bank Ltd
- National Australia Bank
- Oman International Bank SAOG
- Rabobank International
- Shinhan Bank
- Societe Generale
- Sonali Bank Ltd
- Standard Chartered Bank
- State Bank of Mauritius
- Sumitomo Mitsui Banking Corp.
- The Bank of Tokyo- Mitsubishi UFJ Ltd
- UBS AG
- United Overseas Bank Ltd
- Westpac Banking Corp.
- Woori Bank
Foreign banks offer a full range of commercial financing activities and operate under the 1949 Banking Companies (Regulation) Act.
Exim Bank’s financial services
The most important financial institution for Indian exports is the Export-Import Bank of India (Exim Bank). Established in 1981, Exim Bank is the principal coordinator for institutions engaged in financing import and export trade. Its job is to provide facilities to exporters all over the country and coordinate with commercial banks and other lending institutions on export-related loans.
Exim Bank’s non-funded schemes mainly cover assistance in the form of bid bonds, advance payment guarantees, retention money guarantees for raising money abroad, among others. The guarantees are given in foreign currency on behalf of Indian exporters or contractors in favor of the overseas importers, employers and/or banks. The Exim Bank also provides merchant
banking services to assist exporters in assessing global credit sources.
The bank has seven representative offices including Singapore, Senegal, Myanmar, Ethiopia, South Africa, London and Washington D.C.
Other financial institutions
The Industrial Development Bank of India coordinates and supports the operations of banks and other financial institutions engaged in industrial development.
The Industrial Finance Corp. of India provides medium and long- term financing to companies and cooperatives engaged in a variety of industrial and manufacturing fields. It also promotes the industrialization of less developed areas and sponsors training in development banking.
Major financial assistance is offered to industrial enterprises by the Industrial Credit and Investment Corporation of India in the form of rupee or foreign currency loans or equity participation. This institution also offers financing for export development, technology and other ventures. It provides merchant banking services.
Other financial institutions include the National Bank of Agriculture and Rural Development National Housing Bank, and the Industrial Reconstruction Bank.
The Export Credit Guarantee Corp. of India Ltd, operating under the Ministry of Commerce and Industry, provides insurance coverage for Indian exporters. It underwrites major losses through guarantees it arranges with the banks involved. Its policy covers commercial and political risks outside the exporter’s control.
Other important bodies are the General Insurance Corp. of India and its subsidiaries; the Life Insurance Corp. of India and Deposit Insurance and Credit Guarantee Corp.
Foreign exchange policy
The Foreign Exchange Department of the Reserve Bank of India is in charge of laying down the policies and procedures under the Foreign Exchange Management Act of 1999 (FEMA). Under FEMA, foreign exchange transactions are separated into two categories: current account and capital account transactions.
Sourcing from India: Paying for your purchase
This section discusses payment options in India. It is part of the Developing Country Sourcing’s Sourcing from India series to empower buyers looking to enter new supplier markets in Asia.
Sourcing from India: Export documentation
This section discusses export documentation in India. It is part of the Developing Country Sourcing’s Sourcing from India series to empower buyers looking to enter new supplier markets in Asia.
India’s bureaucratic procedures are known for being complex, cumbersome and time-consuming. Missing or incomplete papers, inconsistencies and even misspellings may hinder export clearance. Without the accompanying certificates in proper order, goods will not leave India and may result in possible delays and increases in the cost of your transactions.
Although obtaining the necessary documents and preparing them correctly and consistently is the responsibility of the supplier, it is in buyer’s best interest to have an accurate knowledge of the export process and the required documentation.
In the past, it was required for exporters to obtain an IEC code (a 10-digit Importer Exporter Code) from the Reserve Bank of India in order to engage in export operations. Today, the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, is in charge of granting the IEC code which is mandatory in order to import or export in India.
In order to register an IEC number with the Indian government, an ANF 2A application for IEC code must be filled out and submitted along with necessary documents to the nearest Regional Authority of the DGFT.
