{"id":37314,"date":"2023-09-14T02:56:28","date_gmt":"2023-09-13T21:26:28","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=37314"},"modified":"2025-04-22T13:02:26","modified_gmt":"2025-04-22T07:32:26","slug":"indias-supply-chain","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/indias-supply-chain\/","title":{"rendered":"India&#8217;s supply chain opportunity"},"content":{"rendered":"<h3><strong>What\u2019s in Today\u2019s Article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in News?<\/strong><\/li>\n<li><strong>What are Supply Chains?<\/strong><\/li>\n<li><strong>Why are Global Supply Chains Moving from China?<\/strong><\/li>\n<li><strong>Why are India and Southeast Asia Viewed as Attractive Supply Chain Hubs?<\/strong><\/li>\n<li><strong>Steps Taken by India to Ramp-up its Supply Chain Network<\/strong><\/li>\n<li><strong>Way Forward for India &#8211; Learn from China\u2019s Experience<\/strong><\/li>\n<li><strong>Conclusion<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>However, the announcement at the G20 Leaders\u2019 Summit on the landmark India-Middle East-Europe Economic Corridor (IMEC) has the potential to make India an Asian hub in global supply chains.<\/li>\n<li>This is significant amid the efforts to cut dependence on China-centric global supply chains.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What are Supply Chains?<\/strong><\/h2>\n<ul>\n<li><strong>A supply chain includes <\/strong>every step (beginning with the producers of the raw materials) that is involved in getting a finished product or service to the customer.<\/li>\n<li>It refers to the <strong>geographical location of stages of production<\/strong> (design, production, assembly, marketing, service activities)<strong> in a cost-effective manner<\/strong>.<\/li>\n<li><strong>Global supply chains<\/strong> have been the leading model of industrial production since the 1980s, <strong>influencing the pace and nature of globalisation and regionalisation<\/strong>.<\/li>\n<li>Global supply chains <strong>can be found in a wide range of simple<\/strong> (textiles and clothing, food processing and consumer goods, etc.) and <strong>complex industries<\/strong> (e.g., automotives, aircraft, machinery, electronics and pharmaceuticals).<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why are Global Supply Chains Moving from China?<\/strong><\/h2>\n<ul>\n<li>Today, <strong>China is a major actor in global value chains<\/strong>, accounting for nearly <strong>20% of global manufacturing trade<\/strong> and an even greater share of many intermediate global value chain inputs that are essential for production.<\/li>\n<li>However, even before the Covid-19 pandemic, <strong>Western firms had begun to reduce their reliance on China<\/strong> and its popularity as a sourcing market among Western buyers was diminishing.<\/li>\n<li>The trend was attributable in part to<strong> rising wages and supply chain bottlenecks within Chin<\/strong>a, and investor concerns about <strong>tighter regulation of foreign firms<\/strong>.<\/li>\n<li>Also, the<strong> country\u2019s trade war <\/strong>with the US is forcing multinational companies to rethink their global sourcing strategies.<\/li>\n<li><strong>Some production stages in Chinese supply chains<\/strong>, particularly the labour-intensive ones, <strong>were moving to lower-cost locations<\/strong>.<\/li>\n<li>However, <strong>what makes it difficult to relocate all production from China<\/strong> is that it is costly to shift supply chains because new plants need to be set up, and workers need to be hired and trained, etc.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why are India and Southeast Asia Viewed as Attractive Supply Chain Hubs?<\/strong><\/h2>\n<ul>\n<li>Southeast Asia has attracted foreign companies with <strong>cheap wages, fiscal incentives and improved logistics<\/strong>.\n<ul>\n<li><strong>Vietnam and Thailand<\/strong> are big winners in supply-chain shifting.<\/li>\n<\/ul>\n<\/li>\n<li>But over time, <strong>India <\/strong>can become <strong>a complementary Asian manufacturing hub to China<\/strong> by reaping gains from foreign technology transfers and creating value-adding jobs. This is seen in the &#8211;\n<ul>\n<li>Ramped-up manufacturing of <strong>iPhones <\/strong>in the country,<\/li>\n<li><strong>Early technology transfer<\/strong> in the product cycle of the technologically advanced Mercedes Benz EQS to India, and<\/li>\n<li>Foxconn Technology Group developing<strong> a chip-making fabrication plant in Gujarat<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Manufacturing sectors in India<\/strong> such as automotives, pharmaceuticals, and electronics assembly are already sophisticated, and likely to emerge as winners in this race.<\/li>\n<li>India\u2019s attractiveness to foreign investors is also linked to<strong> geopolitical and economic factors<\/strong>.<\/li>\n<li><strong>Indian service<\/strong> can also be a winner, including in ICT, back-office work, financial and professional services, and transport and logistics.<\/li>\n<\/ul>\n<figure class=\"media\">\n<div data-oembed-url=\"https:\/\/www.youtube.com\/watch?v=DvnHhPca2kI\">\n<div><iframe src=\"https:\/\/www.youtube.com\/embed\/DvnHhPca2kI\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/div>\n<\/div>\n<\/figure>\n<p>&nbsp;<\/p>\n<h2><strong>Steps Taken by India to Ramp-up its Supply Chain Network:<\/strong><\/h2>\n<ul>\n<li>Since 2022, the Indian government\u2019s trade policy has placed <strong>renewed emphasis on preferential trade<\/strong> through a number of bilateral deals with trading partners.