Last week, I came across this interview on an Indian news site which features a discussion with an Accenture executive who notes that Indian firms are looking to China as a low cost source of supply. While I have a hard time believing that China factors in significantly to Indian sourcing from a cost standpoint across the board, certainly there are strategic reasons (e.g., supply assurance) that India might look to China as a key nation to partner with and source from.
In this regard, the Accenture exec in the piece is quoted as noting, "Indian firms are now aggressively investigating China and South-east Asian countries for sourcing. Many are seeking to source higher value products from them." But given the logistics challenges and costs of importing products into India -- let alone moving cargo around in the country -- I doubt that sourcing decisions based primarily on labor arbitrage will have a long life in the region. This case is a perfect example where total cost will trump unit cost where there are local alteratives in virtually all cases.