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Context:

The Global supply chains are shifting from resilience to security, highlighting the importance of India.

About Global Supply Chains

Global supply chains are the backbone of the modern economy, it involves a complex network of suppliers, manufacturers, logistics providers, and retailers, all working together to deliver products to consumers.

The global supply chains are experiencing significant transformations, mainly driven by geopolitical shifts, technological advancements, and global events such as the COVID-19 pandemic. 

The global supply chain management market was valued at approximately $16 billion in 2020 and is projected to grow almost $31 billion by 2026.  

Traditional Supply Chain Models

Historically, global supply chains prioritized efficiency, underlined by the "Just in Time" (JIT) manufacturing approach, the goal was to minimize inventory costs and maximize speed, simplifying operations, reducing waste, and enhancing profitability.

COVID-19 Pandemic Impact

The pandemic disrupted the Global supply chain systems. Lockdowns, border closures, and shifts in consumer behavior resulted in overall shortages and delays. In response, businesses and governments adopted a "Just in Case" strategy; Companies began stockpiling essential goods to avoid supply disruptions. Sourcing from multiple suppliers across different regions to reduce dependency on a single source.

US and China Role

The US and China are the world’s largest economies, they are important to global supply chains:

• China's vast labor force, developed infrastructure, and government support have placed it as the "world’s factory."
• The US leads in sectors like technology, pharmaceuticals, and aerospace, driving global demand for components.

The US-China trade war that started in 2018 significantly impacted supply chains; leading to increased tariffs and trade barriers. As a result many companies have started relocating manufacturing bases to countries like Vietnam, India, and Mexico to mitigate risks and reduce reliance on China.

India’s Growing Role in Global Supply Chains

The importance of India in the global supply chains are growing, mainly due to its economy, strategic location, and large workforce. And, as companies aspire to diversify their supply chains and reduce dependency on China, India emerges as a favorable alternative. 

India's GDP is projected to reach $5 trillion by 2025, this enhances India's capacity to integrate into global supply chains.

The location of India provides easy access to markets in Asia, the Middle East, and Africa, which make it an attractive territory for manufacturing and logistics.

With a young and growing population, India offers a vast labor pool, which is essential for labor-intensive industries. India with its population offers a huge market.  

Initiatives Taken

Make in India was launched in 2014 to transform India into a global manufacturing hub by encouraging both multinational and domestic companies to manufacture their products in India. 

Government plans to invest $1.4 trillion in infrastructure projects by 2025, under the National Infrastructure Pipeline (NIP). This includes improvements in energy, transport, urban infrastructure, and digital connectivity.

Production-Linked Incentive (PLI) Scheme offers financial incentives to companies for boosting domestic manufacturing and attracting large investments in sectors like electronics, pharmaceuticals, and textiles.

Resilient Supply Chain Initiative (RSCI) launched in 2021, as collaboration between India, Japan and Australia, to enhance supply chain resilience and reduce dependency on China.

Challenges for India

India's ongoing tensions with neighboring countries like China and Pakistan. These tensions can impact supply chain security, particularly in regions close to disputed borders.

Inadequate transportation networks and logistical inefficiencies hamper the smooth functioning of supply chains.

Complex regulatory frameworks and bureaucratic red tape can slow down business operations and deter foreign investment.

What can India do?

India should expand its supply chain partners and reduce dependency on a few countries to manage risks associated with geopolitical tensions and trade disruptions.

Investment in infrastructure development, including transportation networks and logistics hubs, is crucial. Improving these areas will enhance India's ability to efficiently participate in global supply chains.

Simplify regulatory frameworks and reduce bureaucratic hindrances to attract more foreign investment and promote smoother business operations.

Strengthening collaboration between the government and private sector is essential to improve supply chain resilience. Establishing standardized security protocols and sharing best practices can help organizations stay ahead of emerging threats.

Challenges

Ongoing trade tensions, mainly the US-China trade war, force businesses to reconsider sourcing strategies. Companies explore new manufacturing bases to mitigate risks associated with geopolitical instability.

Countries are acting more careful about the origins of technologies and components, potentially restructuring supply chains to secure strategic assets and reduce dependency on adversarial nations.

The interconnected nature of supply chains makes them vulnerable for cyberattacks. These attacks can disrupt operations, steal intellectual property, and compromise sensitive data. Ensuring comprehensive cybersecurity measures is necessary to protect digital assets and maintain the integrity of supply chains.

Proposals from the US Department of Commerce to restrict imports of certain technologies from China and Russia emphasize national security. Incidents like the Israeli pager attack underscore the need for robust security measures in supply chains.

Way Forward

Companies can reduce trade disruption risk by diversifying their supplier base and avoiding over-reliance on a single source.  

Investing in advanced technologies such as blockchain, IoT, and AI can enhance supply chain visibility and security. These technologies enable real-time tracking, improve transparency, and help detect and respond to threats more effectively.

Strengthening collaboration between public and private sectors and establishing standardized security protocols can improve overall supply chain resilience. Sharing information and best practices helps organizations stay ahead of emerging threats.

Developing comprehensive risk management and resilience plans is crucial. This includes conducting regular risk assessments, maintaining buffer stocks, and creating contingency plans to ensure continuity of operations during disruptions.

Must Read Articles: 

Un Global Supply Chain Forum

National Logistics Policy

Chipmaking in India

Source: 

The Hindu

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