<\/li>\n<li><strong>The UAE-India Comprehensive Economic Partnership Agreement<\/strong> entered into force in May 2022.<\/li>\n<li>Talks are ongoing to conclude the full <strong>Australia-India free trade agreement (FTA) <\/strong>by the end of 2023.<strong> Negotiations for a UK-India and EU-India FTA are in process.<\/strong><\/li>\n<li><strong>The Indian PM\u2019s visit to Washington DC<\/strong> (in June 2023) showed that supply chains are at the centre of the latest chapter in India-United States relations.<\/li>\n<li>These new deals with Western trading partners reflect plans for deep economic integration <strong>going well beyond India\u2019s previous FTAs which focused solely on the goods trade and related measures.<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Way Forward for India &#8211; Learn from China\u2019s Experience:<\/strong><\/h2>\n<ul>\n<li>The promotion of <strong>export-oriented foreign direct investment (FDI) <\/strong>is key to participating in supply chains.<\/li>\n<li><strong>Local companies need smart business strategies<\/strong> to join global supply chains.\n<ul>\n<li><strong>Conglomerates can cross-subsidise investments<\/strong> and other costs among business units.<\/li>\n<li>Small and mid-sized enterprises should work as <strong>industrial suppliers and subcontractors to large exporters.<\/strong><\/li>\n<\/ul>\n<\/li>\n<li><strong>Business strategies like mergers, acquisitions, and alliances<\/strong> with multinationals and large local business houses are rational approaches.<\/li>\n<li><strong>Investment in domestic technological capabilities<\/strong> to achieve international standards of price, quality, and delivery.<\/li>\n<li><strong>Better targeting of multinationals in new industrial activities<\/strong> in which there may be a potential comparative advantage and better coordination between the central and state governments.<\/li>\n<li><strong>Upstream investment in tertiary-level education<\/strong> in science, technology, engineering, and mathematics.<\/li>\n<li><strong>Caution should be exercised before India attempts to replicate China\u2019s<\/strong> state interventionist template, as there is a significant risk of government failure.\n<ul>\n<li>It may be prudent to actively <strong>engage with think tanks to gain insights into what might work.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Conclusion:<\/strong><\/h2>\n<ul>\n<li><strong>India has a historic opportunity to promote industrialisation in South Asia<\/strong>, which would stabilise the region, increase jobs, and make it less vulnerable to Chinese enticements.<\/li>\n<li>The Indian government <strong>should consider following policy initiatives to promote regional supply chains<\/strong> &#8211;\n<ul>\n<li>Upscaling the Make in India Programme into a <strong>Make in South Asia Programme,<\/strong><\/li>\n<li>Concluding a comprehensive bilateral FTA with Bangladesh, and<\/li>\n<li>Upgrading the Indo-Sri Lanka FTA to support regional rules-based trade and investment.<\/li>\n<\/ul>\n<\/li>\n<li>Unless India creates channels for South Asia, it has no offer for the <strong>Global South.<\/strong> The fresh supply chains opening up with the US are good for India to start its global integration journey, <strong>Neighbourhood First<\/strong>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) What is the UAE-India Comprehensive Economic Partnership Agreement (CEPA)?<\/strong><\/h3>\n<p>The CEPA aims to reduce and eventually eliminate up to 10,000 tariffs between the economies, propelling bilateral trade to newer heights. The UAE&#8217;s Centennial Plan runs concurrently with India&#8217;s Vision 2047, which has set ambitious national imperatives, ensuring prosperity and development for all its people.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2) What is India&#8217;s &#8216;Neighbourbood first&#8217; policy?<\/strong><\/h3>\n<p>A core component of India&#8217;s foreign policy, the concept of the Neighbourhood First Policy came into being in 2008.\u00a0 It was conceived to bolster relations with its South Asian neighbours.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/g20-india-economy-imec-corripor-indias-supply-chain-opportunity-8938924\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>India&#8217;s supply chain opportunity<\/u><\/a><br \/>\n\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As global supply chains are moving from China, India can reap the gains by launching Make in South Asia Programme and concluding comprehensive bilateral FTAs<\/p>\n","protected":false},"author":5,"featured_media":37315,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-37314","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/37314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=37314"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/37314\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/37315"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=37314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=37314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=37314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}