It is also possible to file for the IEC number online at the Directorate General of Foreign Trade’s website.
Mandatory requirements to apply for an IEC code number:
- Application fee
- Bank certificate
- Current bank account
- PAN number
- The physical application containing required documents should reach the DGFT RLA concerned within 15 days of online submission
The application fee for IEC code number is Rs 250.
The Export Inspection Council of India, established by the Central Government and the Ministry of Commerce and Industry, handles quality control, pre-shipment inspection and other trade-support processes.
The Export Inspection Council of India has five Export Inspection Agencies (EIAs) located in Chennai, Delhi, Kochi, Kolkata and Mumbai. These agencies were established with the purpose of implementing the various measures and policies formulated by the Export Inspection Council of India.
They also have a network of sub-offices located at important manufacturing and processing centers, ports, and export points as well as maintain well-equipped laboratories used for inspection and product testing. Services include:
- Certification of quality of export commodities through installation of quality assurance systems (in-process quality control and self-certification) in exporting units as well as consignment wise inspection.
- Certification of quality of food items for export through installation of food safety management systems in the food processing units.
- Issues certificates of origin to exporters under various preferential tariff schemes for export procedures.
In addition to the EIAs, the government recognizes private inspection agencies to carry out quality control inspections and certification.
This is the basic and most important document in international trade. Apart from being the seller’s bill for the merchandise, it contains comprehensive information about the shipper, importer, price, origin, etc., necessary for the preparation of other documents.
While this document is fundamental, some countries require additional invoices. Buyers can find out the requirements from their country’s embassy in India or from trading authorities in their own country.
Certificate of Origin
A Certificate of Origin ensures that goods actually originate from the country from which they have been purchased and have not been re-shipped via a third country.
The GSP Certificate of Origin – Form A is the standard form for exports and is available from Export Promotion Councils in the major cites of India.
This form requires the exporter of detail such items as the means of transport route, description of products, number of boxes and certificate of origin i.e. indications that the product is wholly produced or legally processed in India.
Certificate of Value
This form, required by most countries, is signed by the exporter to confirm the invoice value shown in the commercial invoice is correct.
Certificate of Inspection
Some contracts and countries might require an inspection certificate to be issued by an authorized agency in India working under contract for the foreign buyer. This may be in addition to pre-inspection certificates required by the Indian government.
Marine Insurance Policy
Under Section Three of the Marine Insurance Act 1963, the Marine Insurance Policy covers the transportation of any mode of transport – sea, air or land. Types of marine insurance policies include:
- Cargo insurance: Includes the cargo or good contained in the ship and the personal belongings of crew and passengers.
- Freight insurance: Provides protection against the loss of freight.
- Hull insurance: Covers the infrastructure of the vessel and its equipment.
- Liability insurance: Protects on account of liability to a third party caused by collision of the ship and other similar hazards.
The packing list is the consolidated statement indicating the number of individual cases or packs in a given cargo. The list usually details the weight of the shipments and who packed it, at what date, as well as the quantity of items being shipped.
Bill of lading
This is the most popular document and must conform strictly to the conditions and terms of the letter of credit. There are many types of bills of lading (B/L) to cover various methods of transport, including Transshipment B/L, Container B/L, Through B/L or Multimodal B/L. The buyer should recommend the best possible means to transport the order from India to a designated discharged point.
The B/L lists the port of departure, port of discharge, name of the carrying vessel and date of issue. This date is important because it shows whether the goods have been shipped within the period allowed in the letter credit. It also starts the clock for the period within which the supplier must tender all the required documents to receive payment under the terms of the credit. If a shipment is made after the date in the L/C, it is considered a late shipment.
Combined Transport Document
A Combined Transport Document (CTD) is issued when the merchandise is transshipped using more than one method of transport. It is an alternative document to the traditional B/L. With the global increase in container shipments, combined transport B/Ls are very common and many banks do not require special authorization to be granted in your LC for their use.
