What Does India Manufacture?
Apple and Samsung are two of the biggest companies to adopt the ‘China Plus One’ strategy. They have expanded their sourcing of manufactured products beyond China. Their strategy reduces operating costs and reliance on a single source. India is one of their key ‘Plus One’ manufacturing hubs.
As a manufacturer, India offers a pool of labor to match China’s. India has several big advantages.
- lower labor costs,
- greater political and economic stability,
- proximity to other ‘Plus One’ countries,
- and a government investing in its growth.
This Indian Production Guide will give you everything you need about manufacturing in India. You can then consider India as your own ‘Plus One’.
Understanding the Manufacturing Landscape in India
India and the United States share many similarities.
- Both are former British colonies, with India gaining independence in 1947.
- India like the United States, is a federation of 28 states and 8 union territories.
- India has a written constitution.
- Power is divided between the Central government and the state governments.
- The central government handles all matters of national importance like defense, foreign affairs, and monetary policy.
- The state governments handle issues like education, health, and law and order.
- Both have an independent judicial system, hold democratic elections, and struggle with balancing issues between central and state government relations over time.
- A key similarity is that English is the official language in India. It is the spoken language across education, government, business, and media.
India has several key manufacturing hubs.
Each is in a different state, while Delhi is one of the 8 Union Territories.
- State of Maharashtra: automotive, textile, and electronics industries.
- State of Gujarat: petrochemicals, pharmaceuticals, and textiles.
- State of Tamil Nadu: automobiles, textiles, and IT.
- State of Karnataka: aerospace, biotechnology, and electronics.
- Union Territory of Delhi: automobiles, electronics, and textiles.
Table 1 below highlights the enormous populations and their distance from key international shipping ports, of the key manufacturing hubs.
In 2022, Indian exports to the US totaled US $83 billion. The top Three Exports from the US to India were
- Diamonds (US $9.75 billion): In September 2024, the diamond and jewelry exports to the US reached US$812 million. Gajarat is the home of the cut and polished diamond trade. Manufacturers are spread throughout India.
- Packaged Pharmaceuticals & Medical Equipment (US $7.54 billion): India’s high quality products compete with other global suppliers. The US imports various Indian medical supplies, such as surgical disposables, face masks, bandages, gauze, surgical caps, and sterile gloves. India is becoming a key supplier in the global healthcare industry.
- Refined Petroleum (US $4.87 billion).
Another key export is the textiles and apparel category. In a category dwarfed by China, the value of US imports from India in 2022 was more than US $8.2 billion. This is primarily clothing and home textiles.
Government Support in India
Launched in 2014, the “Make In India” program aims to grow manufacturing’s share of the economy. Early partners were Japanese and German manufacturers. They guided Indian firms in setting up the manufacturing industries of today. Over the past ten years, the increase in manufacturing’s share of GDP has been modest. Despite this, foreign investment and the manufacturing sector are growing. The economic opportunity it presents remains strong. The factors that have hampered growth are being addressed. Reforms are underway to repeal and replace archaic laws to cut ‘red tape’ inefficiency.
The Government’s latest program is the ‘Production Linked Incentive’ (PLI) Scheme. It has opened manufacturing across new industries. These include Pharmaceuticals, Food Processing Industries, Medical Appliances, and electronics. New entrants in the market include both Apple and Samsung.
Does India Have a Quality Problem?
There’s a perception that the output of Indian manufacturing industries is of low quality. If it’s cheap, it’s because of poor quality. Each of the big modern manufacturing economies suffered the
same misperception. Japan’s initial manufactured goods were held to be of poor quality. So too were Taiwan’s, then China’s, and now India’s.
As each of these economies matured and invested in technology, skilled labor, and quality control, their reputation for quality improved. India is undergoing a similar transformation. Quality and innovation are critical enablers of their manufacturing growth.
While there may still be instances of low-quality products, many Indian manufacturers now produce high-quality goods that compete with international brands.
Product Design and Development in India
If you have a unique product or design, securing Intellectual Property protection in India can be challenging. This is improving and is less difficult than in China where greater Government involvement in industry can complicate matters. Between the Indian and U.S. governments, the U.S.- India Trade Policy Forum’s Working Group on Intellectual Property has been taking steps to strengthen the enforcement of IP rights in India.
If you are considering manufacturing a unique product, there are several considerations to keep in mind. These apply to manufacturers anywhere but are important when considering Indian manufacturers.
