Is Establishing a Handicraft Export Business in India Profitable? Pros and Cons with Government Regulations
The handicraft industry of India has received accolades from the global market since the pre-independent era for its exquisite designs and intricate workmanship. Indian handicrafts produced by the artisans and craftspeople carry the life-long beautiful legacy of their forefathers. It shows how vibrant our cultures and traditions are. It is the largest employment generating sector after agriculture in India which employs more than seven million artisans from the rural and urban parts. There are about 67,000 exporters or export houses that are promoting the regional art and workmanship of artisans around the globe. If you are planning to initiate an export business in India, handicrafts are one industry that should be on your priority list. Various reasons are favoring this statement. In this article, we will analyze how a handicraft export business in India can be very profitable and also discuss the pros and cons attached to it in a detailed manner along with various government regulations.
Table of Content
- Overview of the Handicraft Market of India
- Pros of The Indian Handicraft Industry
- Cons of the Indian Handicraft Industry
- Is Handicrafts a Profitable Business in India?
- Important Government Rules and Regulations to be Followed During Exports
- Major Assistance / Schemes Provided by the Government
- Becoming a Successful Exporter of Handicrafts in India
Overview of the Handicraft Market of India
India is one of the important exporters of handicrafts in the global market. The handicraft industry is labour-intensive and highly decentralised, spread across the remotest corners of the country. Being a labour-intensive sector, it employs a vast segment of artisans from rural and semi-urban areas who compete over prices and try their best to deliver the best premium quality products. Apart from sustaining millions of artisans from the length and the breadth of the country, it contributes significantly towards the generation of foreign exchange, while preserving our rich culture and heritage. The handicraft sector of India has great potential as it is not operating currently to its maximum capacity. It is capable of catering to millions of new entrants as it has immense demand in the global market.
This industry has, however, suffered due to many factors in recent years. Lack of education, low capital, lack of awareness about government incentives and programmes, absence of knowledge about market and market strategies, poor institutional framework, and poor exposure to new technological advancements are a few reasons it has suffered a lot. The global pandemic because of the Coronavirus disease has also drastically affected the revenue numbers of handicraft products in the global market. Despite several constraints, the sector has performed extremely well with significant growth of 3 percent annually.
Pros of the Indian Handicraft Industry
- Handicrafts as the name suggests are ‘hand-made’ and thus, are different from the monotonous machine-made products. It has unique designs and intricate craftsmanship. Because of its uniqueness, it has very few competitors.
- Handicrafts are not only measured as decorative articles, it is now catering to the field of fashion, design, obligation, and style. It is now gratifying the needs of millions of consumers from a local market to a global market in this contemporary world by meeting all the standards of the international market with the help of the incentives provided by the government.
- Handicrafts have aesthetic and functional qualities and they are wrapped amid antiquity. Consumers across the world have large discretionary income at their disposal to spend on these beautiful crafts as they represent novelty.
- Indian exporters of handicrafts need comparatively very less investment to start an export business. This is because of several reasons. One of the prime reasons is the abundant labour force that competes for prices.
- There is a high ratio of value addition in this industry. It has immense potential for exports and for earning foreign exchange which helps in the economic development of the country.
- Raw materials for the production of handicraft products are easily available. Most handicrafts make use of raw materials like recycled waste, lac products, naturally available textiles, and so on that can be obtained at cheap rates.
- Everything used for the production of handicraft products is eco-friendly. Arguably, all handicraft products are biodegradable. The best part about them is that they make use of the recycled wastes too. Handicrafts eliminate the use of plants and machinery which reduces the energy consumption to almost zero and promotes sustainability.
- The use of e-commerce platforms like Craftezy, Amazon, and so on has facilitated the export of handicrafts in the international market. Business-to-business platforms like Craftezy work on a commission-based model where users are charged a minimal fee for each transaction. There are a plethora of handicrafts listed on its platform providing a wide range of options for customers from across the globe. It helps exporters of handicrafts reach a large number of global audiences at a very affordable cost.
Cons of the Indian Handicraft Industry
- Indian handicrafts lack productivity. Small players in this industry find it very hard to compete with the big retail chain players globally. They lack proper infrastructure facilities like storage, packing, and shipping facilities which results in a low level of production.
- There is an increased decline in India’s share due to premium quality products produced by the competitors from South Africa, Europe, South Asia, and so on. These competitors spend huge amounts of money on research and developments which results in the production of the consistent quality of handicrafts.
- Exporters usually enter the market of handicrafts without prior knowledge of the global market and its demands and current trends.
- There is a lack of organised identity among the craftspeople and artisans. There is no unity among them in fixing prices, quality standards, etc. Thus, competition among the domestic artisans eventually leads to a lower margin of profit, inferior quality of handicrafts, and price war.
Is Handicrafts a Profitable Business in India?
Handicrafts have been the pride of India for many eras. The Indian handicrafts industry is a lucrative one since it deals with significant numbers. You will need a very low investment as it is made by the hands. Also, this factor will help you fetch a decent amount of money in the global market since customers globally reward beautiful crafts and intricate craftsmanship of the artisans. The Indian handicraft sector today is worth more than US$ 100 billion. The handicraft exports from India increased by almost 2% in the FY20 despite the presence of the Covid pandemic. These are mesmerising figures. Even if the words might not sound so compelling, numbers will.
The government of India is providing marketing assistance to this industry. Export Promotion Council for Handicrafts (EPCH) is an apex body for handicrafts in India and is a self-sustaining body that self-finances all the promotional activities. It organizes fairs, virtual fairs, exhibitions, business meetings with the global market, and works towards increasing awareness on ‘Export Marketing’. To give you more alluring news about this industry, the government of India has increased incentive rates under the Merchandise Export from India Scheme (MIES) to 7% from 5% which will help exporters to recover the input costs involved in the production of handicraft products and will lead to competitive pricing and increase in the exports.
Important Government Rules and Regulations to be Followed During Exports
- To start an export business of handicrafts from India, open a bank account, obtain Permanent Account Number(PAN), obtain Importer Exporter Code(IEC) from DGFT, and get yourself registered with the concerned Export Promotion Organisation.
- There should not be any restrictions on the product that you want to export.
- Prepare, publish and print catalog of the firm or the company and its business line, giving details of the handicraft products to be exported.
- Export prices should be fixed for each handicraft product both on Freight On Board [FOB] and Cost Insurance Freight [CIF].
- While selecting buyers, their credentials must be checked and verified by Export Credit Guarantee Corporation of India Limited.
Major Assistance / Schemes Provided by the Government
- Merchandise Export from India Scheme: To give thrust to the production and exports of handicraft items, an incentive of 3% or 5% duty credit facility is available to the handicraft exporters.
- Market Access Initiative: Space charges are reimbursed for the exporters, subject to conditions for participation in international shows.
- Duty-Free import provision of embellishments/consumables: The member exporters of handicrafts are allowed duty-free import of consumables/embellishments and tools to the tune of 5% of their export performance during the preceding financial year to enhance and improve the quality of handicraft products.
Becoming a Successful Exporter of Handicrafts in India
If you want to become a successful exporter of handicrafts in India, proper research about the market is a prerequisite. Finding proper marketing strategies will help you propel your business growth. Meeting business contemporaries and attending trade shows and trade fairs also is very important and help you broaden your understanding of the market. In the current technological era, taking the assistance of trade platforms like Craftezy, Amazon, and so on can help you in catering to the global audience at ease. Talking specifically about Craftezy, it lists your handicrafts without any hassles and helps potential buyers find your products, effortlessly. Increase your visibility and expand your revenue and profit growth with the help of Craftezy- all at an affordable cost.