The fast spreading coronavirus could help India to strengthen its position in the global supply chain but the decisions have to be taken at a faster pace to make inroads, according to corporate leaders and industry observers.
China commands around 12 per cent of the global trade compared with India’s share of 2.1 per cent, making it a much larger supplier to the world than India.
“One of the beauties of globalisation is that the world has got connected supply chains and China took a pole position in becoming a key part, especially in the manufacturing sector. Almost no vertical in the world can do without China in making some components,” said Sunil Kant Munjal, chairman of Hero Enterprises.
Speaking at the launch of his book — The Making of Hero: Four Brothers, Two Wheels and a Revolution that shaped India — in Calcutta, Munjal said companies and countries were devising a strategy not to depend on a single supplier even though it is the cheapest.
“The positive side is people are now creating a strategy called 1+1. Many global companies are saying that they will not depend on any one single source for anything at all. So, this is an opportunity for a country like ours to go out and take advantage,” said Munjal.
T. V. Narendran, MD and CEO of Tata Steel, concurred.
“I think the virus could be an opportunity for India because it accelerates the derisking of supply chains that originate from China,” Narendran said.
“The journey had started with the trade issues between US and China and now with the virus, there would be even more reason for people to not be over-dependent on the country. From an electronics or auto component point of view, many sectors will benefit as a consequence of this,” he added.
The company already follows the 1+1 model where it buys consumables from countries other than China.
India’s chief economic advsior Krishnamurthy Subramanian had earlier said that the virus outbreak was an opportunity for India even as China recovers from it.
“This is a good opportunity. India can follow up an export driven strategy integrating the assemble-in-India model,” Subramanian had said at an IIM, Joka, event last month.
According to Crisil, local manufacturers which compete with the Chinese in sectors such as ceramics and plastics are expected to benefit, with falling imports.
Moreover, India’s steel, paper, leather and textile readymade garment segments have an opportunity to expand exports.
“Last time, when the US-China trade war began, people said textiles and garments are businesses for us to tap. But Vietnam, Indonesia and Bangladesh did better than us. This time around there is a unique opportunity,” said Munjal.
However, sectors such as aluminium, electronics, and pharma bulk drugs in India will be unable to meet the void created in global trade by China’s virus problem as they are either running at peak utilisation or face capability issues, the Crisil note added.
