India has remained the prominent garment exporter globally for years. The favourable Government policies and incentives have boosted the cross-border trading of different types of garments. If you are looking to leap into this venture, you must know what it takes to get it started. So, without any ado, let dive straight into the legalities of this venture and other key factors.
Analysing the Potential of Garment Export in India
With the availability of ample raw materials and a massive workforce, India is all set to rule the global garment export. India has a vast variety of fabrics and fibers and its cotton textile value chain is quite formidable. Although India is yet to gain traction in global export as far as man-made fiber is concerned, the GOI is making efforts in solidifying the nation’s presence via different schemes and initiatives.
India’s export is projected to register a CAGR of 12-13% by 2027, surpassing the overall valuation of $30- thanks to government-backed incentive schemes, a trade agreement with several nations, and an ever-dropping share of china in the RMG (Ready-Made Garment) market. This will enable our nation to accomplish the gigantic textile export target of US$ 100 billion by 2030.
As per the CareEdge Ratings, the RMGs accounted for a share of $850 billion in the calendar year 2021in the global textile. This figure is expected to reach around 1.5 times by 2027. The global RMG market is composed of the EU, the UK, the US, Canada, Japan, and South Korea which are collectively contributing around 60 percent of the overall global import.
Nations like Bangladesh, Spain, Vietnam, China, and India rule the export regime, with China leading from the front with 33 percent of overall RMG exports -bolstered by amplified productivity, the economy of scale, and reduced transportation costs. Owing to these the Indian RMG garment export is likely to surpass the whooping valuation US$ 30 billion mark by CY27. This will enable the nation to grab a 4.6-4.9% share in the global export, which is currently poised at 3 percent.
Licenses to Start Garment Export from India
Following is the list of licenses that are mandatory to set up a legally viable garment export business in India:
1. Business Registration (mandatory for legalizing the business structure)
Business registration is mandatory to legalize the existence of any commercial entity. Depending on the nature of the business and scale of operation, one can choose a viable business structure from the available options such as OPC, Private Limited Company, Partnership Firm, LLP, etc to get things started. Each structure adheres to distinct constitutional requirements and compliances. So make sure to pick the one that suits your needs.
2. Shop And Establishment License (mandatory for exporters having godowns for stocking goods)
Shop and Establishment license is mandatory for commercial establishments but not for production entities. The licensing process, paperwork, and norms for this license vary state-wise. It is granted by the state’s labor department against the prescribed application and fee.
3. Trade License (mandatory for exporters having godowns for stocking goods)
A trade license is granted by the State’s municipal corporation and it is not applicable in every state. It is a mandatory legal permit that governs various aspects concerning working labour and business premises. The trade license undermines the exploitation of the labourers at the workplace and prevents business owners to attempt illicit conduct in the context of operation or trade to keep everyone’s interest intact.
4. Import-Export Code (IEC) – (It is a mandatory legal permit for exporting or importing goods)
No cross-border trade can be possible without IEC registration. Those who want to start garment export must have this permit in the first place. It is a 10-digit unique code allocated by the authority to the importer or exporter. The IEC helps customs recognize the exporter or importer during shipment inspection. Also, it serves as a bridge when it comes to securing payment from the importer. Directorate General of Foreign Trade accords IEC via online application.
5. RCMC Certificate
It is mandatory for accessing export incentives, duty drawbacks, and duty scrip under Foreign Trade Policy. Directorate General of Foreign Trade accords this certificate against online application available on their portal.
6. Fire NOC (stocking goods in godown for exports)
Establishments with a height of 15 m or high need to secure Fire NOC in India. It is accorded by the state fire department against the prescribed application and fee. Soon after submitting the application for Fire NOC, the fire department official shall perform a premises inspection for the availability of firefighting equipment and an emergency escape plan.
Role of the Apparel Export Promotion Council In Garment Export
AEPC came into existence in 1978. It is an apex government institution that strengthens apparel export by providing viable trade opportunities to exporters. For all textile exporters, AEPC serves as an ideal avenue for information advice, market intelligence, and technical guidance workforce. Registering with AEPC implies that exporters will have access to real-time trade stats, market details, and international fairs to augment their reach. AEPC plays a pivotal role in exploring uncharted trade territories and prominent trade delegations to various nations.
The garment export is a profitable venture since it adheres to tremendous growth potential. The export market size of India in the garment sector is expanding every passing year. Thus, it is an ideal time to leap into this venture and reap a healthy profit margin. However, it is vital to take exporting regulations and expenditures into account before commencing your business journey.
Read Our Article: How To Set Up Garment Manufacturing Business In India?