In recent years, a noticeable shift has taken place on the shelves of American stores, as "Made-in-India" products are gradually replacing those bearing the label "Made-in-China." This transformation reflects a changing landscape in global trade and supply chain dynamics, influenced by shifting geopolitical tensions, quality perceptions, and evolving consumer preferences.

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 disasters, severe supply constraints, Brexit, the war in Ukraine, and increasingly assertive 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 example, US imports of mechanical machinery from China shrank by 28% from 2018 through 2022 but increased by 21% from Mexico, 61% from ASEAN, and 70% from India.

According to the report, India has been a major winner in the global manufacturing arena over the past five years, with its exports to the US rising by $23 billion, or 44%, between 2018 and 2022, while China's exports to the US fell by 10% over the same period.

Indian products are also gaining favour on the American shelves which have high consumer visibility. As a result of Walmart, the largest retailer in America, importing more goods from India, more items bearing the Made-in-India label are being sold in its US locations.

Walmart seeks to source products in a variety of areas where India excels, such as food, consumables, health and wellness, general goods, clothing, footwear, home textiles, and toys. According to Andrea Albright, executive vice president of sourcing at Walmart, the company is on track to meet its goal of sourcing $10 billion worth of goods from India annually by 2027. Based on the company's yearly exports of over $3 billion, India is already one of the world's leading retailers' top sourcing destinations.

Walmart's Global Sourcing office in Bengaluru, which opened its doors in 2002, offers clothes, homeware, jewellery, hardlines, and other popular products created in India to customers in 14 markets, including the US, Canada, Mexico, Central America, and the United Kingdom.

When it comes to direct manufacturing expenses, India has a significant advantage as an export hub. As per BCG's calculations, the average landed cost of Indian-made goods imported into the US, including factory wages adjusted for productivity, logistics, tariffs, and energy, is 15% lower than if the goods are made in the US. By contrast, the average US landed cost from China is only 4% lower than US costs and 21% higher for goods subject to US tariffs related to the trade war.

In most areas, wage inflation has exceeded productivity increases; nonetheless, India has an advantage in this regard. In the US, labour expenses increased by 21% and by 24% in 2022 and 2023, respectively, after accounting for productivity. Similarly, the BCG report finds that productivity-adjusted labour costs increased by 18% in India and by 22% in Mexico. 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.

Another study on sourcing also finds a growing preference for sourcing from India among American businesses, 'QIMA Sourcing Survey 2023: Disruption, Diversification, Digitization' by QIMA, a quality control & supply chain audits company, says that after rising through the ranks of preferred procurement partners in the past few years, India maintains its high appeal as a supplier market.

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 buying regions for the West. In comparison, Southeast Asia's share fell to 33% in the first quarter of 2023.

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 buying regions for the West. In comparison, Southeast Asia's share fell to 33% in the first quarter of 2023.

In terms of 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 and EU headquarters ranked both countries among the top three sourcing geographies.

India’s appeal as a sourcing partner goes far beyond textiles, says the survey. Viewed by industry, India as a supplier market was the most popular among businesses working in the accessories, jewellery and eyewear sectors (where 45% named it among their top three), followed by promotional products (44%). The Textile and Apparel sector, traditionally viewed as India’s “bread and butter”, came in third at 40%.

India was the preferred location for many industries, including printing and packaging, home and garden goods, accessories, and promotional products, when looking at companies that dramatically altered their purchasing geography. In the previous year, a considerable increase in sourcing from India was recorded by half to one-third of the respondents in these sectors.

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 reliance on China. Regarding procurement volumes, 61% and 58% of respondents headquartered in the US and the EU, respectively, stated that they purchased fewer goods from China in Q1 2023 than they did a year earlier.

Yet, China still remains a key piece in global supply chains even as they shift to other countries.

The popularity of Made-in-China products among Western consumers continues to decline, hitting a five-year low for US-based respondents. 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.

The shift of Western supply chains away from China is likely a factor in this, as many of China’s regional competitors rely on Chinese raw materials to fill the orders being redirected to them.