Made-in-India products are gradually taking the place of Made-in-China ones on US stores

 Made-in-India products are gradually taking the place of Made-in-China ones on US stores

"While US goods importation from China declined by 10% from 2018 though 2022 in inflation-adjusted terms, they rose by 44% in India, 18% from Mexico and 65% from the 10 countries included in the Association of Southeast Asian Nations (ASEAN), an analysis done by the consulting firm Boston Consulting Group has pointed out."

 

"At the cost of China, India is gradually benefiting from recent changes in global manufacturing, sourcing, and supply chains.

The global manufacturing landscape is being drastically redrawn for export due to a half-decade of upheaval that has included trade battles, the pandemic, natural catastrophes, severe supply constraints, Brexit, the conflict in Ukraine, and more aggressive industrial policies. According to a recent analysis by Boston Consulting Group, US goods imports from China fell by 10% between 2018 and 2022 in inflation-adjusted figures, but surged by 44% from India, 18% from Mexico, and 65% from the 10 ASEAN member nations.

For instance, between 2018 and 2022, US imports of mechanical equipment from China decreased by 28%, while imports from Mexico, ASEAN, and India climbed by 21%, 61%, and 70%, respectively."

Over the last five years, India has come out on top in the global manufacturing race. The report shows that whereas China's exports to the US fell by 10% during this time, India's exports to the US increased by $23 billion, or 44%, between 2018 and 2022.

With their great consumer presence on American stores, Indian items are likewise becoming more and more popular. The largest retailer in America, Walmart, is importing more goods from India, which means more items with the Made-in-India label are being sold in its US shops.

Walmart seeks to source in a variety of areas, such as food, consumables, health and wellness, general products, clothing, shoes, home textiles, and toys, where India excels. The goal of sourcing $10 billion worth of items annually from India by 2027 is on schedule, according to Andrea Albright, executive vice president of sourcing at Walmart, who spoke with ET about this. The biggest retailer in the world already counts India among its top sourcing destinations, with yearly shipments to the country valued at over $3 billion.

Walmart's Global Sourcing office in Bengaluru, which opened its doors in 2002, helps consumers in 14 countries, including the US, Canada, Mexico, Central America, and the United Kingdom, get their hands on popular items such as clothes, homeware, jewelry, and hardlines created in India.

Why does India have greater allure?

When it comes to direct manufacturing expenses, India has a significant advantage as an export hub. The average landing cost of items created in India and imported into the US, including factory salaries adjusted for energy, tariffs, logistics, and productivity, is 15% less than if the goods are made in the US, according to BCG's estimates. Conversely, the average cost of commodities arrived in the US from China is 21% higher for items subject to US tariffs connected to the trade war and just 4% lower than US prices overall."

 

In most areas, wage inflation has surpassed increases in productivity; nonetheless, India has an advantage in this regard. For instance, from 2018 to 2022, labor expenses in the US increased by 21% and in China by 24%, after accounting for productivity. According to the BCG analysis, productivity-adjusted labor costs increased by 22% in Mexico and 18% in India. Still, these two nations are among the most affordable places in the world to manufacture goods, with Mexico offering the US the most advantageous near-shore alternative.

An increasing inclination towards sourcing from India

The 'QIMA Sourcing Survey 2023: Disruption, Diversification, Digitization' conducted by QIMA, a quality control and supply chain audits company, also reveals a growing preference for acquiring from India among American businesses. The study states that India's high appeal as a supplier market has continued to grow as it has risen through the ranks of preferred procurement partners in recent years.

According to a poll conducted among US and EU-based respondents, 42% listed one or more South Asian nations among their top three sourcing partners, demonstrating South Asia's continuous ascent through the ranks of the most significant purchasing areas for the West. In comparison, Southeast Asia's share fell to 33% in the first quarter of 2023.

When examining the individual nations, the leaders of the two regions—India and Vietnam—are seen as equally significant foreign sourcing partners for the West; in fact, over 25% of respondents with US or EU headquarters ranked both countries among the top three sourcing geographies.

According to the poll, India is a desirable sourcing partner for purposes other than textiles. According to industry, companies operating in the Accessories, Jewelry, and Eyewear sector were the most interested in India as a supplier market (naming it in their top three, at 45%), followed by Promotional Products (at 44%). Third place at 40% went to the Textile and Apparel industry, which is often thought of as India's "bread and butter."

When considering companies that made substantial changes to their purchasing location, printing and packaging, home and garden, accessories, and promotional products were among the sectors that chose India as their destination of choice. In the previous 12 months, between half and one-third of respondents in these industries said that they had increased their sourcing from India considerably.

According to the Qima study, 73% of US-based buyers (a five-year low) and 85% of EU-based purchasers named China as one of their top three sourcing partners, indicating that Western buyers are continuing the long-term trend of reducing their dependence on China. Regarding procurement numbers, 61% and 58% of respondents headquartered in the US and the EU, respectively, said that they purchased less goods from China in Q1 2023 than they did a year earlier.

Even Nevertheless, China continues to play a significant role in international supply chains, even as they move to other nations.

For US-based respondents, the popularity of Made-in-China products continues to decline, reaching a five-year low. In contrast, for businesses based in Asia (other than China), the survey found that 85% of respondents named China among their top three sourcing partners in 2023, up from 65% in 2019. Given that many of China's regional rivals depend on Chinese raw materials to fulfill contracts that are diverted to them, the movement of Western supply chains away from China is probably a contributing element in this."