Indian exporters benefit from US tariffs on Chinese e-commerce shipments
What's the story
The recent imposition of tariffs by the US on low-value Chinese e-commerce shipments has opened a new opportunity for Indian exporters, especially those dealing in customized goods.
According to the Global Trade Research Initiative (GTRI), India, with more than 100,000 e-commerce sellers and $5 billion in current exports, is perfectly placed to fill the gap left by China.
Trade reforms
India's trade system needs urgent reforms
Despite the potential benefits of this opportunity, GTRI stresses that India's trade system needs urgent reforms.
The current system favors large exporters more and doesn't support small online sellers sufficiently.
The report also notes that banking reforms are critical as Indian banks find it difficult to handle the high volume and low-value nature of e-commerce exports.
Banking challenges
RBI rules restrict e-commerce exports
The Reserve Bank of India's (RBI) rules allow only a 25% gap between the declared shipping value and final payment, which is too restrictive for online exports.
The GTRI report suggests raising this limit to 100% and giving banks flexibility to approve legitimate cases.
It also highlights bank fees as an issue for low-value exporters, suggesting these charges must be waived for low-value exports.
Digital shift
Need for digital transformation in customs system
The GTRI report calls for a digital transformation of India's customs system.
It recommends online operations with 24/7 automated inspections and easy-to-follow digital checklists for small exporters.
The report also suggests updating courier-mode shipments to accommodate terms like "Delivered Duty Paid (DDP)," ensuring that the paperwork matches real-world logistics and avoids unnecessary delays.
Financial support
Improved credit access and incentives for small sellers
The GTRI report emphasizes the need for better access to credit for small online sellers.
It notes that while big players receive loans at 7-10% interest rates, small online sellers pay 12-15% and are left out of public credit programs.
The report recommends bringing these smaller businesses under priority sector lending to level the playing field.
Further, it urges extending incentives like advance authorization scheme, RoDTEP (Remission of Duties and Taxes on Exported Products), and duty drawback schemes.