Global trade patterns have been shifting significantly over the last five years as U.S. companies diversify their supply chains. Steep tariffs, the pandemic, increasing climate disasters, geopolitical tensions, and greater consumer preference for sustainable and ethical practices have made it clear that supply chains must evolve to mitigate higher costs and disruptions. For many companies, this means moving away from reliance on China.

A recent survey by OnePoll, conducted for  India Index, found that U.S. C-Suite executives are over three times more likely to choose India over China for their future supply chain needs. Of the 500 U.S. executives surveyed, 61% said they would consider sourcing from India if India had the same materials as China.

So why India? Samir N. Kapadia, Founder and CEO of India Index, provided six compelling reasons companies may choose India over China for future supply chain needs. 

Here are some excerpts from his article with the Supply Chain Management Review.

1. Rising Tariffs and Costs

Tariffs on imports from China, imposed in 2018, have significantly increased the need for American businesses to look elsewhere. The pandemic further emphasized the necessity to diversify sourcing either locally or to another country.

“In many respects, China is now in a bit of disfavor,” said Kapadia, adding that concerns over forced labor, intellectual property theft, and increasing shareholder-driven campaigns are also motivating companies to diversify out of China.

2. Concerns Over Intellectual Property Theft

Intellectual property (IP) theft is a major concern for U.S. companies trading with China, particularly the fear of stolen technology. The Five Eyes intelligence-sharing network, consisting of officials from the United States, Britain, Canada, Australia, and New Zealand, recently accused China of stealing secrets across various sectors, including innovations from quantum technology and robotics to biotechnology and artificial intelligence.

OnePoll’s survey found that 54% of respondents felt China posed a high risk regarding intellectual property, while only 29% thought the same of India.

3. Fear of Reputational Risk

Today’s conscious consumers hold companies accountable for their business practices, including their supply chains.

“The reputation of a company can be very much hinged upon the way they conduct supply chain,” said Kapadia. “The Fortune 500, even beyond, are now seeing that they need to operate within countries where they won’t get slammed in some op-ed, or they won’t get called up to some congressional hearing given their practices.”

4. Economic Growth in India

India, the fastest-growing economy in the world with a GDP growth rate of 7.2%, is becoming an appealing alternative for global trade. This economic growth brings greater investment in infrastructure, helping India fill gaps that once prevented it from competing on the world stage.

“The whole purpose of India’s infrastructure growth is to provide for these companies to now come in and feel they have that support system,” said Kapadia. “We think that’s very much going to be the trend over the next five years, and this sort of gap that we’ve seen in India will slowly kind of come to a close.”

India is becoming an increasingly attractive destination for U.S. companies looking to diversify their supply chains away from China. Factors such as rising tariffs and costs, concerns over intellectual property theft, reputational risk, economic growth, political alignment, and large corporate commitments make India a favored alternative. As these trends continue, India’s role in global trade is poised to grow significantly.

Here is the complete feature - Samir Kapadia speaks with SCMR on the India Advantage.