Though less widely used than sea transport, airfreight is a growing export medium. The B/L equivalent for airfreight is an air waybill (AWB). It is not a document of title and is non-negotiable, but is a receipt issued by the shipper carrying goods by air.
Post parcel receipt
Very similar in concept to the Air Waybill, the post parcel receipts (PPR) is a receipt of good exported, although the quantity shipped is usually small comparison. Unless the export items are under L/C, it is recommend that the items are dispatched to the buyer’s bank.
Bill of exchange
Once the goods have been shipped, the letter of credit can be released from the issuing bank to the negotiating bank, through a foreign exchange bank or a foreign bank branch.
The exporter issues a bill of exchange and submits this to the foreign bank along with the shipping documents, letter of credit and any other documents required.
Most documentary discrepancies will ultimately affect the disposition of the letter of credit, the most common form of payment in international purchases.
Millions of dollars are wasted each year in time, correspondence and delays because of mistakes in documentation or non- compliance with the document requirements, stipulated by the L/C. These unnecessary costs are amplified by bank charges for making amendments to or attempting to rectify irregularities in the L/C.
Three different banks are usually involved in each L/C transaction:
- The issuing bank (the buyer’s bank)
- The advising bank (the issuing bank’s branch in the exporter’s country)
- The negotiating bank (the bank to whom the beneficiary presents his documents for payment under the L/C)
Some transactions involve only an issuing bank and a negotiating bank.
One of the functions of banks dealing with L/Cs is to scrutinize the terms of the L/C and compare these items with the documentation submitted by the supplier. While banks don’t concern themselves with the conditions of the goods, they must ensure that all terms and documentary requirements are met.
If the documents are all in order and are presented within the stipulated time, the bank will make the payment. Irregularities that might prevent a bank from making payment do not necessarily have to be egregious errors; email technical irregularities, spelling errors or even the transposition of a letter within a word are sufficient to constitute a discrepancy.
Discrepancies such as these result in higher interest paid, the loss of the exporter’s insurance premium, additional demurrage and warehousing charges for goods stranded at the warehouse, as well as other indirect costs resulting from delayed shipments.
Sourcing from India: Settling trade disputes
Trade disputes are common in India but can be minimized or avoided with extra care. Going through the process of settling trade disputes can be a frustrating experience and buyers not willing to spend time and money on disputes that could take years to resolve can choose other options to settle the disagreement.
Trade disputes arise for various reasons. Even if both parties involved have acted conscientiously and in good faith, problems can emerge. The very complexity and multifaceted nature of an international sales contract, involving a number of provisions, such as transportation, banking, insurance etc., presents many opportunities for misunderstanding. Quality standards and their interpretation differ from country to country, as do commercial practices. However, such problems usually can be minimized and court cases should be avoided at all costs.
India’s lingering reputation for inferior quality, inconsistency and unreliable shipment has hurt its export drive. Despite improvements in quality and the ability of suppliers to produce quality goods on time, buyers are still wary when it comes to making purchases. Late delivery and inconsistent quality are two problems regarding attention.
While every trade dispute has its own particular circumstances and unique characteristics, trade disputes in India are usually due to the following:
- Non-shipment or delay in shipment
- Price increase
- Inferior quality
Non-shipment or delay in shipment
A delayed or cancelled shipment is a major cause of concern to foreign buyers. Direct financial loss can be avoided if payment of the letter of credit depends on the supplier meeting a specified shipment date, unless the goods go adrift during shipment, which is beyond the control of the supplier and would likely be the subject of a dispute with the shipper or an insurance claim.
The buyer and supplier maintaining a good relationship or having a reliable agent monitor the production process is necessary to avoid this problem. The supplier or agent can inform the buyer that the shipment could be delayed to enable the buyer to adjust the planned sales schedule.
Foreign exchange fluctuations provide another potential cause of trouble. Unforeseen hikes in the cost of imported components may leave the manufacturer little choice but to renegotiate the price of the finished goods at a later stage.
