Sourcing from India

In the last two years, we have seen a lot of disruptions in the global economy especially due to the coronavirus pandemic which also severely impacted the international supply chains. The situation is starting to improve but seems by far not over. The global supply chains are reshaping, providing a window of opportunity to India. Most of the global companies are looking for an alternative sourcing destination to China and are eyeing at India for the same.

Amazon’s announcement to invest over USD 6 billion in their infrastructure in India, Walmart’s entry into the e-commerce market in India, First Solar’s announcement to invest USD 645.7 million in India are all signs of positive development in the country. Besides that India is the 6th largest manufacturer of cars, the biggest of Two-Wheelers and Farmtractors.

India can be the next big global supplier

As the world’s largest democracy and fast-growing economy, India has a lot to offer. It is positioning itself as an attractive sourcing destination in the past couple of years. Many giant players have already shifted their sourcing to India and are benefitting from the same.

In FY21, India received a total foreign direct investment (FDI) inflow of USD 81.72 billion. Furthermore, in the first two quarters of 2021, India has received FDI of USD 30 billion, which is a whopping 15% increase over the same period last year.

Government Initiatives have a positive impact

The Government is also taking initiatives to promote manufacturing in India so as to meet the global demand. In July 2021, Government has launched six technology innovation platforms to develop technologies faster thereby boosting manufacturing sector in India to compete globally. Government initiatives such as ‘Make in India’, ‘Atmanirbhar Bharat’, Production Linked Incentive Schemes, etc. also aim at developing local capacities for sourcing in India.

What makes India an attractive sourcing destination?

Sourcing in India has gained an upsurge in recent times. Easy availability of raw materials, availability of young manpower, cheap labour cost, skilled workforce, abundant resources, an improving infrastructure, advanced technologies, plenty of engineering colleges and universities and supportive government policies boost sourcing in India.

Key advantages that India possesses as a sourcing destination

• Low Labour Costs

One of India’s biggest strengths is its cost-effectiveness. The labour cost is cheaper in India when compared to other competing nations. Therefore, many companies from Europe and the USA are now turning to India as their sourcing destination in order to lower their costs. And, lower costs directly mean a high return on investment.

• Prosperous Export Industry

Owing to the liberalization of numerous Indian trade laws and policies as well as government support to promote exports, the volume of India’s exports has grown manifold. As per the statistics, India’s exports stood at USD 291.80 billion in FY 2020-21. Moreover, exports from India rose 22.63% year-on-year to USD 33.79 billion in September 2021.

• Domestic Availability of Raw Materials

A wide range of raw materials right from cotton to silk, jute, metal, wood, marble, bamboo and others are readily available in India. In fact, India is the largest producer of a lot of raw materials. Furthermore, India is rich in natural resources. This makes it easy and cost-effective for companies to source from India.

• Advanced Infrastructure and Latest Technology

India is one of the fastest-growing economies in the world. It primarily focuses besides on the IT sector on manufacturing, deploying the latest technologies and advanced infrastructure. Besides, companies in India invest heavily in training the workforce on the latest technologies to ensure their employees are at the top of their game all the time. This helps Indian firms cater to the demanding needs of global businesses.

• Stable Government and Supportive Policies

India is economically and politically known as a stable country. The policies of the Indian Government are highly supportive and favourable for small and medium size industries.

Contributed by @Divya Sehgal (Jan 2022)