Sourcing from India: Here's How to Do It
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Due to political tensions and rising labour costs in China, more and more companies are shifting to India as a sourcing location. After all, India boasts access to a wide array of raw materials, high-quality producers and the costs are lower than in China. But what is the best way to tackle sourcing from India?
India has become one of the world’s most important production centres in the past decade. The Indian government has invested heavily in the development of the industrial sector, with the result that the Indian automotive industry, aerospace sector, technology and pharmaceutical sector (vaccines) now manufacture for the entire world. Indian exports have grown in recent years from 226 billion dollars in 2010 to over 800 billion dollars in 2024. This growth is based on a few pillars:
- Availability of raw materials
India is one of the largest producers of raw materials worldwide. A wide range is available, such as steel, metal, wood, bamboo, marble, cotton, silk and jute. - Affordable labour costs
One of India’s strengths is how low its costs are, wages in India are much lower than in competing countries. - Highly educated staff
Indian companies invest heavily in training their employees to ensure that they can meet the quality requirements of international companies. - Stable government and supportive policies
India is relatively stable economically and politically. In addition, the Indian government encourages the development of the manufacturing sector with favourable regulations for exports from India and for foreign companies that want to produce in India. - Advanced infrastructure and technology
India’s development in the field of technology, aerospace and the automotive industry benefits the other sectors in the country. The new advanced technologies that are developed in these industries quickly find their way into the other parts of the manufacturing sector.
Convinced? Get started with sourcing from India
Step 1: Start with good market research
Many companies see India as one country, but it is better to approach India as a continent such as Europe. The different industries are often located in a specific cluster in a state where the best (raw) materials, infrastructure and staff can be found for this specific sector. For example, the automotive industry has four large clusters in Gujarat and around the cities of Chennai, Pune and New Delhi.
Do not get fixated on these clusters, but look at all options across India. Sometimes, options outside of these clusters are more advantageous, for example because wages are lower outside of the cities. Once you have determined which locations meet your requirements, you can create a list of potential suppliers and manufacturers in these regions.
Step 2: Evaluate potential manufacturers
To guarantee that you get the desired specifications and quality, your potential supplier must have the right expertise and experience in your sector. In addition, you want to be sure that the supplier uses quality manufacturing systems, what its annual output is and whether it has sufficient experience in exporting the product.
If you have little experience doing business in India, it is recommended to include a local consultant in this step. They know exactly which legal requirements products must meet and which permits are required to produce and ship your products. Our experts have the know-how to guide your organisation through this process smoothly.
Step 3: Schedule a visit or call
After evaluating them, you can select the three to five best options of your list of potential candidates. With them, you will delve deeper into your requirements and the possibilities that the producer can offer you. In this step, it is recommended to plan a tour through the facility, or, if a visit is not possible, a video call to get a better idea of the way the supplier works and the quality of the products that are manufactured there. If you are satisfied, you can request a quote, so that the price and conditions can be negotiated.
Please note that a factory in India usually looks different from what you are used to. This does not mean that the products that are manufactured are of lower quality. Often the factories in India are simpler, there is no air conditioning for example, but the machines are of the same caliber as in Europe.
Step 4: Samples and quality control
As soon as you have agreed on the price and conditions with the manufacturer, samples can be made. It is important that you have people available in India who can check the manufacturing process and the quality, before you do another quality check at your headquarters. If everything is to your liking, the first batch can be manufactured. Even though you have already screened your new supplier in various ways, it is still recommended to have quality checks carried out annually or even more frequently.
Sourcing in India is a great way to get to know the market
India is one of the largest and fastest growing consumer markets in the world. Even though you may ‘only’ start sourcing products or raw materials in India, your presence and local contacts will give you the opportunity to explore the market further. India is expected to have the largest population in the world in 20 years and you will not be able to ignore this important market in the long term. Start your sourcing adventure in India with an open mind and a long-term strategy, because India has an incredible amount to offer international companies.
