India Can Be The Next Big Global Supplier

Coronavirus is both a crisis and an opportunity. The government can help India emerge as an alternative sourcing destination

- Sudhir Mehta

Over the past decade, China has been one of the world’s fastest growing economies. It has become central to the global supply chain. But currently, its going through a black swan event, which will have a significant impact on global trade dynamics.

The unfortunate impact of coronavirus has already started showing effects across supply chains of most global companies. At the current levels, the GDP growth in China during the first quarter is expected to fall as low as 4 per cent and, if the effect of outbreak continues, the adverse effect on annual growth could be much worse. China’s top exports include products such as electrical machinery, appliances and equipment. India’s exports are dominated by mineral products, chemicals and precious metals.

The current disruption in China will essentially mean reshaping of global supply chains, providing a window of opportunity to India. Most global companies are looking to mitigate their ‘China’ exposure and create alternative supply options. Travel restrictions may dissuade companies from undertaking new product development in China for some time.

Given the dynamics of world trade, other Asian economies like Vietnam or Thailand are the first stop for these global companies. A window is now open for India to take immediate steps to position itself as an attractive alternative sourcing destination to China.

A sourcing destination

The story of India in manufacturing exports, with some notable exceptions, has been one of unrealised potential, and we are a local production and consumption focussed nation. China’s GDP per capita is five times that of India’s and its manufacturing sector is 10 times bigger than India’s.