Amid a challenging global economy, India has emerged as a significant economic and geopolitical power in recent years. The Indian economy grew at 7% a year on average since opening its markets to international competition in 1991.
India: Next hype or genuine opportunity?
What industrial companies need to know before they sell, make or buy in India
For manufacturers, the global footprint they once relied on may no longer make sense. Rising factor costs, geopolitical risk, slowing demand growth and tight labor markets are forcing them to rethink where they sell, make and buy. India is moving up the strategic agenda. Its expanding middle class, growing talent pool, competitive cost base and evolving supplier ecosystem make a strong case on paper. But is India truly the next major opportunity, or just another hype?
At a glance: India’s workforce is expected to remain a significant long-term growth asset, with more than 1.1 billion working-age individuals projected by 2050. With nearly 60% of the workforce under the age of 35, India is well positioned to sustain productivity and adapt to emerging technologies.
"India is not one market – it is 28 different markets. The companies that succeed are the ones who resist the temptation to launch nationally and instead build presence state by state."
India’s threefold opportunity
The short answer is that India offers genuine potential. Its appeal lies in a combination of market growth and low costs as well as a rapidly growing talent pool and an evolving supplier ecosystem. Together, these create opportunities across sales, value creation and selective China+1 sourcing.
Yet the opportunities come with complexity. Regional fragmentation, infrastructure gaps and varying supplier maturity require companies to carefully assess where India can create the greatest strategic value: which markets, which locations and which sourcing categories.
India as a sales market
India's expanding middle class and rising purchasing power are creating significant long-term sales potential. As the chart below shows, the country’s middle class already accounts for around one third of its population and is projected to exceed one billion people by 2047, while disposable incomes are growing at more than 10% a year.
But India is a diverse market: customer preferences, purchasing power, regulations and distribution channels vary considerably across regions, and opportunities are increasingly concentrated in dynamic, fast-growing urban centers. Companies need to think regionally, prioritizing attractive states and cities, adapting products and pricing to local requirements and building strong local partnerships.
"Indian labor costs are less than half of China but productivity is much lower. Local complexity and cultural differences should not be underestimated and need to be managed by local leadership."
India as a value creation hub
India is also an attractive location for production and engineering, combining scale, talent and an increasingly established industrial base. In 2025, its labor force reached over 600 million people, while registered manufacturing output grew by more than 7%. The country adds more than 1.3 million engineering graduates each year. Yet the business case can vary significantly by location, depending on productivity, infrastructure, talent availability and operational complexity. Industry is also highly concentrated, with just five states (Tamil Nadu, Maharashtra, Gujarat, Uttar Pradesh and Haryana) accounting for more than half of registered manufacturing employment. The task is to identify the right activities and locations, focusing on established industrial and engineering hubs, standardized activities that transfer well and strong local operating models.
_large_image.png)
"The companies that got India sourcing right all did the same thing first: they picked one commodity, built the relationship and invested in supplier development before worrying about scale."
India as a sourcing market
For sourcing, India's maturing supplier base is positioning the country as an increasingly attractive alternative, particularly in selected low- to mid-complexity categories such as castings, forgings and machined components. As the chart below shows, piece-price savings typically range from 15% to 30%, but the full business case depends on supplier capabilities, quality, delivery performance and total landed cost.
India's growing integration into global supply chains shows in its exports: engineering-goods exports reached around USD 117 billion in FY2024/25, up more than 65% over the past decade, with momentum also in automotive components, electronics, pharmaceuticals and chemicals. However, supplier maturity continues to vary significantly across categories and regions. Capturing the opportunity requires a selective sourcing approach, combined with rigorous supplier qualification and targeted supplier development.
_large_image.png)
Time to define the right India strategy
The opportunities in India are real, but no single approach can capture them. The country’s scale and increasing purchasing power make it an attractive long-term growth market; its manufacturing and engineering ecosystem offers tangible scope for near-term value creation; and its developing supplier base makes it a credible, albeit selective, China+1 sourcing alternative.
At the same time, companies face regional differences, price sensitivity, uneven supplier maturity, talent challenges and operational complexity. Winning in India requires clear choices: define the ambition, focus on the most attractive markets and activities, build on India's strongest ecosystems, localize the operating model and invest in local capabilities. Across selling, making and buying, the lesson from the companies that have succeeded is the same: start narrow, get it right, then scale.
FAQ
Sign up for our newsletter
Further readings
