India has over a billion people with low labor costs, and the USA is the largest economy in the world. Therefore, it makes sense for Indian entrepreneurs to export from India to the USA. India currently exports over 200 billion USD annually, and many of the popular products include:
- Refined Petroleum,
- Gems and Precious Stones,
- Mechanical Equipment, Electrical Equipment, and Cars,
- Pharmaceutical Products, and
- Iron and Steel
The U.S. is India’s largest export market, accounting for about 18% of all of India’s total Exports. Combine this with the fact that India-USA economic relations have increased during previous years, opportunities to export from India to the USA will naturally increase as well.
While there is no formal free trade agreement or trade preference between India and the US, India is apart of many trade agreements.
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Trade Agreements and Trade Preferences help Export from India to the USA
Trade Agreements and Trade Preferences are international trade legal arrangements that allow individuals and companies to export their products to other countries without having to pay import duties. This could potentially make the products more affordable and competitive in that foreign country. The “Global System of Trade Preferences among Developing Countries” is one of the primary trade preferences that India is apart of. Along with 41 other nations, the countries are able to promote trade and economic development amongst each other. Entrepeneurs can benefit even more with trade preferences by using trade finance to fund their exports.
Funding Your Exports with Trade Finance
In trade finance, there are many ways exporters can ensure they are paid.
Letter of Credit
A letter of credit is a legal contract that guarantees that an exporter will be paid because if the buyer does not pay the exporter, the bank will pay the exporter. Most banks around the world are familiar with a letter of credit as it has been a common international trade document for a very long time. Therefore, instead of relying on the word of this person, you can have the buyer have a bank issue a letter of credit to minimize your risk of nonpayment.
In addition, many countries have Export-Import (EXIM) Banks. EXIM banks offers credit insurance, a great way for exporters to minimize the risk of nonpayment from buyers. Many countries have an export credit agency such as the EXIM bank and it offers legal protection in this trillion dollar business. If a buyer does not pay the exporter, the EXIM Bank will pay the exporter up to 95% of the value of the sales agreement. This drastically reduces the risk for exporters involved in international trade at an affordable rate.
Companies can obtain loans from reputable local and international banks. International Trade is a trillion dollar industry and banks are very familiar with trade loans. Banks are willing to fund transactions for creditable international buyers, and experienced exporters. New companies may add experienced individuals to their Board of Directors Team that have banking relationships.
The Opportunity will only increase.
As the USA continues increase diplomacy with India, business relations will also increase. There are many opportunities to export from India to the USA, and entrepreneurs have more avenues than ever to make this reality. Indian products are exported all over world and historically international trade has been a major way to create jobs. Taking advantage of free trade agreements and trade finance will allow entrepreneurs to thrive in the global economy. Contracts such as purchase agreements and supply agreements can further help entrepreneurs minimize risk. This will help entrepreneurs minimize their risk and increase profit when they export from India to the USA.
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