IASbhai Daily Editorial Hunt | 30th Dec
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EDITORIAL HUNT #291 :“Global Supply Chain Politics | UPSC ”
Sujan R. Chinoy
Global Supply Chain Politics | UPSC
Sujan R. Chinoy is a former Ambassador and currently the Director General of the Manohar Parrikar Institute for Defence Studies and Analyses.
Resilient supply chains as a pandemic lesson
An economy such as India can ill-afford the shocks of disruption or be held hostage by an over-reliance on imports
SYLLABUS COVERED: GS 3 : Economy : Demand vs Supply
Global supply chain was disrupted by COVID-19 but still few countries managed to dominate the supply chain . Discuss -(GS 3)
- Disruption in Supply Chain
- Examples that hit home
- New Initiatives
- Way Forward
- RESILIENT SUPPLY CHAINS : A key lesson learnt by the world during the COVID-19 pandemic has been the importance of creating resilient supply chains that can withstand disruptions and ensure reliability for the global economy.
- TERROR ATTACK AT ARAMCO : Terrorist drone attacks on Aramco’s oil refineries in Saudi Arabia in September 2019 resulted in a drop of 5.7 million barrels of oil per day.
EXAMPLES THAT HIT HOME
- SUPPLY CHAIN POLITICS : Man-made interruptions in supply chains are equally disruptive.China has long practised “supply chain politics”.
- FISHING TRAWLERS EXPERIENCE : Japanese entrepreneurs learnt a hard lesson when the detention of a Chinese fishing trawler captain in 2010 near the disputed Senkaku Islands resulted in the Chinese government cutting off exports of rare earths to Japan.
- PANDEMIC VS MANUFACTURING SECTOR : In India, several companies felt the disruption in the automotive, electronics and white goods sectors.
- CHINESE HEGEMONY OVER APIs : India excels in the pharmaceuticals sector but the over-reliance on Active Pharmaceutical Ingredients (APIs) from China still creates vulnerabilities in the value chain.
- SEMICONDUCTOR INDUSTRIES : Tensions with China led the United States government to impose restrictions on export of microchips to China’s biggest semiconductor manufacturer, Semiconductor Manufacturing International Corporation (SMIC).
A NEW INITIATIVE
- MILITARISATION AND TRADE : Greater weaponisation of trade and technology is here to stay.
- It is in this context that India, Japan and Australia initiated the Supply Chain Resilience Initiative (SCRI) in September this year, focusing on automobiles and parts, petroleum, steel, textiles, financial services and IT sectors.
- FUTURE PARTICIPANTS : The SCRI may be bolstered by the future involvement of France, though this might depend on the European Union’s position. The United Kingdom has also shown interest in the SCRI.
- TRADE AND STRATEGIC ISSUES : China has resorted to similar tactics, of maintaining advantageous trade and economic engagement, without relenting on strategic issues.
- UNREALISTIC ARRANGEMENTS : China’s calls for “normal relations” with India are unrealistic given the continuing face-off in Ladakh.
MOVES BY AUSTRALIA, JAPAN
- ECONOMIC LEVERAGE : China has often used its economic leverage to weaken an opponent’s resolve on contentious issues.
- AUSTRALIAN MOVES : Facing such a dilemma, Australia has demonstrated strong political will in countering arbitrary Chinese sanctions imposed on its key exports of grain, beef, wine, coal and much else.
- CHINESE INVESTMENT POLICY : Yet, they have shown an early capacity for risk mitigation through the “China Plus One” business strategy, aimed at diversification of investments to the Association of Southeast Asian Nations (ASEAN), India and Bangladesh.
- COMPETITION AND DIVERSITY : In Phase-1 of Japan’s $2.2 billion Relocation Package announced this year, 89 Japanese companies availed subsidies to diversify out of China.
- SMALL MANUFACTURING HUBS : A sizeable number of small and medium enterprises (SMEs) chose to relocate to Southeast Asian countries such as Vietnam, Thailand and Malaysia.
- SHOCKS IN SUPPLY CHAIN : A large emerging economy such as India can ill-afford the shocks of disruption in supply chains. Nor can it allow itself to be held hostage due to an over-reliance on imports.
- IMPORT DEPENDENCY : What is noteworthy is that despite being the fourth largest market in Asia for medical devices, India has an import dependency of 80%.
- DOMESTIC MANUFACTURING : Given the renewed thrust in the health-care sector, this is the right time to fill gaps through local manufacturing.
- FOREIGN INVESTMENT : Today, India is seeking to enhance its presence substantially in the global supply chains by attracting investments in the semiconductor components and packaging industry.
- PROMOTION AND ADVERTISEMENT : The government is actively promoting domestic manufacture of printed circuit boards (PCBs), components and semiconductors.
- HIGH VALUE ADDITION : The Indian electronics sector gradually shifts away from completely knocked down (CKD) assembly to high value addition.
- DEFENCE MANUFACTURING : Defence is among the key pillars of the ‘Atmanirbhar Bharat’ policy.
- MAKE IN INDIA INITIATIVE : The government is providing a big boost to defence manufacturing under the ‘Make in India’ programme.It has identified a negative import list of 101 items.
- PROCUREMENTS : There is a tremendous opportunity for foreign companies to enter into tie-ups with reputed Indian defence manufacturers to tap into the growing defence market in India.
- The push for self-reliance through ‘Atmanirbhar Bharat’ is not an autarkic policy.
- INCLUSIVITY AND PARTICIPATION : It does not imply foreclosure of the Indian economy to foreign trade and participation in the global economy.
- STRENGTHENING SUPPLY CHAINS : On the contrary, it is aimed at strengthening India’s capacities to participate more vigorously without being prey to supply chain disruptions.
SOURCES: THE HINDU EDITORIAL HUNT | Global Supply Chain Politics | UPSC