India, Japan and Australia’s Trade Ministers have recently inaugurated the Supply Chain Resilience Initiative (SCRI). The SCRI aims at enhancing supply chain resilience with a focus on achieving strong, sustainable, balanced, and inclusive growth in the Indo-Pacific region. Together with the U.S., India, Japan, and Australia form the Quad grouping.
Understanding Supply Chain Resilience
In international trade, supply chain resilience refers to a strategy that enables a nation to diversify its supply risk across multiple supply nations instead of relying solely on one or a few. Its importance is evident during unexpected events such as natural disasters, pandemics, conflicts, and intentional trade halts, which can disrupt supplies from specific countries and adversely impact the economy of the target country.
The Genesis and Objectives of the Supply Chain Resilience Initiative
The Covid-19 pandemic instigated the development of the SCRI. The pandemic exposed worldwide and regional vulnerabilities in supply chains, dramatically affecting lives, economies, and livelihoods. The goal of SCRI is to attract foreign direct investment and transform the Indo-Pacific into an economic powerhouse. It also aims at fostering mutually beneficial relationships among partner countries and developing strategies for enhancing the existing supply chain network. For instance, Japan and India have an India-Japan competitiveness partnership that addresses the installation of Japanese companies in India.
Features of the SCRI
Originally proposed by Japan, the SCRI’s purpose is to lower dependence on China due to possible reconfiguration of supply chains in the Indo-Pacific region amid the Covid-19 pandemic. Initially, the SCRI will concentrate on sharing best practices on supply chain resilience, organizing investment promotion events, and conducting buyer-seller matching events. The initiative also includes joint measures like supporting digital technology utilization and trade and investment diversification. The SCRI may expand based on consensus, with ministers meeting annually to guide the implementation and enhancement of the SCRI.
SCRI’s Significance to India
Following border tensions with China, nations like Japan perceive that India may be open to discussions on alternative supply chains. However, China remains a significant source of critical imports for India, such as mobile phone components and pharmaceutical ingredients. Thus, a sudden internal drive to sever ties with China would not be feasible. Over time, if India improves its self-reliance or collaborates with exporting nations other than China, it could instill resilience into the economy’s supply networks.
Moving Forward
The SCRI can help enhance India’s manufacturing competitiveness and expand its share in global trade. To achieve this, there is a need to develop infrastructure that strengthens India’s export competitiveness. While India is an appealing choice for potential investors as both a market and a manufacturing base, progress in ease of doing business and skill-building must be expedited.