American retailers, including Wal-Mart, Gap, and Chico’s FAS, are increasing purchases of cheap clothing and jewelry from India as they brace for rising costs when China, their biggest overseas supplier, revalues its currency.

Wal-Mart, the world’s largest retailer, is boosting purchases from India by 30% to $1.5 billion this year. The Bentonville, Ark.-based chain has an 86-employee purchasing office in Bangalore, India, from which “we could export a lot more,” Wal-Mart International’s CEO, John Menzer, said during a conference in New York on June 13.

Retailers that bought about $65 billion in Chinese goods last year are turning to India because the anticipated yuan revaluation may increase their costs by 10% over two years, said Ken Mark, the managing director of Martello Group in London, Ontario, who’s co-written Harvard Business School case studies on Wal-Mart.

“Retailers could shift the fall season to India,” said Norbert Ore, committee chairman of the Tempe, Ariz.-based Institute for Supply Management, the world’s largest association of purchasing managers. “We’ve gotten into a virtual world where buyers can quickly move to the lower-cost country,” he said. “If you see a shift in the yuan, you are going to have some impact.”

America is pressing China to change its decade-old policy of fixing the yuan at about 8.3 to the dollar to reduce the flood of low-price goods into America.

Federal Reserve Chairman Alan Greenspan on June 7 said a revaluation of the yuan is “something that I’m certain they will take on reasonably soon.” On June 23, he said such a currency change wouldn’t increase American manufacturing “significantly” and would “likely redirect trade within Asia.”

Retailers including Wal-Mart are also expanding purchases in China this year, in part to support an expansion of retail stores. Wal-Mart, which operated 45 stores in China on April 30, plans to add 15 locations this year in the nation.

Wal-Mart bought $18 billion in apparel and other goods from China last year, an increase from $10 billion in 2001, making it the country’s seventh-largest export trading partner ahead of the U.K. A yuan revaluation may be “more burdensome for Wal-Mart than other retailers,” said Jon Jacobs, fixed-income analyst at Cantor Fitzgerald in New York. “Wal-Mart has based their positioning on being the lowest-price vendor.”

Indian factories may gear up to produce as much as $5 billion in goods for Wal-Mart over the next three years, said Nirav Sheth, deputy head of research at Brics Securities in Mumbai.

“India has a strong manufacturing base, particularly in textiles, mainly because of cheap labor costs,” Mr. Sheth said. “The quality of textiles from India is comparable to the best in the world.”

India’s costs for producing clothing are about 1% less than China’s, according to a Bain & Co. report from June.

Gap, the largest American clothing chain, has increased purchases in India, said Vivek Hinduja, chief operating officer for marketing for Gokaldas Exports, an apparel supplier in Bangalore, India. The company’s sales rose 34% to $165 million in the year ended March 31. Gap, its largest customer, makes up more than a third of sales.

India, which has the fourth-largest economy in Asia, doesn’t have China’s capacity to make a broad range of consumer products including toys, shoes, and ceiling fans. Some Indian exports are more expensive than their Chinese counterparts, said Chiquan Guo, international business professor at the University of Texas-Pan American.

“One thing that pulls India back in global competition is their extensive labor laws that are believed to be biased toward employees,” Mr. Guo said.