US brands see a future in India


Workers at Sunlord, which has helped Melissa & Doug diversify beyond China, in Greater Noida, India. — ©2024 The New York Times Company

TOY brand Melissa & Doug had a situation. For decades, it had leaned heavily on factories in China to make its products – wooden puzzles, stuffed animals, play mats. Suddenly, that course looked risky.

It was February 2021, and the world was besieged by a pandemic. Lockdowns disrupted Chinese factories. Trade hostilities between Washington and Beijing were undermining the benefits of depending on plants in China.

President Donald Trump had slapped tariffs on a broad variety of Chinese imports, increasing their prices, and President Joe Biden extended that policy.

Melissa & Doug was eager to shift some production to other countries. Which explained the arrival of its chief supply chain officer at a factory in Greater Noida, a fast-growing city about 50km southeast of the Indian capital, New Delhi.

The factory was owned by a family business called Sunlord. The Melissa & Doug executive was surprised to see that the plant could make high-quality wooden toys, at prices comparable to those in China.

Late last year, Sunlord completed its first batch of products for Melissa & Doug, a modest order of about 10,000 items, and now is cranking out 25,000 per month.

“What they want is 20 to 30% of their production being done in India,” said Sunlord director Amitabh Kharbanda.

“India has a lot of positive vibes right now.”

In a global marketplace reshaped by volatile forces – not least the animosity between the United States and China – India shows signs of emerging as a potentially significant place to manufacture products.

Multinational brands that have for decades relied on Chinese factories are expanding to India as they seek to limit the vulnerabilities of concentrating production in any single country.

The shift to India could make the global supply chain more resilient, reducing its susceptibility to shocks.

It could also boost fortunes in India, which missed out on the manufacturing boom that lifted hundreds of millions of people from poverty in East Asia – first in Japan, South Korea and Taiwan, then in China and, more recently, in Thailand, Indonesia and Vietnam.

Though roughly one billion people are of working age in India, the country has only 430 million jobs, according to the Centre for Monitoring Indian Economy, an independent research institution in Mumbai. And most of those who are counted as employed endure a precarious existence as day labourers and farmhands.

Growing exports could be a source of new jobs – especially for women, who have been largely shut out of the formal working ranks.

India’s manufacturing growth remains nascent and tenuous. In its nearly 80 years as an independent nation, the country has typically been ruled by stultifying bureaucracy, ardour for self-sufficiency and disdain for international trade.

Prime Minister Narendra Modi has altered that perception, winning plaudits from business leaders for streamlining regulations and championing industry.

But this has produced more speeches than paycheques: manufacturing makes up only 13% of India’s economy, a lower share than a decade ago, when Modi took office.

His authoritarian bent and demonisation of India’s Muslim minority stoke doubts about his leadership, risking social strife that could undermine the country’s appeal.

And Modi’s disappointing performance in recent national elections yielded greater uncertainty. After losing its Parliament majority, his Hindu nationalist party was forced to forge a coalition to maintain power – a wild card for future governance.

Over the past 10 years, even as India has aggressively built out ports and highways, its basic infrastructure has remained patchy, challenging the movement of raw materials and finished goods.

Even those involved in Indian manufacturing wonder about the country’s ability to handle a surge of growth.

American brands “see the strength which India brings to the table”, said Kailesh Shah, managing director of All Time Plastics, which operates a kitchenware factory north of Mumbai.

But American companies rely so heavily on Chinese industry that even a modest shift could have big consequences.

Not for the first time, the world echoes with pronouncements that India is finally on the verge of seizing its destiny as a major manufacturing power. Such rhetoric previously failed to translate into reality.

But this time, India’s mission is helped by geopolitical realities.

Last year, in a survey of American companies with operations in China by the American Chamber of Commerce in Shanghai, 40% said they were shifting planned investments to other countries, or intending to do so, because of tensions between Washington and Beijing.

Most of the companies were looking to South-East Asia.

Mexico is especially well positioned to capture additional orders, given its proximity to and trade pact with the United States.

But those countries are puny compared with China, limiting how much additional business they can absorb. They also remain significantly dependent on Chinese industry for key components and raw materials.

India presents a unique proposition as a country of 1.4 billion people, making it even larger than China. With abundant raw materials, from cotton to iron ore to chemicals, it holds the potential to develop its own supply chain.

If any country might someday replicate China’s role in the manufacturing realm, India may possess the best shot.

These attributes explain why Walmart, the world’s largest retailer, is aggressively expanding its pursuit of suppliers in India, with the goal of increasing its purchases to US$10bil a year by 2027, from about US$3bil in 2020. Apple is entrusting Indian factories with growing slices of the enterprise for making iPhones.

“I do not foresee future investments of American companies going into China,” said Amitabh Kant, a senior government official who is close to Modi.

“All of them are shifting their manufacturing to India. It’s a massive opportunity to create jobs.”

European companies are similarly inclined.

“There’s been way too much dependence on consumer goods from China,” said Uli Scherraus, managing director of TecPoint, a German retailer of steak knives, cutting boards and grilling accessories.

“What everyone is learning the hard way is that it’s not good to rely on one supplier for anything.”

For India, the hope is that an influx of multinational brands will spread the bounty of manufacturing beyond the south of the country, where auto plants and technology businesses have proliferated.

At the centre of that vision is India’s most populous state, Uttar Pradesh, which has long been synonymous with rural poverty.

Suddenly, representatives from retailers in North America and Europe are descending to explore possible factory sites.

In western Uttar Pradesh, the city of Moradabad – home to 1.3 million people – has long sustained itself by forging metal goods. It is positioned on the Ramganga River, whose banks are made of sand that has proved especially useful for the art of casting.

On a recent afternoon, inside a factory run by a family-owned business called Shree Krishna, hundreds of men wielded machinery to transform coils of steel and piles of lumber into products destined for kitchens from Barcelona to Boston – cutting boards, cocktail shakers, ladles.

It was 41°C, and the windows were propped open, allowing a modest breeze to permeate as ceiling fans whirred. Air-conditioning was not on the menu.

“We are used to it,” said Samish Jain, who oversees Shree Krishna’s marketing.

Jain, 35, paused at a table where men applied swathes of cloth to wipe dust from wooden cake stands for Walmart Superstores in the United States. The American brand previously purchased small quantities of these items from his factory, he said.

“This is a big order,” he added. “Two million dollars plus.”

Jain’s father and his two brothers began making stainless steel jugs and mugs for the domestic market. By the mid-1990s, they were exporting, sending mixing bowls and colanders to the United States.

These days, the four sons of the founders, Jain among them, play active roles in the company.

Educated at a graduate business programme in Florence, Italy, he favours fashionable eyewear and designer shirts.

Where his father prefers to speak Hindi, Jain is fully comfortable in English and savvy in traveling the globe.

Shree Krishna has been making products for Walmart for more than two decades.

But recent months have brought a surge of interest from the retailer, whose buyers recently visited the plant from company offices in Bangalore and Hong Kong.

The Jain family envisions multiplying its business by 10 or even 20 times over the next five years.

Many worried that the relationship between the United States and China would yield further business-impeding acrimony – especially if Trump regained the White House in November’s election.

“If Trump gets in again, he’s going to finish off what he started,” said Dov Shiffrin, a representative for Yukon Glory, a barbecue accessories company that manufactures in China.

“India is the wave of the future,” he said. “They’re going to be the next China.” — ©2024 The New York Times Company


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