Can India Step Up to the Plate? – Part I

Until now, China has almost been the sole-source supplier to the world for a number of essential items ranging from penicillin and antibiotics, semiconductors, telecom equipment, heavy machinery and rare-earth materials to surgical masks, gloves, hospital gowns, ventilators and PPE (Personal Protective Equipment). Even some of the major food items such as corn, rice, pork, wheat and garlic are processed, packaged and supplied by China. No wonder, it has been known as the Factory of the World.

Today, the COVID-19 pandemic, which first started in China, is changing this landscape with many countries now seriously questioning their dependency on China. This terrible disease has hit the world so fast and in such in an unprecedented scale, creating not only panic but also paralysis, and causing a catastrophic failure of the global supply-chain, closures of small to medium-sized businesses, severe unemployment in the labor force and unexpected disruptions to manufacturing sectors, let alone travel and transportation industries, that it brought many of the global economies to a screeching halt. This crisis has not only unleashed death and destruction at a monumental level but also caused unmitigated miseries everywhere.

As a result, many businesses are now scrambling to find alternative solutions and secondary sourcing to make up the missed delivery from their primary suppliers in China, while moving core business priorities to more “stable and reliable” partners.

Over the past two decades, Chinese economy has expanded at a breakneck pace. In 1995, the value of China’s imports and exports of goods totaled $280.9 billion or 3% of global trade. By 2018, its total trade in goods had more than quadrupled to $4.6 trillion or 12.4% of global trade. To accelerate its own growth rate even faster, China has recently embarked on its “Belt and Road” initiative and started investing heavily in Africa.

China’s recent advance as a superpower occurred because Western Capitalism became dependent on Communist China for it to flourish, and allowed their supply-chains to be set up in China. Even Japan, one of its arch-rivals, invested heavily in China for automotive parts and vehicle manufacturing.

As today’s crisis continues, most of the western countries want India to succeed and do so quickly. India has many of the prerequisites that China does to replace supply chains for the world. If and when US, UK, and other countries shift production and pull their supply chains out of China, one of the major beneficiaries is likely to be India which has large untapped human capital. India also as a large democracy has the world’s goodwill behind it. 

Here is my Call to Action. India in the next twelve months, leveraging its strong allies such as US, UK, Japan, Brazil, Singapore, Australia, and many others, should come up with an initiative to compete with the Chinese gameplan. This would be to integrate supply chains, to secure and serve its trading partners, and to deny Chinese hegemony in global trade.

First and foremost, India will need to ramp up its infrastructures and manufacturing capabilities. India has lot to lose if it does not, and allows China to continue its dominance of the world stage, dictating trade terms and denying access to its markets and capital. Only through a direct partnership with its top allies, India can provide resistance to China’s overarching plans to ensure that both Western and Eastern democracies have a prosperous and bright economic future.

Many other countries like Germany and France are trying to reduce their dependency on China, and countries like Vietnam are trying to fill the void. Here comes the opportunity for India, a trusted partner to the world for ages, to step up to the plate and fill the void.

The whole world’s eyes are focused on India today. They are keenly watching to see if India can step up to the plate and measure up as an alternative supplier to the world. They would love to minimize their dependency on China and want India to win.

The question is: “Does India want to win?”   

References:

1.  "Coronavirus Is Proving We Need More Resilient Supply Chains," Tom Linton and Bindiya Vakil, Harvard Business Review, March 2020.

2.  "Sourcing from China: Lessons from the Leaders," The Boston Consulting Group, March 2020.

3.  "The Top 20 Economies in the World," Caleb Silver, Investopedia, March 2020.

4.  "Why China is The World’s Factory," Prableen Bajpai, Investopedia, Feb. 2020.

5.  "China and the World: Inside the Dynamics of a Changing Relationship," McKinsey Report, June 2019.

6.  "China vs. India: A Race India Lost Before it Could Even Start," Time Magazine, November 2011.