What You Need to Know about Manufacturing in India

Country Overview

For businesses looking to join eCommerce with a competitive advantage, one of the best things to do is find a manufacturing sector that isn’t saturated with international businesses. In India, the manufacturing sector has evolved from its earlier stages of industrialization to its current phase of global competitiveness, making it a great location for newer, smaller businesses to manufacture.

Before it becomes overrun by foreign brands, now is the time to connect with manufacturers, gain access to the advancing production capabilities, and start creating relationships with the suppliers for better rates down the road.

The manufacturing sector in India is progressing largely due its location nearby the export giant, China. China remains the largest exporter of goods to India, sending textile materials, plastics and rubber precious metals to suppliers. The trade reliance on China for raw materials continues to impact the growth of India’s textile industry, but the nation is also becoming less dependent as production of raw materials starts to rise. For example, cotton production is forecasted to increase by 9.3 percent YoY.

The Indian textile industry is only second in size to China. More than 50 percent of India’s textile exports are cotton based, but suppliers also manufacture synthetic fabrics, wool, and silk. The textile sector is one of the oldest industries in India, so Indian suppliers differentiate by implementing antiquated, quality-focused techniques in the production of goods like knitted custom clothing garments.

Over 45 million people work in the Indian textile industry, making it one of the largest sources of employment generation in the country. With so many workers in the industry, suppliers will likely expand and create more opportunities for foreign brands to manufacture. There’s untapped potential in the manufacturing sector for smaller eCommerce retailers.

Specializations

The top 3 manufacturing industries in India most relevant to eCommerce sellers are leather, electronics, and the largest, textiles.

India’s factory wages are the lowest among Mexico, Philippines, Vietnam, Indonesia, and China. These kinds of wages can lead to 10-15 percent increase in savings for your eCommerce business, which in turn increases your profit margin.

High import duties are placed on steel and aluminum from India, but if you’re in the consumer goods sector you don’t have to worry about high import duties. However, once you start shipping large orders from India into the US, your shipments will increase in value and become subject to a higher duty rate. Customs duties are the import taxes charged by the government on all products imported for resale. You can use a FBAforward calculator to multiply the total amount on your commercial invoice by the duty rate for your product. The end number is the amount of customs duty you will pay.

Shipping from India is less costly compared to shipping from other countries in Asia. However, the total shipping cost includes the base rate as well as a CGST and SGST, which are both part of a Goods and Service Tax. These taxes are unique to India’s exports. The major share of revenue under CGST is meant for the central government and SGST tax revenue is meant for the state government.

Production Capabilities

On the whole, what makes India a competitive manufacturing location is the low cost of manpower and strong technical and engineering capabilities contributing to higher quality production runs.

India also poses a language advantage since English is an official language of India. It may be easier to communicate with Indian suppliers compared to suppliers in China or Vietnam, which will simplify negotiations.

Most Indian suppliers require a minimum order quantity (MOQ) that ranges between 500-1000 pcs. However, many suppliers are willing to negotiate a lower MOQ in order to work with you. That being said, if you’re looking to manufacture in the textile industry, you may run into factories that are working with big buyers like adidas or Ralph Lauren. In this case, it will be harder to negotiate since your small business won’t add as much value to their factory.

Competing with big brands is something to expect no matter where you manufacture. In India, many of the factories work like conglomerates, where one big company owns several different factories for spinning, garmenting, knitting, etc. While there may not be enough capacity at the main factory to add your production run, it’s possible to manufacture out of one of the subsidiary factories and still remain under the qualified management and quality control of the overarching factory.

When it comes to the textile industry, India boasts loads of advantages: low cost of labor, centuries of experience, countless specializations, domestic production of raw materials, and reliable suppliers with large production capacities.

It’s important for smaller businesses to also be made aware of the two different segments in the textile industry: the unorganized sector and organized sector.

The unorganized sector consists of handloom and handicrafts, operated on a small scale and through traditional tools and methods. This sector is best for eCommerce retailers looking to manufacture intricate, artisan goods from hand-spun and hand-woven production techniques.

The organized sector consists of spinning, apparel, and garments where suppliers apply modern machinery and techniques for mass production. This segment has the capacity to produce a wide variety of products suitable to different market segments. While suppliers in this segment are focused on larger production runs, the finished goods still reflect the ancient culture and traditions of the country in terms of textiles.

Working Legally

There’s always risk inherent in sourcing from a foreign country. You can search through sites like Global Sources and find countless suppliers while never knowing for certain which ones are reliable. It can be like looking for a needle in a haystack.

Some of the best suppliers in India won’t even market their services on these kinds of sourcing websites because they don’t want to be associated with fraudulence.

Sourcify’s sourcing concept eliminates the risk of connecting with illegitimate suppliers because it only sends quotes to buyers from pre vetted factories. As the buyer, you can submit your product specifications onto Sourcify’s software platform and receive fast quotes from several different suppliers. Instead of looking for the needle in the haystack, you get the ball in your court. You can pick the quote that meets your budget and product demands.