Launch of Supply Chain Resilience Initiative | 29 Apr 2021

Why in News

The Trade Ministers of India, Japan and Australia have formally launched the Supply Chain Resilience Initiative (SCRI).

• The SCRI aims to create a virtuous cycle of enhancing supply chain resilience with a view to eventually attaining strong, sustainable, balanced and inclusive growth in the Indo-Pacific region.
• The trio (India, Japan and Australia) along with the US makes Quad grouping.

Key Points

• Supply Chain Resilience (Concept):
  
  • Meaning: In the context of international trade, supply chain resilience is an approach that helps a country to ensure that it has diversified its supply risk across a clutch of supplying nations instead of being dependent on just one or a few.
  • Importance: In unanticipated events -whether natural, such as volcanic eruptions, tsunamis, earthquakes or even a pandemic; or manmade, such as an armed conflict in a region — that disrupt supplies from a particular country or even intentional halts to trade, could adversely impact economic activity in the destination country.
• Supply Chain Resilience Initiative:
  
  • Background:
    
    • The Covid-19 pandemic was having an unprecedented impact in terms of lives lost, livelihoods and economies affected, and that the pandemic had revealed supply chain vulnerabilities globally and in the region.
  • About:
    
    • Objectives:
      
      • To attract foreign direct investment to turn the Indo-Pacific into an “economic powerhouse”.
      • To build a mutually complementary relationship among partner countries.
      • To work out a plan to build on the existential supply chain network. Japan and India, for example, have an India-Japan competitiveness partnership dealing with locating the Japanese companies in India.
    • Features:
      
      • The SCRI, first proposed by Japan, aims to reduce dependence on China amid a likelihood of rechurning of supply chains in the Indo-Pacific region amid the Covid-19 pandemic.
      • Initially, SCRI will focus on sharing best practices on supply chain resilience and holding investment promotion events and buyer-seller matching events to provide opportunities for stakeholders to explore the possibility of diversification of their supply chains.
      • Joint measures may include supporting the enhanced utilisation of digital technology and trade and investment diversification.
      • Expansion of the SCRI may be considered based on consensus, if needed, in due course. The ministers have decided to convene at least once a year to provide guidance to the implementation and development of the SCRI.
        
        • This assumes significance in the wake of Japan's keenness to onboard the ASEAN in the initiative, something that India has opposed.
        • India wants to safeguard its interests from China’s indirect influence through the bloc (ASEAN) as it builds on its self-reliance through reduced dependence on imports.
• Significance to India:
  
  • Following the border tensions with China, partners such as Japan have sensed that India may be ready for dialogue on alternative supply chains.
  • China still remains a large source of critical imports for India, from mobile phone components to pharmaceutical ingredients. An internal push to suddenly cut links with China would be impractical.
  • Over time, if India enhances self-reliance or works with exporting nations other than China, it could build resilience into the economy’s supply networks.

Way Forward

• It will help boost India’s manufacturing competitiveness and increase its share in world trade. In this pursuit, there is a need to create an infrastructure that raises the competitiveness of India’s exports.
• While India appears an attractive option for potential investors both as a market and as a manufacturing base, it needs to accelerate progress in ease of doing business and in skill building.

Source: PIB