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Why source from India

By on June 21, 2017 in Business Tips with 0 Comments

Why-source-from-India

 

Over the past few years, India has made a great stride towards becoming a manufacturing hub. This primarily means global organizations are increasingly looking towards India for the development of their products, whether it be R& D based or simply the manufacturing of product accessories.  Right from the drastic change in government regulations that have considerably made doing business easy to increased trade openness, India has improved on a lot of counts. It’s a widely accepted fact that to transform from being a developing nation to a developed nation, becoming a manufacturing hub is essential, since it generates employment for millions and also reduces the trade deficit. India has innumerable advantages, some of them being high number of skilled workers, comparatively low wage rates than many other countries etc. All of this makes it clear that India has everything it takes to become a manufacturing hub, all that is required is a planned and sustained focus towards it.

This clearly articulates the fact that sourcing from India has the same advantages as sourcing from countries such as China. We give you detailed reasons about why you should start sourcing from India.

 

Lower labour costs

According to a study, average wages in India are approximately 10 times lesser as compared to that in the United States or in Europe. As a result of the cyclical effect labor wages have on the cost of the end product, this ensures considerable monetary savings in the long term. The savings are sure to make any organization all the more competitive and efficient. This is also realized by all major global behemoths and is perhaps the primary reason for them to increasingly source from India.

 

Minimum wages

Source – Business insider

 

Lower commodity and utility costs

One of the major issues that every organization faces while manufacturing or sourcing goods from a particular area is the cost of raw materials. The cost of raw materials can differentiate between an organization working efficiently with consistent profits and an organization making continuous losses, standing on the verge of bankruptcy. In this aspect alone, India offers advantages that cannot be rivaled by most countries. Whether it be the cost of raw materials or whether it be utility rates such as water, electricity etc., all of them are lower in India as compared to countries like United States, England, Germany etc.

 

Highly qualified young workforce

As has been widely referenced before, India is probably one of the youngest nations on this planet. By some estimates, around 65 percent of India’s population is below the age of 30. A large part of this segment ranges from being qualified to highly skilled. This ensures out of the box thinking and the free flow of innovative ideas. Organizations looking to source products from India would have no problems in trying to get the right workforce, that will surely increase their overall productivity and efficiency multi fold. Some of India’s colleges like the Indian institute of sciences, Bangalore, Indian institute of technologies etc. are renowned amongst the world’s finest, all of this ensures consistent flow of highly skilled workforce for the future and thus all the more reasons for sourcing from India.

 

Working age population

Source – strategicforesight.com

 

Social, economical and political stability

Its indisputable that India is one of the most economically, socially and politically stable countries in the world. Incidents of social unrest are negligible here, there’s a full fledged political system consisting of the governing party and the opposition parties; both decided by the Indian people. To top it all, India also has economical stability i.e – financial laws such as taxation, licensing requirements do not keep on periodically changing here. It’s common knowledge that organizations need economical stability before investing at a particular place, this is necessary because they need to decide on policies which they will follow in the coming years. If the laws pertaining to taxation, licensing etc. keep on changing, then organizations will have to contend with constantly changing their business policies ( not a good news for any organization). Thus economic stability is paramount and this is also the reason why India is an ideal place to source from.

 

A legal system that fairly decides on trade disputes

Trade disputes are a common occurrence in all places, what is required is the need for a legal system that fairly decides on issues without any bias. In a lot of countries, there’s bias against a foreign based organization when it comes to settling matters of disputes between two entities. Unlike those countries, India has a very strong grievance redressal system that decides on the given facts rather than any inherent bias. Organizations involved in trade disputes can seek justice, with the option of filing multiple appeals against the decision also available.

 

Access to funds from global financial institutions

India is a signatory to multiple financial statuettes, ensuring almost all global financial standards and norms are followed here. This ensures financial institutions worldwide are ready to lend in India, making access to funds for organizations very easy. Any organization wishing for funds to invest in India is likely to have multiple options to choose from. Right from global multinational banks to Indian public sector banks and innumerable micro financing institutions, plenty of options are available for organizations here.

 

Incentives from the government of India

The Indian government in it’s endeavor of making India a manufacturing hub is providing innumerable sops to encourage firms to source from India. Along with this, the Indian government is also laying emphasis on building the requisite infrastructure that will encourage firms to invest in India. Most of the infrastructure being developed is through the PPP ( public private partnership model). Some of the sops and incentives that can be availed by organizations here are,

  • Investment allowance – An investment allowance at the rate of 15 percent to a manufacturing company which is investing in excess of 4.17 million U.S $ in a year
  • R & D incentives – A weighted deduction of 200 percent in income tax for expenditure that pertains to research and development
  • Export incentives – Innumerable incentives like duty drawback, duty remission schemes have been provided by the Indian government to boost exports
  • The passage of GST ( goods and services tax ) is expected to further ensure benefits for companies looking to outsource from India
  • Apart from all of the above, states across India have their own incentive structure when it comes to boosting outsourcing from their cities and towns

 

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