For India it’s all about the demand in supply chains

ANALYSIS
Liquid Medical Oxygen cylinders arrive at Mumbai port from Kuwait. The second wave of the pandemic has not dented India’s reputation as a global supply chain frontrunner.
Liquid Medical Oxygen cylinders arrive at Mumbai port from Kuwait. The second wave of the pandemic has not dented India’s reputation as a global supply chain frontrunner.Courtesy: ANI

India’s resilient economy offers huge benefits coupled with the largest untapped potential for nations who have opted for the China plus alternative in global supply chains.

The Harvard Business Review in an analysis, published in May 2020, had identified India as the ‘next big thing’ in the supply chains eco-system while the world was being ravaged by the Covid-19 pandemic last year.

India had just put into place an effective national lockdown strategy – meant to control infection rates and loss of lives – and, by all accounts, the tactic to counter the virus seemed to bring home a decent report card. The country started to look inwards in a bid to prepare itself towards achieving a state of economic self-sufficiency through various schemes, reforms and projects initiated by the government.

Corporates all over the world sat up and took notice and suddenly the FDI’s started to flow in. It was partly the allure of the Indian markets and, in the case of the United States, a survey conducted by the Pew Center which found out that two-thirds of Americans had an allergic view towards China.

So what was the alternative?

Despite battling a devastating second wave of the Covid-19 pandemic India still has one eye on its economy. The government’s strategic ties with global powers like the EU and UK, among others, signifies its commitment to expand trade and economy via meaningful partnerships.
Despite battling a devastating second wave of the Covid-19 pandemic India still has one eye on its economy. The government’s strategic ties with global powers like the EU and UK, among others, signifies its commitment to expand trade and economy via meaningful partnerships.Courtesy: ANI

All eyes on India despite the second wave

The needle of confidence pointed towards India and Facebook made a statement of intent by announcing that they were all set to pump in $5.7 billion into the country’s largest telecom entity - Reliance Jio. The floodgates to FDI simply burst open and decisions makers were signing hefty cheques over virtual meetings across sectors.

There was a twist to last year’s story with India being caught unawares by a more lethal variant of the virus, in a devastating second wave of the pandemic this year. The government’s global outreach, when it offered medical aid to a number of nations, during the first wave of the pandemic, paid off and countries came together in support of the Modi administration.

Two mammoth strategic partnerships signed by the Indian authorities, with the European Union and the United Kingdom, bear testimony to the fact that India’s allure has not diminished and even though it is fighting the virus with all the power at its disposal it has still got one eye focused on the economy. Negotiations between Australia, Japan and the US, alongside the parameters of the Quad, New Delhi’s outreach towards south Asian countries and its Neighbourhood First policy has made it evident that India would crop up as the logical choice in the world of supply chains and as an attractive investment destination to China.

Many have wondered what makes India stand up as a global supply chain leader, the answer perhaps lies in the sheer scale of its untapped potential despite the mega deals that are coursing in. The Harvard Business Review observed that in 2019, the United States imported $452 billion of goods from China. Only five low-cost countries have GDPs larger than that: India, Mexico, Indonesia, Brazil, and Thailand. India is the biggest economy among these candidates and has the largest untapped potential for filling part of the supply chain vacuum that is created by the exodus from China.

Indian Prime Minister Narendra Modi in a virtual Quad meeting with US President Joe Biden, Australian PM Scott Morrison and Japanese PM Suga. The SCRI launched between India, Australia and Japan will reinforce supply chains in the Indo-Pacific.
Indian Prime Minister Narendra Modi in a virtual Quad meeting with US President Joe Biden, Australian PM Scott Morrison and Japanese PM Suga. The SCRI launched between India, Australia and Japan will reinforce supply chains in the Indo-Pacific.Courtesy: ANI

Boosting the Quad

The Quad has recently been boosted by a renewed engagement between its member nations. This was demonstrated by the trade ministers of India, Australia and Japan who formally launched a Supply Chain Resilience Initiative (SCRI) to reinforce supply chains in the Indo-Pacific region.

An initial discussion in September last year sparked the possibilities of trade diversification with an aim to reduce dependence on China for finished goods and medical supplies during the pandemic. A joint statement towards this summed it up saying, “The SCRI aims to create a virtuous cycle of enhancing supply chain resilience with a view to eventually attaining strong, sustainable, balanced and inclusive growth in the region. The ministers consented that expansion of the SCRI may be considered based on consensus, if needed, in due course.”

Analysing the development, Gurjit Singh, former Indian ambassador to Germany said, ““India wants to use the SCRI to bolster its own economic initiatives and keep leverage when negotiating the revision of the India-Asean FTA. Guidelines on how SCRI will function are expected to emerge... Connectivity and standards may be a focus of this. These will help in creating B2B collaboration.”

A manufacturing facility in India. The PLI schemes introduced by the government along with several noteworthy reforms across sectors have made the country an attractive destination for FDI and supply chain location.
A manufacturing facility in India. The PLI schemes introduced by the government along with several noteworthy reforms across sectors have made the country an attractive destination for FDI and supply chain location.Courtesy: ANI

Resilience and reliability

According to a study done by KPMG, titled Supply Chains Post Covid-19 (November 2020), “India is faced with the opportunity to attract companies for whom supply chain relocation has become top priority in the wake of Covid-19. The country’s favourable business environment, liberal FDI norms, constantly improving Ease of Doing Business rankings, enormous consumer base and rapidly improving digital infrastructure make it a top contender to emerge as a global manufacturing hub.”

Small wonder that Niti Aayog CEO Amitabh Kant played up India’s credentials as a reliable global supply chain player saying last year that, “The production linked incentive (PLI) schemes launched by the Indian government for various sectors (13 in total) will ensure that India is able to attract investments in manufacturing at a time when global supply chains are being relocated.”

Given that the world still hasn’t extricated itself from the grip of the pandemic it is natural for supply chain frontrunners to assess the ‘new normal’ and look into the future. This would mean working with current supply chains – to firm up efficiency and security of supply delivery – while looking out for new paths and partners. Countries have been searching for the China + strategy and the spotlight has been repeatedly falling upon India which has shown promise and resilience.

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