Context: In a move to counter China’s dominance of supply chain in the Indo-Pacific region, trade ministers of India, Japan and Australia have formally launched the Supply Chain Resilience Initiative (SCRI).
Background

• In the context of international trade, 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.
• Importance: In unanticipated events -whether natural, such as volcanic eruptions, tsunamis, earthquakes or even a pandemic; or manmade, such as an armed conflict in a region — that disrupt supplies from a particular country or even intentional halts to trade, could adversely impact economic activity in the destination country.

About SCRI

• It aims to create a virtuous cycle of enhancing supply chain resilience with a view to eventually attaining strong, sustainable, balanced and inclusive growth in the region.
• Initially, SCRI will focus on sharing best practices on supply chain resilience and holding investment promotion events and buyer-seller matching events to provide opportunities for stakeholders to explore the possibility of diversification of their supply chains.

Possible policy measures under the initiative may include

1. supporting the enhanced utilization of digital technology.
2. supporting trade and investment diversification.

Significance

• It aims to reduce dependence on China amid a likelihood of rechurning of supply chains in the Indo-Pacific region amid the Covid-19 pandemic.
• It seeks to build upon the existing bilateral frameworks like the Asean-Japan Economic Resilience Action Plan and India-Japan Industrial Competitiveness Partnership and attract foreign direct investment in the region.

Objective

• 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.

Reasons for the Initiative

Covid-19 Realization: With spread of Covid-19 globally, it has been realized that dependence over a single nation is not good for both global economy and national economies:

• Assembly lines are heavily dependent on supplies from one country.
• The impact on importing nations could be crippling if the source stops production for involuntary reasons, or even as a conscious measure of economic coercion.

USA-China Trade Tensions: The tensions began when the United States and China both applied tariff sanctions on eachother.

India as an Emerging Supply Hub: The businesses have started seeing India as a “hub for supply chains”.