India has opportunity to get ahead in global supply chain reconfiguration race: KPMG report

The COVID-19 pandemic led to the dismantling of global supply chains as countries imposed lockdowns, exposing the reliance of businesses around the world on a few markets for fulfilling their manufacturing and sourcing requirements, a KPMG report said on Tuesday.

According to the report titled ”supply chains post COVID-19”, India has a unique opportunity to adopt a more inclusive and proactive role in leveraging its vast pool of skilled resources, competitive costing and developed eco-system for select sectors to get ahead in the global supply chain reconfiguration race.

The report suggests that a more realistic approach for many companies looking to realign supply chains would be to consider a ”China + n” strategy to their future course of action. This allows for a non-linear consideration of global trade, more in the nature of production networks with multidimensional value accretion phases rather than sequential links in a chain.

“We, therefore, expect a de-emphasis on efficiency and the lowest cost dominant determinants, in favour of an interdependent, ecosystem-based value framework that assigns more equal weight to risk exposure, supply alternatives, tax considerations, and channel complexity,” said the report.

India has a favourable business environment and liberal FDI norms; Constantly improving Ease of Doing Business rankings, enormous consumer base and rapidly improving digital infrastructure, outlined the report.

Moreover, the country is home to the second-largest digital citizenry in the world, after China, with a reported 718.74 million internet users. As per KPMG in India”s analysis, India is set to be home to a billion digital users by 2028.

The report highlights critical sectors that India must focus on to realise the opportunities presented by the global supply chain reconfiguration. These include chemicals, pharmaceuticals, automotive and telecom, among others.

India is well-positioned to be an alternate source of supply to the global chemical industry with permission for 100 per cent FDI in the sector, dedicated investment zones, availability of raw materials and a large domestic talent pool, said the report.

Besides, the country”s pharmaceutical industry has progressed strongly and today is one of the largest generic suppliers to the global markets.

In the telecom sector, India has plenty of enabling factors that should prove attractive to foreign investors considering the country as a destination for their manufacturing plants. These include a phased manufacturing programme to promote the domestic production of mobile handsets, a subsidy in SEZs, among others.

Besides, the success of domestic and multinational auto component players in India over the years, lends robust, credible support for positioning the country as a reliable partner in global auto supply chains. The Automotive Mission Plan 2016-26 targets 3x growth for the automotive industry and aims to establish India as a manufacturing base and an export hub.

Neeraj Bansal, COO- India Global and Leader – Supply Chain Re-alignment, KPMG in India says, “India has a unique opportunity to take a more inclusive and proactive role in leveraging our vast pool of skilled resources, competitive costing and developed eco-system for select sectors to get ahead in the global supply chain reconfiguration race.”