Tariff shocks push Indian businesses to revisit manufacturing strategy

According to media reports, many Indian consumer goods companies—including household names like Parle, Amul, ITC, and Godrej Consumer Products—have reportedly been considering shifting part of their manufacturing operations to third countries. The goal is to soften the blow of escalating tariffs and ensure continued, cost-effective access to the US market.

The trend isn’t just limited to the fast-moving consumer goods (FMCG) sector. Titan, the jewellery and watchmaking arm of the Tata Group, is also reportedly planning to relocate some of its production activities to the Gulf region, as per media reports, which added that this strategic move aims to help the company maintain competitive export pricing while securing easier access to the US market.

The underlying message is clear: companies are trying to stay one step ahead of the unpredictable trade policy shifts.

When US President Trump first introduced sweeping tariff measures during his initial term, companies worldwide began to distance themselves from China, seeking alternative production hubs to reduce dependence and diversify risk. At the time, India appeared to be a promising alternative—with its massive domestic market, skilled workforce, and warming trade ties with Washington.

However, the optimism is now tempered by new challenges. With Trump’s additional 25 per cent tariff on Indian exports, many Indian manufacturers are reassessing the benefits of manufacturing domestically.

The tariffs raise fundamental questions about cost competitiveness and market access—especially for export-heavy industries like apparel and textiles.

In response, a growing number of companies are reportedly trying to adopt an ‘India + One’ approach—a diversification model where India remains the key manufacturing base, but operations are expanded to other countries as well. This strategy provides more flexibility and resilience against the evolving trade landscapes.

Firms with operations across multiple countries already have manufacturing footprints overseas, giving them some cushion against the current disruption. However, those entirely dependent on India for production now face mounting challenges, as they come under pressure to rethink their long-term manufacturing and supply chain strategies.

The apparel sector, a major contributor to India’s export basket, is particularly vulnerable to the tariff hikes, and some garment manufacturers are already taking proactive steps to mitigate the challenges. According to media reports, a top executive from a leading global garment exporter—offering end-to-end solutions—indicated the company was evaluating a neighbouring country as a potential site for a new manufacturing unit to deal with the increased US tariffs while names like Gokaldas Exports Ltd and Raymond Lifestyle Ltd are reportedly also planning to take advantage of significantly lower tariffs—around 10 per cent in certain African countries—compared to the 50 per cent duty imposed on exports from India.

Another renowned name is banking on its manufacturing facility in Ethiopia, especially for the US-bound shipments.

Meanwhile, entities like Pearl Global Industries (PGIL), with a multi-country presence, seem to be better placed to deal with the US tariffs. PGIL, for example, reportedly has operations in Bangladesh, Vietnam, and Indonesia—the countries that have thus far managed to avoid the worst of the US’ tariff hike.

Such geographic diversification will offer the Indian companies a critical buffer against tariff shocks, helping them retain their client base, especially in the lucrative US market, without sacrificing margin or competitiveness.

As the additional US tariffs start to bite, many Indian apparel exporters are likely to explore setting up facilities abroad. Whether through partnerships, joint ventures, or greenfield investments, expanding beyond Indian borders could become a necessary move to safeguard business, felt many within the industry.

ALCHEMPro News Desk (DR)