Virendra Pandit
New Delhi: Only until 2020, the West led by America heavily depended on China for importing cheaper goods and their retail stores were full of “Made in China” stuff.
No longer. The COVID-19 pandemic’s impact worldwide forced many countries to look for alternative supply chains to replace Chinese goods. That’s how their China+more strategy evolved to reduce their dependence on Beijing and they diversified sourcing of material.
Now, according to reports, Walmart, the world’s largest retailer, has drastically cut down shipments from China and found India an attractive option.
Walmart is importing more goods to the United States from India and reducing its reliance upon China as it looks to cut costs and diversify its supply chain, the media reported on Thursday.
Between January and August 2023, for example, Walmart shipped 25 percent of its US imports from India, compared with just 2 percent in 2018.
Only 60 percent of its shipments came from China during the same period, down from 80 percent in 2018, although China remains Walmart’s biggest source for importing goods.
The trade shift indicates the rising cost of importing from China and escalating political tensions between Washington and Beijing, which are encouraging large US companies to import more from countries including India, Thailand, and Vietnam.
“We want the best prices,” Andrea Albright, Walmart’s Executive Vice-President of Sourcing, was quoted as saying. India has emerged as a key component of Walmart’s efforts to build that manufacturing capacity.
Walmart has been accelerating growth in India since 2018 when it bought a 77 percent stake in Indian e-commerce firm Flipkart. Two years later, it committed to importing USD10 billion of goods from India each year by 2027. Currently, it imports USD 3 billion worth of goods from India per annum.
Among the goods Walmart imports from India are toys, electronics, bicycles, pharmaceuticals, packaged food, dry grains, and pasta.
India, whose stock market has zoomed to record highs this year, is viewed as the country best equipped to outperform China in low-cost, large-scale manufacturing. Its rapidly growing workforce and technological advancement were a big draw for Walmart, which started its sourcing operations in Bangalore in 2002.
Now, the company employs more than 100,000 people, including temporary workers, spread across several offices under its Walmart Global Tech India unit, Flipkart Group, PhonePe, and sourcing operations.
Walmart CEO Doug McMillon met the Indian Prime Minister in May 2023, a meeting that Narendra Modi termed “a fruitful one.”
“Happy to see India emerge as an attractive destination for investment,” PM Modi wrote on X, formerly known as Twitter, on May 14. McMillon said Walmart would “continue to support the country’s manufacturing growth and create opportunity.”
Walmart’s rival Amazon said this month it is targeting merchandise exports worth USD 20 billion from India by 2025.
The rising cost of shipping goods from China has also contributed to the switch to India, supply chain experts say.
Sourcing from mainland China has become less competitive because of rising labor costs versus other manufacturing centers. China’s minimum wage changes from province to province and sometimes even from city to city, with a range between 1,420 yuan per month and 2,690 yuan per month (USD 198.52 – USD 376.08).
In contrast, average wages for unskilled and semi-skilled workers in India range from about Rs. 9,000 to Rs. 15,000 a month (USD 108.04 – USD 180.06).
The COVID-19 pandemic exposed weaknesses in global supply chains, showing US importers to be over-reliant on a small number of markets.
Pakistan and Bangladesh have also benefited from Walmart’s strategy, expanding as suppliers of home and apparel products, Albright said.
The Reserve Bank of India forecasts that the country’s economy will expand by 6.5 percent this fiscal year. China is expected to grow around 5 percent in 2023.