The move comes against the backdrop of a growing anti-China sentiment, and these brands fear the backlash could impact their overall sales in India. For large players — including Puma, Adidas and Nike — imports from China account for 10-30% of the products they sell in India. For most other global players, who have a smaller presence here, the share is much higher. “Consumers are coming to our stores and demanding to see where the products are made,” said the MD of a multinational sportswear brand. “I just finished a call with my team to move whatever production we do in China for the products that we sell here to India and other countries such as Vietnam and Indonesia.”
The government is mandating the disclosure of ‘country of origin’ even on e-commerce marketplaces, with some such as Myntra adding it for new product additions. While the final production or assembly may shift to other countries, there will be a significant part of the inputs from China.
The sportswear companies, however, said that manufacturing in India will push up costs. “Initially, we will absorb the extra cost as we feel the anti-China sentiment is here to stay for some time,” said the CEO of a large global footwear company. Senior industry executives pointed out that domestic manufacturers have not yet developed scale, as a result of which brands will find it dearer in the beginning to move sourcing and production of finished goods to India.
“It will cost them around 10% more to make in India, but so was the case when they first shifted production to China,” said the MD of a home-grown footwear manufacturing company that makes shoes for most global sportswear companies. “China has scale and makes for the world, while we only make for domestic consumption. We, too, will achieve similar scale over time.” He said conversations to move part of the sourcing and production from China to India are under way and, at the current pace, it will take these brands around a year or two to achieve the same.
“Prior to GST, footwear imports from China were expensive as the countervailing duty (CVD) was linked to the maximum retail price (MRP),” said a senior executive at a footwear retail chain. “But CVD got absorbed in GST and, despite the government taking efforts to ramp up duty on goods coming in from China, a large part of the hundreds of containers that arrive on Indian shores every day are under-invoiced. This is counterproductive for domestic manufacturers.”
Other global retailers and brands, too, are ready to hedge sourcing to different markets other than China for the goods that they sell in India. “China contributes a negligible proportion of our imports,” said US sportswear brand Under Armour MD Tushar Goculdas. “Under Armour’s merchandise suppliers are based around the world. We do not foresee any significant impact on our India business as a result of any duties or curbs that the government may introduce.”