Why More Companies Are Sourcing from India in 2025

As global supply chains continue to adapt to economic shifts, geopolitical changes, and evolving consumer demands, India has emerged as a strategic sourcing destination for companies across the globe. In 2025, the trend of sourcing from India has not only gained traction but is also seen as a long-term pivot for businesses aiming to diversify their manufacturing base.

This comprehensive guide explores why sourcing from India has become increasingly attractive in 2025, supported by up-to-date export data, cost factors, trade policies, and manufacturing developments.

1. India’s Resilience and Growth in Global Trade

India’s merchandise exports reached approximately USD 437 billion in FY2024, marking a resilient performance despite global economic uncertainties. While sectors like electronics and engineering goods led the export surge, traditional strongholds such as textiles, pharmaceuticals, and handicrafts continued to perform steadily.

India has expanded its reach beyond traditional markets. The India-UAE Comprehensive Economic Partnership Agreement (CEPA) and India-Australia Economic Cooperation and Trade Agreement (ECTA) have reduced or eliminated tariffs on several goods, improving export competitiveness. These agreements, along with ongoing talks with the EU and UK, are part of a broader strategy to strengthen India’s global trade profile.

2. Tariff-Free Advantage for U.S. Importers

Unlike products imported from China, which are still subject to Section 301 tariffs imposed by the United States, most Indian exports to the U.S. remain tariff-free or are subject to significantly lower duties, with many products still enjoying the lowest import rate of just 10% as of May 2025. Additionally, expectations are high for India to secure a favorable trade deal with the Trump administration, which could further strengthen its export position and provide even greater incentives for U.S. importers. This gives companies sourcing from India a clear pricing edge when selling into Western markets.

For businesses in consumer goods, apparel, furniture, and eco-friendly products, this difference can translate into substantial margin improvements.

3. Competitive Labor and Production Costs

India continues to offer one of the lowest labor costs among major manufacturing economies, with an average manufacturing wage significantly lower than China, Vietnam, and Mexico. This cost advantage extends across multiple industries including textiles, leather, machinery, and electronics.

Additionally, India’s large domestic base for raw materials (cotton, jute, iron, aluminum, etc.) and growing adoption of automation have helped drive down production costs without compromising on quality.

4. Low Minimum Order Quantities (MOQs)

In contrast to China, where suppliers increasingly prefer high-volume orders, Indian manufacturers are often more flexible and willing to accommodate smaller MOQs. This is particularly beneficial for:

• Startups and small brands launching new SKUs
• DTC (direct-to-consumer) e-commerce businesses
• Product testing in new markets

This flexibility allows buyers to de-risk inventory investment and be more agile in product development.

5. Improved Infrastructure and Policy Support

Over the past five years, India has made major strides in logistics and digital infrastructure. Key developments include:

• Expansion of Dedicated Freight Corridors (DFCs) for faster cargo transport
• Increased port capacity and container handling
• National Logistics Policy (2022), streamlining multimodal transport and warehousing
• Integration of e-invoicing and GST compliance for smoother B2B operations

These improvements have significantly reduced lead times and logistics bottlenecks

6. Reliable IP Protection and Legal Framework

India’s intellectual property (IP) regime has matured, offering solid protections under the Patents Act, Trade Marks Act, and Copyright Act. Enforcement mechanisms have also become more responsive, especially in special economic zones (SEZs) and export-oriented units (EOUs).

For buyers creating proprietary designs, packaging, or formulas, this reduces the risk of IP theft or duplication, a concern that has grown in other manufacturing destinations.

7. Skilled Workforce and Cultural Compatibility

India produces over 1.5 million engineering graduates annually, providing a deep talent pool for sectors such as automotive, electronics, tooling, and precision components. Additionally, English proficiency is high, especially among business professionals and engineers, simplifying technical communication and negotiations.

Cultural compatibility with Western business practices and a time zone that overlaps well with both Europe and the U.S. support smoother supplier interactions and faster iteration cycles.

8. Sustainability and Ethical Manufacturing

India is rapidly evolving into a hub for eco-friendly products and sustainable manufacturing, supported by both government incentives and market demand. From biodegradable materials to solar-powered production facilities, more manufacturers are aligning with ESG standards.

Companies aiming to build responsible supply chains increasingly choose India for its transparency and ethical manufacturing practices, especially in categories like home goods, fashion, and accessories.

9. Regional Manufacturing Hubs to Match Product Needs

India’s diversity is also reflected in its industrial geography:

• North India: Textiles, handicrafts, and leather goods
• West India: Chemicals, engineering goods, plastics
• South India: Electronics, automotive parts, aerospace
• East India: Tea, mining, and emerging electronics clusters

Buyers can strategically select regions based on product category and sourcing priorities such as cost, quality, or logistics access.

10. On-the-Ground Support from Experts

While India offers vast opportunities, navigating the market can be complex without local expertise. That’s why many companies work with sourcing partners that offer boots-on-the-ground support for supplier verification, quality control, and logistics.

At I2W we bring nearly 20 years of experience in global sourcing, with an established presence across India and Asia. Our team helps you identify the right suppliers, ensure compliance, and deliver quality products on time.

Ready to Diversify Your Supply Chain?

India’s rise as a global sourcing powerhouse is no longer just a trend – it’s a strategic move for companies focused on resilience, cost efficiency, and long-term growth. Whether you’re shifting away from China or expanding your supplier base, India offers unmatched advantages in 2025.

Get in touch today to explore how we can help you start or scale your sourcing operations from India with confidence.