GS-2 INTERNATIONAL RELATIONS-Bilateral, regional and global groupings and agreements involving India.
Japan has mooted the Supply Chain Resilience Initiative (SCRI) as a trilateral approach to trade, with India and Australia. The initiative aims to reduce the dependency in china,with Covid-19 and trade tensions between China and the United States.
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.
Unanticipated events whether natural such as volcanic eruptions, earthquakes or even a pandemic; or manmade such as an armed conflict in a region that disrupt supplies from a particular country could adversely impact economic activity in the destination country.
Why Japan proposed?
- Potentiality of joining other Asian and Pacific Rim nations later.
- Assembly lines are heavily dependent on supplies from one country.(which would be break down by a pandemic like COVID19.)
- Conscious measure of economic coercion.(in 2019 Japan exported $135 billion worth of goods to China and imported $169 billion.)
- South China Sea trade tensions have caused alarm in Japanese trade circles.
- Japan is heavily reliant on international trade.
- Nudge to diversification of risk.(As part of the country’s economic stimulus package, the Japanese government earmarked $2.2 billion to incentivise its companies to move their manufacturing out of China.)
- Japan is the fourth-largest investor in India($33.5 billion in the 2000-2020;2% of inflows in that period)
- Imports from Japan into India more than doubled over 12 years to $12.8 billion in FY19.
- Exports from India to the world’s third-largest economy stood at $4.9 billion that year.
- India having pulled out of the Regional Comprehensive Economic Partnership.
- India and Japan are a part of QUAD (also includes the USA and Australia) and Malabar (naval) exercise (also includes the USA).
- Alternative supply chains.
- China’s share of imports into India in 2018-5%.
- Active Pharmaceutical Ingredients for medicines such as paracetamol, India is fully dependent on China.
- In electronics, China accounts for 45% of India’s imports.
- Chinese supplies dominate segments of the Indian economy.(3% share in total arrivals)
- Australia, Japan and India are already part of another informal grouping, the Quadrilateral Security Dialogue(QUAD).
- China has been Australia’s largest trading partner(6% of Australia’s exports, with iron ore, coal and gas dominating the products.)
- China banned beef imports from four Australian firms in May
- Levied import tariffs on Australian barley.
- China’s education Ministry warned its students,‘rising racism’ in Australia, urging them to re-assess their aspirations.
- China’s Ministry of Culture and Tourism warned citizens should by ‘no means travel to Australia’ on account of rising ‘racist incidents’.
- While India appears an attractive option for potential investors both as a market and as a manufacturing base, trade experts point to the need for India to accelerate progress in ease of doing business and in skill building.
- Tax incentives, as the one recently announced to compete with the likes of Vietnam and the Philippines for investments in manufacturing, alone may not suffice.
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.