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News: US Federal Reserve chair Jerome Powell recently said that Americans should be prepared for the global supply chain to remain in crisis through 2022.
Covid-induced supply chain disruption highlighted the loopholes of total dependence on one country for vital products, and diversification will take a few years to implement.
What is the risk to the global supply chain?
If China’s ‘zero- Covid strategy’ fails after the Winter Olympics in February, there is going to be a major crisis. Delta variant could further the crisis.
-if it experiences a devastating Covid wave, the Chinese government will be forced to clamp down on exports of critical products, to fulfill the demand of its own population.
Lean manufacturing processes and just-in-time delivery mean a factory closure in one Asian country can unleash a global crisis.
How much is the dependence of the world on China for products?
According to the United Nations, China accounts for 28.7% of global manufacturing output. China is India’s largest trading partner; bilateral trade was at $92.68 billion in 2019.
A major chunk of electronic components, auto parts, consumer durables, active pharmaceutical ingredients (APIs), and key starting materials (KSM) required to manufacture lifesaving drugs are imported from China.
In case of any disruption, global healthcare would be severely affected. For example, 80% of heparin(used to prevent blood clotting) comes from China. Without heparin, critical care will suffer, virtually paralyzing the entire global healthcare delivery system.
What needs to be done by India?
It is important for every Indian industrial body to create a checklist of vulnerable items and secure supply till the end of 2022.
Most countries cannot be self-reliant due to small aging populations, which means a small consumer base
or a lack of a talented workforce. It is time for India to enhance its status by becoming a global manufacturing hub.
Source: This post is based on the article “Another Supply Chain Crisis?” published in Times Of India on 22 November 2021.
