Global Supply Chain & India

Global supply chains are undergoing a radical reconfiguration, in the backdrop of the COVID-19 pandemic, rising economic nationalism across the world, and significant geopolitical shifts.

India emerges as a natural choice in filling the supply chain vacuum left by the exodus from China. The strength of India’s case lies in its diverse business landscape, skilled workforce, and domestic market of 1.3 billion people with growing disposable incomes.

Challenges

India offers global investors a large and attractive market, a sizeable demographic advantage and a vibrant private sector, though there are a few obstacles:

• poor infrastructure, and
• Stifling bureaucracy.

Opportunities

Specific industries in India are relatively better positioned than others to emerge as attractive and viable alternative locations in the global supply chain rebalancing efforts.

• Life Sciences and Pharmaceuticals: The Indian pharmaceutical industry is the world’s third largest in terms of volume and thirteen largest in terms of value. It also caters to 62 per cent of the global vaccine supply and is the largest supplier of generic drugs to the global manufacturing industry.
• Chemicals: India’s chemical industry is expected to clock a compound annual growth rate (CAGR) of 7 to 8 per cent to reach USD 160 billion by 2025 and account for 3-3.5 per cent of the global chemical industry.
• Automobile: The Automotive Mission Plan 2016-26 targets 3X growth for automotive industry and establishes India as a manufacturing base and an export hub. The plan also seeks to outline the trajectory of advancement of the auto-ancillary ecosystem in India.
• Telecom: India is home to the second largest digital citizenry in the world, after China, with a reported 673 million internet users12, and is also the second largest global market for smartphones.

Way forward

While India has many of the ingredients to emerge as the preferred market for global investments and manufacturing, it is critical that the government maintains both the pace as well as scalability of reforms, while strengthening infrastructure growth.