Business before Atmanirbhar

Many multinationals were already sourcing items across categories from India for overseas buyers

Much before taking Indian products to the global market turned fashionable under various signature schemes, many multinationals were already sourcing items across categories from this country for overseas buyers. For example, the two biggest names in retail—Walmart and Ikea—have been procuring Indian products for the world market even when they did not have any presence in the country. 

Bentonville-headquartered Walmart has been sourcing Indian products for more than two decades now, though it announced its retail entry into the country through a cash-and-carry business much later in 2007. Swedish furnishing major Ikea has had a more than 35 years of association with India when it comes to sourcing products and raw materials for its markets around the world. Ikea decided to enter India decades later in 2012 and opened its first store in the country in 2018.

Another global major—Amazon—too began its India sourcing under “global selling” in 2015, years before Atmanirbhar Bharat became an overriding theme. This was two years after the Seattle-headquartered online company had gone live with its India marketplace triggering an  e-commerce battle with Flipkart, now majority-owned by Walmart .   

                    

Even so, most multinationals, including the ones mentioned above, have joined the recent government call to be a part of the initiative to boost production in India and give Indian products a global identity.  Ikea, which in the past couple of years has spoken about doubling its India sourcing to 600 million euros by 2020, has not made the latest figure available yet. Having started its India sourcing journey in the 1980s, the Swedish major works with around 50 suppliers and 400,000 people in the supply chain from Tamil Nadu to West Bengal for its global markets. Also, it’s been engaged with some 1,200 local artisans across the country for making special collections for global stores.

Overall, 20 to 25 per cent of what Ikea sells in India is locally sourced, it claims. The company, which was recently a talking point for its comment on toys, wants to source more from India for the $100-billion global toy market. As for Walmart, India’s among the top three sourcing destinations. China, Vietnam and Bangladesh are some of the other important sourcing markets for the retail major. The company puts its direct India sourcing at $3 billion currently, and its growing in healthy double digit year-on-year.   Pharma­ceutical products make up for a bulk of its India sourcing for the global market, according to data available with the industry. Textile, handicraft, furnishings are among the other important categories. In December 2020, when Atmanirbhar was at its peak perhaps, Walmart committed to source products worth $10 billion every year from India starting 2027.

People who track the local sourcing market point out that the indirect sourcing from India should also be counted for a company like Walmart. Mostly, third-party sellers are responsible for indirect sourcing such as in food products involving complex regulatory norms. Indirect sourcing from India to cater to global markets is pegged at around $2 billion right now at Walmart. If direct sourcing grows to $10 billion by 2027, even indirect sourcing would grow somewhat proportionately. Also, there are chances that some of the indirect sourcing may merge into direct sourcing if the regulatory environment improves in the coming years.        

As for Amazon, its flagship global selling programme — to help lower the entry barrier for Indian MSMEs to start or expand their exports business using e-commerce — is all about reaching customers worldwide through Amazon’s international websites and marketplaces. The programme includes more than 70,000 exporters across India for showcasing millions of made-in-India products across the world. As of July 2020, MSMEs exporting through this channel had surpassed $2 billion in cumulative sales. Last January, before the government had kick-started the Atmanirbhar project in a big way, Amazon founder Jeff Bezos announced that the company would digitally enable 10 million MSMEs in India to facilitate exports worth $10 billion by 2025.

The industry, meanwhile, is waiting for some of their challenges to be sorted out to be able to meet their own export commitments as well as to fulfill the government mission of making in India and exporting to the world. Walmart faces many hurdles in exporting mangoes because of the quarantine requirements. Sending prawns to the world markets is another hassle without product standardisation. For Amazon, despite the many success stories like Raigarh’s Naturevibe Botanicals  emerging as one of the fastest growing Indian brands in the organic foods category on many global marketplaces of the American company, jewellery as a category faces export barriers due to certifications. Also, regulations for MSMEs to get started on exports need to be more competitive. For a company like Ikea, sourcing raw material, especially  certified wood, is a challenge for large scale manufacturing.