This is reasonable and if there is any doubt about the increase, it can be checked to a certain extent by the importer. Careful selection of a supplier should help avoid problems. But if price hikes are unable to be adjusted, a victim may find legal action as the only course to attempt to recover lost potential profits or to be recompensated for a damaged reputation.
If the consignment is in the right quantity but suffers from quality problems – such as color decay, damage, dents, stains, substandard materials, deterioration in quality, or defective packing – the answer should lie in the contract.
The contract should specify a period of time (30 days, for example) during which a claim should be made. A safeguard against these difficulties is to have the consignment tested or inspected before shipment, although this does not necessarily cover all contingencies.
These problems are common in in
Fortunately, most cases can be resolved more cheaply and amicably through conciliation or arbitration, two processes which can go hand-in-hand.
For many small items bought in international transactions, there is often a negligible difference between the quantity ordered and the quantity shipped. Depending on what kind of goods they are, a small difference is usually acceptable. The maximum percentage acceptable to the buyer can be specified in the contract.
India’s Copyright Act of 1957 generally conforms to the Universal Copyright and Berne Conventions and provides for both civil and criminal penalties for copyright infringement.
Penalties for the unauthorized copying of computer software were also added by the Information Technology Act of 2000 and can carry up to $240,000 in fines for unauthorized copying, according to a 2013 U.S. Department of Commerce report.
However, inadequate resources are being devoted by the Indian government to copyright enforcement programs. The nature of the Indian judicial procedures can make it difficult to prove infringement and enforce the law.
The Indian Constitution delegates the enforcement of copyright laws to state governments. For example, the Central Bureau of Investigation (CBI) does not pursue Intellectual Property Rights cases even though it has international jurisdiction.
The country is making strides toward stricter copyright laws. In 2012, the Copyright Act of 1957 was amended to make Indian Copyright Law compliant with the WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT).
The India’s Parliament passed the Trade Marks (Amendment) Bill of 2009, making the country in better compliance with international standards for granting and filing trademarks.
Before the bill was passed, Indian law required applicants to approach different countries in different languages with a separate fee for each. Today, trademarks can be filed using a single application in the 84 member countries of the Madrid Protocol, according to a 2013 report by the United States Department of Commerce.
Pharmaceutical products, agro-chemical products and software embedded in hardware can be patented in India. However, the interpretation and application of patent law lacks clarity in several areas including compulsory license, defining the scope of patentable inventions and pre-grant opposition provisions.
Indian law “does not protect against the unfair commercial use of test data or other data submitted to the government during the application for market approval of pharmaceutical or agro-chemical products,” according to a 2013 United States Department of commerce report.
Sourcing from India: Product gallery
Choose from our gallery of innovative and new products from India selected by our export consultants and as featured on the Analyst’s Choice section of GlobalSources.com. For more Indian suppliers and their latest products, visit NewSourcingMarkets.com.
This 16oz mug from Maqbool Hussain & Company of Moradabad, India, is made from solid copper with a brass handle. With a divoted surface, this tactilely pleasing mug is eco-friendly, corrosion-resistant and requires low maintenance. Customization is available to ensure the mug is suitable for buyer’s requirements.
The four-utensil stainless steel cookware set from JK Stainless of India is ideal for all your key kitchen tasks with a restaurant-grade boiling pot, two sauce pans and a frying pan. Its stainless steel ensures it will appear brand new with little maintenance and can endure even the harshest treatment.
This multicolored checkered handbag from Think Fashion of India is made of quality cotton fabric. The spacious bag comes in measurements of 14x14x5.25in. Its strong stitching gives it a perfect and durable finish. The bag can be paired with a variety of clothing due to its varied color scheme. A wide range of designs is available. Think Fashion specializes in bags, wallets, belts and leather garments.
The model UCR 0500 silk scarf from India’s INDMODE is 100 percent silk. This scarf with floral patterns measures 50x180cm. This accessory, which is available in a variety of shades, can be teamed up with both casual and formal wear to add elegance and style to an ensemble. Customized silk scarves and stoles can be made to meet buyers’ requirements.