DGFT's Boost for E-commerce Exports

E-commerce exporters in India are set to benefit from comprehensive financial support, thanks to the guidelines established by the Reserve Bank of India (RBI). These guidelines, allowing for pre-shipment and post-shipment credit, along with packing credit loans in foreign currency (PCFC), underscore the commitment to fostering a thriving export ecosystem. The Directorate General of Foreign Trade (DGFT) has been instrumental in championing the cause, ensuring that credit facilities vital for e-commerce exports are readily accessible.

What is DGFT?

The Directorate General of Foreign Trade (DGFT) operates under the Ministry of Commerce & Industry of India. This governmental body formulates and implements the foreign trade policy and provides a regulatory framework for India's import and export activities. DGFT plays a crucial role in promoting and facilitating international trade, contributing to the country's economic growth.

Pre-shipment Credit for e-Commerce Exports

Pre-shipment credit is a financial facility extended to exporters before the shipment of goods. In the context of e-commerce exports, this credit is instrumental in financing various pre-export activities, such as procuring raw materials, processing, packing, transportation, and other essential activities. It provides exporters with the necessary financial support to fulfill export orders promptly.

For e-commerce exporters, securing pre-shipment credit is vital for ensuring a smooth and efficient export process. It empowers businesses to manage working capital requirements, meet production demands, and fulfill customer orders without financial constraints. This credit facility acts as a catalyst, allowing e-commerce enterprises to navigate the initial phase of the export cycle with confidence.

Post-Shipment Credit for e-Commerce Exports

Post-shipment credit is extended to exporters after the shipment of goods. It serves to bridge the gap between the dispatch of goods and the realization of export proceeds. In the context of e-commerce exports, post-shipment credit becomes crucial for businesses to maintain their financial momentum and address operational needs after the completion of the export transaction.

For e-commerce exporters, post-shipment credit provides the necessary financial support to manage cash flow during the period between shipping the goods and receiving payment. This is particularly relevant in the digital economy, where transaction cycles can vary. Post-shipment credit ensures that e-commerce businesses can sustain their operations, fulfill subsequent orders, and navigate the complexities of global trade seamlessly.

DGFT's Stance on Export Credit

In a recent trade notice (Trade Notice No. 26/2023-24), the DGFT emphasized that e-commerce exports should not be excluded from pre-shipment and post-shipment export credit, including PCFC. The notice, issued after engaging with industry stakeholders, calls upon banking and financial institutions to align with RBI guidelines and extend the mentioned credit facilities to e-commerce exporters promptly.

Addressing Industry Concerns

Concerns regarding the availability of pre-shipment and post-shipment export credit for e-commerce exports were raised during discussions on the promotion of cross-border trade in the digital economy, a key aspect of the new Foreign Trade Policy 2023. The DGFT, in response to industry representations, conducted consultations with the RBI to clarify the existing framework. It was established that the RBI's "Master Circular-Rupee/Foreign Currency Export Credit and Customer Service to Exporters" provides an inclusive framework, allowing all eligible exporters, including those in e-commerce, access to essential credit facilities.

Fueling e-Commerce Growth

The move by the DGFT and RBI is poised to fuel a significant e-commerce boom in India. By enabling exporters to access pre-shipment and post-shipment export credit, along with PCFC, the policy ensures that financial resources crucial for international trade in the digital age are readily available. This aligns with the objectives of the recently introduced Foreign Trade Policy 2023, emphasizing the need to address issues related to e-commerce exports, including specialized credit facilities.

Applying for Pre-Shipment and Post-Shipment Credit

1. Documentation Preparation: Gather all necessary documents, including export orders, invoices, packing lists, and details of the goods to be exported.
2. Choose a Lending Institution: Select a bank or financial institution that offers pre-shipment and post-shipment credit facilities. Ensure that the chosen institution aligns with DGFT and RBI guidelines.
3. Application Submission: Submit a formal application for pre-shipment credit, specifying the required amount and providing comprehensive details about the export transaction.
4. Credit Assessment: The lending institution will assess the creditworthiness of the exporter and evaluate the authenticity of the export documents.
5. Approval and Disbursement: Upon approval, the lending institution disburses the pre-shipment credit, allowing the exporter to proceed with pre-export activities.
6. Post-Shipment Credit Application: After the goods are shipped, initiate the application process for post-shipment credit, providing the necessary documentation.
7. Evaluation and Disbursement: The lending institution evaluates the post-shipment documents and disburses the credit amount, helping the exporter manage finances post-shipment.

The Road Ahead

The DGFT's Trade Notice serves as a proactive step to encourage e-commerce exporters to leverage pre-shipment and post-shipment export credit and PCFC. This policy initiative, aimed at creating a conducive environment, showcases the Indian government's commitment to supporting the growth of the country's digital economy through robust e-commerce exports. As the digital landscape evolves, the synergy between regulatory bodies and financial institutions ensures that e-commerce businesses have the financial backing they need to thrive in the global marketplace.