‘India emerging as export powerhouse for US firms’

New Delhi: India is among the emerging future export powerhouses for US companies as the world’s biggest economy looks to significantly cut imports from China, according to a report by Boston Consulting Group.

India, Mexico, and Southeast Asia are quickly emerging as export manufacturing powerhouses. All three offer competitive cost structures, deep pools of labour, and growing scale and capabilities across diverse industries.

India has the additional benefit of possessing a potentially enormous domestic market, says the report.

India is rapidly developing as a producer of engines and turbines and has the additional benefit of possessing a potentially enormous domestic market, says BCG.

The report highlights moderately high assembly costs and labour constraints as a constant worry in the US “One option, which combines a quick lead time with improved resilience, would be to shift final assembly and systems to Mexico and components to Germany. A second option, which focuses on lowering costs, would be to shift assembly and procurement to India.

The time to market would be slower here than in the Mexico-Germany option or in the status quo, but the potential cost savings range from 25 per cent to 40 per cent,” observes the report.

“India is very cost competitive, however, and it has recently negotiated trade deals with Australia and the United Arab Emirates. Although India is just starting to emerge as a major exporter, it has a broad manufacturing base that supplies everything from electric vehicles and heavy machinery to chemicals and appliances for its domestic market,” the report says.

According to the study, India enjoys a strong advantage in direct manufacturing costs as an export platform.

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 per cent lower than if the goods are made

in the US.

In comparison, landed cost advantage for Chinese imports is only 4 per cent.

Consequently, India has emerged as one of the winners in global manufacturing over the past five years, with its exports to the US surging by $23 billion, a 44 per cent increase from 2018 to 2022. During the same time period, US imports goods imports from China declined by 10 per cent .

US imports of mechanical machinery from China shrank by 28 per cent from 2018 through 2022, but increased by 21 per cent from Mexico, 61 per cent from ASEAN, and 70 per cent from India.