Why South Asia is the New Center of Gravity for Global Sourcing

South Asia—led by Bangladesh and India—continues to become a strategic geographical player in global sourcing, offering a unique blend of economic advantages and growing manufacturing capabilities. However, as the region gains prominence, it must also navigate challenges in quality, compliance, and ethical practices to cement its role in the global supply chain. Matching China’s dominance remains a formidable challenge. 

South Asia’s rise: What’s driving the growth? 

The economic and geographic advantages of South Asia are undeniable. Labor costs in countries like Bangladesh and India remain among the lowest in the world, providing a cost-effective alternative for companies facing rising wages in traditional hubs like China, which is becoming more expensive. Additionally, South Asia’s proximity to key markets in the Asia-Pacific, Middle East, and Europe positions it as a strategic player in the global supply chain. 

Geopolitics has also played a pivotal role. The ongoing U.S.-China trade tensions have prompted multinational corporations to diversify their sourcing strategies. Regional trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP), have further cemented South Asia’s attractiveness by reducing trade barriers and fostering economic collaboration. 

Infrastructure and technology investments are another driving force. India, for example, has invested heavily in industrial corridors, port infrastructure, and logistics networks under its "Make in India" initiative. The region also embraces technological advancements in production and supply chain management, further enhancing its global competitiveness. 

Spotlight on success: Bangladesh and India 

South Asian nations have emerged as a standout region in electronics and textiles, leveraging a combination of investor-friendly policies and a skilled workforce. Companies like Samsung and Apple have expanded production in both countries, attracted by low production costs and favorable trade agreements. 

In addition, Bangladesh has carved a niche in the ready-made garment (RMG) industry. The sector accounts for over 80% of the country’s exports, driven by cheap labor and government support. Despite a turbulent year marked by political upheaval and industrial action, Bangladeshi apparel manufacturers have maintained strong partnerships with Western buyers in 2024 (QIMA data on inspection demand shows a +27% year-on-year increase). However, the industry must address sustainability and human rights concerns to remain competitive.  

India’s manufacturing landscape is more diversified, spanning pharmaceuticals, IT hardware, and textiles. Initiatives like the Production-Linked Incentive (PLI) scheme aim to attract global players by offering incentives for domestic manufacturing, positioning India as a hub for high-value industries. As decoupling from China continues slowly, global supply chains are increasingly relying on India for manufacturing capacities, as seen from the double-digit expansion in demand for inspections and audits recorded by QIMA in 2024. 

While India and Bangladesh remain the flagships of South Asia sourcing, Sri Lanka and Pakistan have also seen an uptick in manufacturing orders in 2024, a trend that is likely to carry on into 2025 as both countries’ economies continue to stabilize. 

The challenges: Quality, compliance, and ethical considerations 

Despite its growing prominence, South Asia faces significant hurdles in maintaining quality standards, ensuring compliance, and addressing ethical concerns. 

Maintaining consistent quality across diverse sectors like electronics and fashion remains a challenge globally – even more so compared to previous years, a recent survey of 600-plus businesses shows. In the case of South Asia, labor is abundant, but skill gaps persist, requiring significant workforce training and development investment. Meeting global quality expectations will be critical for sustaining long-term partnerships. 

Compliance with labor laws and environmental regulations is another pressing issue. South Asian countries have faced criticism for unsafe working conditions, inadequate wages, and excessive working hours in industries like textiles. In Bangladesh, worker compensation remains a hot-button issue: critical violations in this area were flagged in one out of every three factories last year, QIMA data shows. To align with global expectations, manufacturers must embrace sustainable practices and adhere to stringent environmental, social, and governance (ESG) standards. 

Ethical challenges, such as child labor, exploitation, and unsafe factory conditions, continue to tarnish the region’s image. Addressing these issues head-on through policy reforms and corporate responsibility initiatives will be essential for South Asia to emerge as a trusted sourcing destination. 

A global opportunity 

South Asia’s rise as a supply chain hub is not just a regional phenomenon but a global opportunity. The disruptions caused by the COVID-19 pandemic and geopolitical tensions have underscored the importance of diversifying supply chains. South Asia’s ability to enter this role could enhance global supply chain resilience, reducing dependency on single-source regions like China. 

Sustainability presents another avenue for South Asia to differentiate itself. With consumers and investors increasingly prioritizing ethical and environmentally responsible sourcing, the region can lead in green manufacturing and fair-trade practices, creating a win-win for businesses and workers. 

Conclusion 

South Asia’s emergence as a supply chain powerhouse reflects a broader realignment of global trade dynamics. With its economic advantages, strategic policies, and investment in infrastructure, the region is well-positioned to play a central role in international sourcing. However, its long-term success will depend on its ability to address quality, compliance, and ethical challenges. As South Asia rises, it can redefine global sourcing—not just in terms of cost but as a sustainable and responsible growth model. 

This is South Asia’s moment. It’s a story of potential, promise, and the responsibility to rise to the occasion.