India’s opportunity to re-shape global trade flows
India is poised to take advantage of the supply chain shifts triggered by COVID, and knows it.
Its recent trilateral Supply Chain Resilience initiative along with Australia and Japan is a potentially game-changing opportunity to solidify its strategic position in the Indo-Pacific region. And the country is displaying remarkable strength across its 17 so-called ‘Champion Sectors’ – such as textiles and biotechnology – as it continues to move up the value chain with first-world markets.
I have been impressed and motivated by India as it continues to fuel its vision of a more competitive future in the global trade economy.
In March, Prime Minister Narendra Modi’s government announced incentives for ‘niche’ firms such as electronic manufacturers that have already attracted $1.5 billion of investments from more than twenty companies, including the likes of SAMSUNG and Apple. What’s more, India’s allowance of 100% foreign direct investment in most sectors, exempting companies from sharing their trade secrets with local partners, makes the country an attractive place to do business.
However, to convert these inbound investments into long-term gains and solidify its position as a world-class trade hub, India must rapidly enhance the competitiveness and resilience of its supply chains.
The post-COVID opportunity for India
It is no secret that businesses and countries alike are pursuing serious efforts to diversify their supply chains in the wake of COVID. They are seeking inputs from sources other than China, while mitigating themselves from the fallout of the ongoing US-China trade talks.
Not only is India feeling the impact of these challenges itself but has the added pressure of being looked to by key players across the world as a potential alternative to China.
According to Harvard Business Review, the United States imported $452 billion worth of goods from China in 2019. Only five low-cost countries have GDPs larger than that: Mexico, Indonesia, Brazil, Thailand, and India.
Of these candidates, India has the biggest economy and the largest untapped potential for filling the potential vacuum that will be created by diversifications away from China.
There are challenges that will need overcoming
Despite its apparent position of strength, the rapidly rising expectations of India risk outpacing what it can realistically deliver.
Domestic production needs improving, while complex federal and political structures can hamper the smooth flow of goods across the country. As Bipul Chatterjee (executive director at CUTS International in India) points out, while productivity remains steady, the challenge remains to reduce the country’s incremental capital-output ratio from the current level of 4.5 to 3.6.
New, robust partnerships and financial and technological investments will enable India to rise above these challenges and unlock even more growth.
Unlocking growth through partnership
In 2018, we created a $3bn fund in partnership with India’s National Investment and Infrastructure Fund (NIIF) with the aim of acquiring assets and developing projects in sea and river ports, freight corridors, special economic zones, inland container terminals, and invaluable infrastructure such as cold storage. DP World’s expertise in logistics infrastructure together with NIIF’s local knowledge and government expertise created the right combination to maximise the significant growth opportunities in the region. It is integral to me that we partner with leaders in their field to make them even stronger.
Today, we already benefit from a significant presence in India. Six port terminals across the Indian Coastline handle one-fourth of India’s container trade volume, and we are building two FTZs at strategic locations in Nhava Sheva and Chennai, helping to expand their trade and manufacturing capability. Projects like this as well as many others offer integrated supply chain capabilities across port terminals, rail, warehousing, inland rail terminals, cold chain, 3PL, and feeder services.
To help India further its ambitions, I am committed to an even deeper partnership between India and DP World, spanning the supply chain, technology, government and infrastructure development projects, and even sport, as the recently announced global logistics partner for the Royal Challengers Bangalore. Cricket is a part of India’s DNA and this year, due to COVID, the Indian Premier League has moved to the UAE for 2020, bringing significant logistical challenges for all concerned. We have used our teams and infrastructure in both India and UAE to ensure the players have everything they need to perform.
By making India’s domestic supply chains more efficient, we aim to reduce India’s cost of logistics while improving their real-time visibility, predictability, and connectivity.
Through our partnership, I hope that together we can energise and fulfil the vision of the Indian government’s Sagarmala Programme, set up with the aim of modernising the country’s logistics sector, boosting exports, and generating millions of new jobs.