Recently Japan has initiated a supply chain resilience initiative (SCRI) with India and Australia. What is SCRI? What is the need for it?
In light of the COVID-19 crisis and the recent global-scale changes in the economic and technological landscape the necessity and potential to enhance the resiliency of supply chains in the Indo-Pacific region came into limelight. Supply chain resilience is an approach that helps a country to ensure that it has diversified its supply risk across a clutch of supplying nations instead of being dependent on just one or a few. SCRI is an approach that helps a country to ensure that it has diversified its supply risk across a clutch of supplying nations instead of being dependent on just one or a few.
- The initiative aims to reduce the dependency on a single nation (at present China).
- SCRI is a direct response to individual companies and economies concerned about Chinese political behavior and the disruption that could lead to the supply chain.
Objective of SCRI
- To attract foreign direct investment to turn the Indo-Pacific into an “economic powerhouse”.
- To build a mutually complementary relationship among partner countries.
- To work out a plan to build on the existential supply chain network. Japan and India, for example, have an India-Japan competitiveness partnership dealing with locating the Japanese companies in India.
Need for SCRI
- If supply chains are heavily dependent on supplies from one country, the impact on importing nations could be crippling if that source stops production for involuntary reasons, or even as a conscious measure of economic coercion.
- US-China trade tension could threaten globalization as a whole and have a major impact on countries like India, Japan and Australia which are heavily reliant on international trade.
- SCRI can work with Association of Southeast Asian Nations (ASEAN) to build stronger supply and manufacturing chains that are protected from external shocks and influences.
India needs to enhance self-reliance against China, so that it could build resilience into the economy’s supply networks. Economic measures are of real value in this regard.