Introduction
Over the past 10 years, India's exports have increased dramatically, with companies in many different sectors (i.e. manufacturing, technology, agriculture, textiles, pharmaceuticals and Services) exporting products & services. However, success as an exporter is dependent upon more than just the price or quality of products. A key consideration for successful export businesses will be selecting where to base themselves, who they are trading with, and/or where to base their overseas businesses.
There is not one "best" country for all exporters, but the best country will depend upon factors such as: Target Market Access, Tax Efficiency, Ease of Doing Business, Banking Infrastructure, Trade Agreements and Regulatory Stability. In this article, we explore which foreign countries currently present the most advantageous environments for Indian export businesses and why these countries are strategically important.
Key Factors That Make a Country Ideal for Indian Exporters
Before identifying specific countries, it is essential to first establish the most critical criteria that affect export-oriented businesses. Export-oriented businesses typically favour countries that offer:
- Strong Trade Relations with India
- Ease of Establishment of Companies and Foreign Ownership
- Access to International Banking and Payment Systems
- Stability of the Legal System and Tax System
- Free Trade Agreements and/or a Favoured Tariff Structure
- Global Credibility for Buyers and Partners
As a result of these variables, several countries consistently rank as preferred export destinations.
United Kingdom (UK): A Global Trade and Credibility Hub
British companies continue to be a major focus for Indian suppliers exporting to Europe & the USA. The United Kingdom has a strong global reputation and operates within an environment that is conducive to establishing businesses. In addition, the legal system provides high levels of confidence for international purchasers when establishing relationships with companies in the UK because of the use of English law and the high level of transparency in Corporate Governance.
a) The UK has well-established business relationships with India (via trade),
b) Foreign companies have 100% Foreign ownership rights in the UK (with full support and backing) and
c) British Banks facilitate international transactions in multiple currencies (GBP) for exporters located outside of the UK (to as many markets as possible).
The UK has a very extensive Network of Double Taxation Agreements (DTAs) with countries worldwide. Additionally, many Indian Companies use the UK as a base from which to re-export and perform international trade activities.
Many Indian exporters utilise the UK as a Strategic International Hub for their service exports, textile exports, pharmaceutical exports, engineering exports, consulting/expert exports, etc.
United States (USA): The Largest Consumer Market
With its enormous population and high levels of disposable income, the USA is one of the best export markets for Indian exporters because it represents the world's largest consumer market.
Despite increased complexity surrounding regulatory issues, there are rewards for Indian exporters that are properly armed.
Advantages of the USA:
- World's largest import market.
- High demand for various Indian IT services, pharmaceuticals, textiles and consumer products.
- Strong e-commerce/B2B.
The USA possesses highly developed logistics and warehousing infrastructures.
The USA has a strong and well-organised legal and contract enforcement system.
For most Indian exporters that prioritise reaching a large audience, developing a strong brand and attaining premium pricing, the USA is an essential market, regardless of the increased level of compliance to export products to that market.
United Arab Emirates (UAE): Gateway to the Middle East and Africa
Indian exporters have identified the UAE (primarily Dubai) as a leading place to do business because it's viewed as a region that offers tax efficiency and regional access.
The UAE can be considered the global trading and logistics hub between Asia, Europe, and Africa.
Reasons to be attracted to the UAE:
• Strategic geographical positioning
• 0% or low corporate tax rates for most types of trading structures
• Strong trade relationship between India and the UAE with CEPA benefits
• Exceptional ports/free trade zones/logistics facilities
• Simplified customs/re-export processes
• The UAE is an ideal location for sellers of commodity products, such as Jewellery, Food, Electronics, and Re-exports.
Singapore: Asia’s Trade and Financial Hub
Singapore is viewed by many as the best location in Asia for foreign trade and businesses that focus on exports. In addition to having a transparent regulatory environment, Singapore also offers a robust financial system, making it a prime location for setting up your overseas business or regional trading operations.
Notable advantages of doing business in Singapore include:
- Geographical proximity to markets throughout the Southeast Asian region.
- Low taxes and extensive double tax treaties with many countries around the world.
- World-class banks providing financing for import/export activity.
- Ease of business setup and operation compared to other countries in Asia.
- Strong protection of contract rights and intellectual property.
Many Indian exporters use Singapore as a regional distribution point and/or procurement hub or as an international trading business.
Netherlands: Gateway to the European Union
The Netherlands is an opening that exporters commonly use to get to the European Union. With its first-class ports and transport facilities, the Netherlands stands to be the best opening into Europe for exporters.
The Netherlands assures exporters of the following: access to the EU single market, an efficient and well-developed logistics and warehouse network, tax treaties that are business-friendly, customs and trade facilitation that is efficient and a regulatory environment that is stable.
Indian exporters of chemicals, machines, agricultural products, and other consumer goods have a plus in the Netherlands, as its central location in Europe.
Australia: Stable Market with Strong India Ties
The United Kingdom is a developing area where Australian businesses are exporting to Australian organisations based on agreements made between the two countries.
There is ample opportunity because of an already established economy and also continued growth in the demand for Australian businesses to receive goods and services from Indian-based sources.
Some of the benefits of partnering with Australian Companies include:
Strong relationships between Australia and India as trading partners,
Increased demand for agricultural and service exportation from India,
A transparent Tax and Regulatory System,
An English Speaking Community in the Business World of Australia.
The Education Services, IT, and food products Professional Services have the potential to provide a very attractive business relationship.
Which Country Is “Best”? A Practical Perspective
It is impossible to say definitively which foreign country is most suitable for an Indian exporter. The best country depends on many factors, including:
The type of product/service sold
Who the desired customers are
How much the product/service will cost
What level of taxation and compliance is acceptable
Any plans for future growth beyond the near term?.
In addition:
The UK is a good place to establish credibility and do international business with a broad range of customers.
The USA provides the greatest opportunity for growth and profits, especially if you can find resources to help you scale quickly to serve more customers.
The UAE provides advantages from a tax perspective, particularly if you plan to re-export goods back into other markets.
Singapore offers a location within Asia, as well as access to trade financing.
The Netherlands offers good access to the EU market.
Lots of successful Indian exportersutilisee various jurisdictions as part of their overall strategy and do not solely rely on one country.
Conclusion
Indian export companies have to be patient when picking the right location for their foreign presence since this decision not only determines their legal and tax liabilities but also their capability to grow in these new markets. The invitation and decline of each international market are largely dictated by its position in the world trade routes, thus making it either advantageous or disadvantageous.
The most successful exporters maximise the potential of their presence overseas by aligning themselves with their export goals and regulatory environments. When selecting an appropriate host country and incorporating it into a compliant international business structure, Indian exporters can create substantial opportunities to develop their global reach, increase profits, and enhance their reputations in the eyes of customers and prospects alike.
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