Managing Supply Chain Issues – UPSC GS3

Supply chain disruptions: 
They can be natural as well as man-made.
  1. Natural: In Japan, the Great Tohoku Earthquake of 2011, followed by the Tsunami, led to a nuclear disaster (Fukushima Daiichi), causing a sharp drop in Japanese automobile exports to the United States.
  2. Man-made:
    • Terrorist drone attacks on Aramco’s oil refineries in Saudi Arabia resulted in a drop of 5.7 million barrels of oil per day, triggering a sharp spike in global oil prices
    • Supply chain politics by china: Chinese government cutting off exports of rare earths to Japan.
    • COVID-19: Led supply chain disruption has affected the automotive, electronics and white goods sectors, pharmaceutical industry which depends on China for Active Pharmaceutical Ingredients.
    • Security issues: the USA has put restrictions on exported microchips from China.
India’s vulnerabilities to supply chains disruptions:
  • Automotive parts: dependent on China for 27% of imports.
  • Medical devices: though India is the fourth largest market in Asia, it has an import dependency of 80%, which comes primarily from China, the U.S., Germany, Singapore and Japan.
  • Expanding electronic industry: worth $120 billion in 2018-2019 and is forecast to grow to $400 billion by 2025, is heavily dependent on imports, especially from China.
Countering Chinese policy of misusing its economic dominance:
  • The Supply Chain Resilience Initiative (SCRI): by India, Japan and Australia. France and U.K.
    • It aims to ensure supply chain stability by focusing on automobiles and parts, petroleum, steel, textiles, financial services and I.T. sectors.
  • Japan’s “China Plus One” business strategy: aimed at diversification of investments to the Association of Southeast Asian Nations (ASEAN), India and Bangladesh.
    • Companies in health care and medical devices, manufacturing personal protective equipment (PPEs), would have bene?ted more by shifting to India.
  • Atmanirbhar Bharat Initiative: Aimed at strengthening India’s capacities to participate more vigorously without being prey to supply chain disruptions.
    • Under which India identified a negative import list of 101 items.
    • Provides an opportunity for foreign companies to enter into tie-ups with reputed Indian defence manufacturers to tap into the growing defence market in India.
Conclusion: India has the capacity and the potential to become one of the world’s largest destinations for investments, and one of the world’s largest manufacturing hubs, in the aftermath of the pandemic.
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