According to a poll, supply chains find China to be “risky,” whereas American businesses prefer to locate in India.

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In a significant shift, U.S. companies are reevaluating their supply chain strategies, considering India as a preferable alternative to China.

A survey conducted by UK market research firm OnePoll, commissioned by India Index, indicates that 61% of 500 U.S. executives surveyed would choose India over China for manufacturing materials. Furthermore, 56% expressed a preference for India for their supply chain needs in the next five years.

Table of Contents

Perceived Risks in the Chinese Supply Chain

The survey sheds light on U.S. executives’ concerns about the Chinese supply chain, with 59% finding it “somewhat risky” or “very risky” to source materials from China.

In contrast, only 39% expressed similar concerns about sourcing from India. This shift in perception highlights the evolving dynamics in the global business landscape.

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India’s Appeal and Long-term Investment Perspective

India is increasingly viewed by U.S. companies as a long-term investment strategy rather than a short-term pivot to navigate tariffs. Samir Kapadia, CEO of India Index, notes the positive influence of warming ties between the U.S. and India, driven by the “friendshoring” policy of President Joe Biden, encouraging companies to diversify away from China.

Biden-Modi Initiatives and Collaborations

The strengthening relationship between the U.S. and India, as evidenced by President Biden and Prime Minister Modi’s collaborations, has played a pivotal role.

Their joint efforts in defense, technology, and supply chain diversification have positioned India as an attractive alternative. The continuous dialogues and agreements between the two nations contrast with the strained U.S.-China relations.

Caution Amid Optimism: Risks in India’s Supply Chain Capabilities

While optimism surrounds India’s potential, U.S. firms remain cautious about certain aspects. The survey highlights concerns such as quality assurance (55%), delivery risk (48%), and intellectual property (IP) theft (48%) when considering India as a manufacturing hub.

Recent incidents, like the temporary shutdown of an Apple supplier’s factory due to a fire, contribute to these reservations.

Acknowledging China’s Enduring Role in Supply Chains

Despite the diversification trend, industry experts agree that completely shifting supply chains away from China is challenging. Both Amitendu Palit, a senior research fellow, and Samir Kapadia emphasize that China will remain a cornerstone in the U.S. supply chain strategy. The enduring robust investments in China attest to its continued significance.

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Vietnam as a Contender, but India’s Unique Edge

Vietnam has been a common consideration in the “China plus one” strategy, experiencing a surge in foreign direct investments. However, India, with its substantial customer base, holds a unique appeal that Vietnam cannot replicate.

While both countries offer cost savings, India’s advantage lies in its extensive market access.

India’s emergence as a favored destination for U.S. firms reflects a broader trend of reevaluating global supply chain dynamics. As companies seek alternatives to navigate risks and capitalize on market opportunities, India’s strategic positioning and collaborative initiatives with the U.S. make it an increasingly attractive choice.

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