Big boost! India winning global manufacturing battle as supply chains shift away from China, reveals study

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India’s manufacturing success in the global arena over the past five years has been notable and it has emerged as a winner, as per a study by BCG, quoted in an ET report. During this period, Indian exports to the US surged by $23 billion, marking a 44% increase from 2018 to 2022. In contrast, China experienced a 10% drop in its exports to the US.
The study, titled ‘Harnessing the Tectonic Shifts in Global Manufacturing,’ sheds light on the transformation in manufacturing and sourcing across various industries. This shift has been triggered by factors such as trade disputes, the pandemic, geopolitical tensions, and supply chain disruptions. In response, global companies have had to reconsider their manufacturing and sourcing strategies, with India emerging as a favored destination.
The study highlights India’s advantage in direct manufacturing costs as an export platform. According to BCG’s calculations, the average cost of Indian-made goods imported into the US, factoring in factory wages, productivity, logistics, tariffs, and energy, is 15% lower compared to goods manufactured in the US. In contrast, Chinese goods offer only a 4% cost advantage over US-made products and are 21% more expensive when subject to US tariffs related to the trade war.

Specifically, semiconductor and material shipments from India to the US saw a remarkable 143% increase over the past five years, though starting from a modest base. Meanwhile, China’s exports in these categories decreased by 29%. Furthermore, Indian exports of auto components to the US rose by 65%, and mechanical machinery exports grew by 70%.
Ravi Srivastava, the global leader of BCG’s operations practice said that for the past two decades, there has been talk of India’s potential in manufacturing, often with a lingering question mark. Now, it seems that many pieces of the puzzle are falling into place. What sets this study apart is its comprehensive perspective, not only delving into the reconfiguration of global supply chains but also providing validation to the growing narrative of India as a manufacturing hub, he said.

Looking forward, BCG sees potential for India to further enhance its role as a strategic manufacturing and sourcing destination. However, the decision to incorporate India into firms’ strategies depends on a complex mix of factors, and there is no one-size-fits-all solution, it says.