Keep Supply, Demand at Hand

Context: India must take into account the altered global economic landscape to achieve objectives of self-reliance by increasing share of the Global Supply Chain (GSC), and reducing its economic dependence on China.

Increasing Self Reliance in GSC: Imperative of risk mitigation

• Cluster-based production approach: with minimum reliance on external supply chain would cut the risk of disrupted supply due to shocks like a pandemic or natural disaster.

• Build large inventories to reduce supply risk associated with clusters.

• Greater localization of supply: India is not an outlier, it perhaps the only choice available.

• Like China, who consciously followed a strategy of localization post-2008 crisis, with the share of domestic value addition in exports rising to 87%.
• It will provide a substitute for Indian final goods producers like automakers, who can cover their lost demands domestically.

• Set Long-term targets for increasing domestic share in value addition: by overcoming issues of inadequate infrastructure, logistical support, and lack of skills.
• Replicating matrix of producers from China: contributing to overall product development instead of focussing on single company substitution which is dependent on sub-contracting.

•  Sustain growth of ‘infant matrices’ can be ensured through a combination of tariffs and subsidies.

• Establish industrial commons: An ecosystem of suppliers, research universities, and manufacturers in one place to enable quick assimilation and up-gradation of technologies and also for skilled workers.

• For E.g. Identify 10 products and create a specific ecosystem around them.

Conclusion: India to take advantage of incumbency that China enjoys as the mother factory of the world must follow Chinese self-reliance strategies of enhanced local production with reduced risk from GSC.