4 minute read 10 Sep 2020
Repurpose the supply chain – COVID-19

How India can seize the global supply chain opportunity in the post COVID-19 era

By Gaurav Taneja

EY India Government and Public Sector Leader and AIM Advisory Government and Public Sector Leader.

At the intersection of public policy, private sector and citizen service. Avid traveler. Football enthusiast.

4 minute read 10 Sep 2020

With the newly defined objectives of global companies and countries to reduce their supply chain risks in the long term and fix the broken value chains in the short term, India has an exclusive opportunity to emerge as the preferred destination during and after the COVID-19 pandemic.

With prolonged COVID-19 crisis, both regional and global supply chains stand fractured. The countries and companies that, over the last few decades, had been increasingly optimizing their supply chains by restructuring their operations through offshoring to low cost countries, today face one big question: ‘What should they be doing to diversify their supply chain risks?’

With the disruptions in supply chains, every company that relied on inputs from abroad has been severely impacted. It is becoming evident that the supply chain strategies that were most celebrated in pre-COVID-19 world can no longer be relied upon. For instance, the lean or the ‘just-in-time’ inventory strategies that entail manufacturers to maintain minimum raw material, may need to be revaluated. There is thus a pressing need to re-engineer the global supply chains wherein the fundamental assumptions may need to be re-examined, manufacturing bases may need to be diversified, trade channels may need to be altered, and investment destinations may see a shift.

In line with the urge to create a resilient supply chain system, the consumption-driven developed economies such as the EU, Americas and Asia are not only rethinking their business strategies, but also are beginning to look at other nations to mitigate their supply chain risks. For instance, Japan has earmarked US$ 2.2 billion economic stimulus package to help its companies shift production out of China as the pandemic disrupted supply chains between the two trading partners.

As companies look to fix their broken value chains in the short term and reduce their supply chain risks in the long term, India has an exclusive opportunity to emerge as a preferred business destination during and after the COVID-19 pandemic. Recognizing this opportunity, the Honorable Prime Minister of India, in his address to the nation on 12 May 2020, laid-out his vision of an ‘Atmanirbhar Bharat’ (Self-reliant India) and outlined economy, infrastructure, system, demography and demand as the five pillars.

EY’s report on ‘Managing the impact of COVID-19 on India’s supply chains’ examines how can the vision of self-reliant India be realized by strengthening the social and economic pillars, while leveraging and improving the other four pillars – infrastructure, system, demography and demand. The report presents an in-depth analysis on:

  • The value chains of 15 key sectors in India
  • The disruptions in the sectoral value chains caused due to the COVID-19 pandemic
  • The opportunities and roadmaps to re-engineer and overhaul the Indian business machinery to make the country an attractive destination for foreign and domestic value chain investments
  • Sector-specific ‘possible interventions’ for the governments and private sector stakeholders – classified into short, medium and long-term categories – focused at creation of a strategic plan to return business to scale expeditiously, including building a resilient supply chain and planning for the “new normal”.
Key areas of intervention

While the report ‘Managing the impact of COVID-19 on India’s supply chains’ lists out sector-wise thought-through possible interventions, some major common areas of intervention as the economy prepares to tap on the potential opportunities being presented by the ‘New Normal’ scenario are as below:

Managing the impact of COVID-19

Under the above-mentioned groupings, some of the immediate measures the governments may undertake include:

  • Immediate release of incentives under the industrial and sectoral policies
  • Enact ease of not just doing business but resuming, diversifying and expanding too
  • Allow extended operating hours
  • Provide plug-n-play infrastructure and common facility centers (CFCs) in each district, with focus on technological support and export promotion
  • Establish helpdesks and digital platform to bridge information gap between suppliers, buyers and logistics service providers
  • Revisit, renegotiate and enforce FTAs, especially with respect to value addition clauses and change in import-export basket of India
Building a resilient supply chain is crucial not only to ensure current growth of the country, but also to respond to future disruptive events.
Gaurav Taneja
EY India Government and Public Sector Leader and AIM Advisory Government and Public Sector Leader.

What next

In the way the ’New Normal’ wave is building up, India’s (or for any country’s) economy can swing in two extreme ways. It can either be pulled into a deep depression, or if the potential opportunities are embraced and a well-thought-through plan of action is developed and effectively executed, then the economy can catapult to recovery and consequent development.

With India’s strong macro-economic fundamentals, favourable demographic dividend, improved ease of doing business (EoDB), and availability of resources for ramping up manufacturing capacities, the country can position itself as an attractive investment destination for investors across the globe. This would require the government, local bodies and the industry to leverage this opportunity optimally. The governments should, hence, prepare plans to manage the current outbreak as well as future disasters, if any, to ensure minimum disruption to the business ecosystem. The planning may include capacity building of human resource, current adoption as well as switchover to use of technology, preparing standard operating procedures and creating reserves/ funds for such situations. Perhaps, it is the nature’s decree for us to ‘go low and slow’ but certainly this gives us an opportunity for - Building a better working world!

Summary

With prolonged COVID-19 crisis, both regional and global supply chains stand fractured. There is a pressing need to re-evaluate the global supply chains wherein fundamental assumptions may need to be re-examined, manufacturing bases may need to be diversified, trade channels may need to be re-engineered, and investment destinations may see a shift.

As companies look to fix their broken value chains in the short term and reduce their supply chain risks in the long term, India has an exclusive opportunity to emerge as a preferred business destination during and after the COVID-19 pandemic.

About this article

By Gaurav Taneja

EY India Government and Public Sector Leader and AIM Advisory Government and Public Sector Leader.

At the intersection of public policy, private sector and citizen service. Avid traveler. Football enthusiast.