- Simplicity: Design your product to be easy to make, assemble and repair.
- Components: In-market sourcing of components will reduce your lead time and cost.
- Quality Control: Work with your supplier to ensure quality control measures are in place at all critical points during the manufacturing process.
- Manufacturing Skill Set: Ensure the manufacturer’s capability aligns with what is needed to manufacture your product to the quality standard your customer demands.
- Packaging: Ensure your product’s packaging can cope with the demands of transportation from the factory gate to your destination in the US. Indian summer temperatures can be high and roads to ports, while improving, can be in poor condition.
Production MOQs and Quality Control in India
Minimum Order Quantities are a challenge to establish in any supply agreement in any market. MOQs vary depending on the complexity of your product, the MOQs of any unique raw materials required to be sourced by the manufacturer, and the manufacturer’s size.
Manufacturers seek to maximize the MOQ to achieve economies of scale. The customer seeks to minimize the MOQ to reduce the cost of capital, transport, and inventory. Finding a compromise that works for you is key.
Communication in English means the task of negotiating with potential manufacturers is easier. This frees you to focus on your negotiating strategy. A successful first strategy is to negotiate smaller up front MOQs with the promise to move to larger MOQs. This allows you to set up your supply chain, generate cash flow, and finance larger MOQs once your supply chain has been established.
Alternatively, seek smaller manufacturers. They are more flexible in the size of their MOQs and ability to fulfill custom orders. The risk you face with a small manufacturer is the finished product’s quality. However, if you can secure the quality you need, negotiate a smaller initial MOQ, and then scale with them, you will form a long-term relationship based on trust. Together you can open doors to deeper collaboration in the future.
Like any manufacturer in Europe, Japan, or the US, Indian manufacturers have adopted international quality standards like ISO 9001, ISO 14001, and others to improve their processes. Third-party inspectors are welcomed by manufacturers to verify product quality and compliance with standards.
Logistics and Shipping in India
Transit times from Indian ports to the US average 30 to 35 days to the West Coast, and 35 to 40 days to the East Coast.
Imports valued above $800 attract a US Customs Duty upon arrival. Like any import into the USA, the Harmonized Tariff Schedule or HTS code is needed to determine the duty payable. Customs and Border Patrol (CBP) uses an extended version of international HS codes — Harmonized Tariff Schedule of the United States Annotated (HTSUS). The code is used to identify the imported product. The identity and origin determine the applicable duty.
Challenges and Opportunities in Manufacturing in India
Challenges and risks are intrinsic aspects of importing from any market. Pairing with reputable suppliers who have the same desire to establish a sound working relationship is key. Adverse exchange rates, weather, and economic events will make business more difficult. However, partners who work together will find mutually beneficial solutions.
At this point, the shadow of additional tariffs isn’t being cast over India. There is a risk based on BRIC members (for which India is a foundation member) having recently discussed the option to move away from transactions in the US dollar to a third currency. Such a move is unlikely.
There is a second risk to remember – the next Administration in Washington DC. The simple view of international trade is “You’re either a winner, or a loser”. If the US has a trade surplus with another nation, it wins. If it has a trade deficit, it loses. And if the US loses, it’s because the other side isn’t playing fair. The US imports more from India than India exports to the US. In September 2024 alone, US exports to India were USD $3.4 billion. Indian exports to the US were double that at USD $7 billion. This puts India on the winning side of Trump’s international trade ledger. It also puts India on his potential tariff target list of nations.
Despite these two risks, the third way of assessing the challenges and risks of doing business in India is by observing the actions of larger corporations. Are they developing closer ties, or withdrawing in favor of other sources? Joining Apple and Samsung in deepening their sourcing relationship in India is Proctor & Gamble. The maker of the Gillette razor has moved to increase the use of cheaper Indian steel as part of its strategy to offset higher costs under the threat of tariffs.
Infrastructure is attracting significant investment as part of the government’s push to increase Indian manufacturing. This applies to roads, railways, ports, and airports. The key issue is congestion leading to capacity constraints slowing the planned growth of India’s manufacturing sector.
Why India is a Manufacturing Leader
While challenges persist, India’s potential as a source of manufactured goods is undeniable. As infrastructure and processes improve, it will become a more attractive destination for manufacturers. By staying informed of India’s evolving landscape, US businesses can capitalize on India’s growth and avoid the worst of proposed tariffs.
