How Can Indian Businesses Create Resilient Global Value Chains?

In an increasingly interconnected world, the global economy is shaped by complex networks of production and trade, known as global value chains (GVCs). For Indian businesses, participating in and shaping resilient GVCs is critical for sustained growth, competitiveness, and economic development. However, the disruptions caused by events such as the COVID-19 pandemic, geopolitical tensions, and climate change have underscored the need for resilience in these networks.

Embracing Digital Transformation

Digital technologies are key enablers of resilient GVCs. Indian businesses can leverage Industry 4.0 technologies such as artificial intelligence (AI), blockchain, the Internet of Things (IoT), and big data analytics to enhance supply chain visibility, predict disruptions, and optimize operations. For instance, blockchain can provide end-to-end transparency, ensuring trust and efficiency in transactions, while AI can facilitate demand forecasting and inventory management. Indian IT and technology firms, such as Infosys and Wipro, exemplify how digital solutions can support global clients in enhancing their value chains.

Diversifying Supply Chains

Over-reliance on a single source or geography for raw materials or production can expose businesses to significant risks. Indian companies should adopt a multi-sourcing strategy by identifying alternative suppliers across different regions. Diversification helps mitigate the impact of localized disruptions, such as natural disasters or geopolitical conflicts. Partnering with suppliers from ASEAN countries under India’s “Act East” policy and leveraging trade agreements like the India-UAE Comprehensive Economic Partnership Agreement (CEPA) can help businesses diversify export destinations effectively.

Strengthening Domestic Ecosystems

Building resilience begins at home. Indian businesses should collaborate with domestic suppliers and MSMEs to develop robust local ecosystems. Supporting smaller enterprises through technology transfer, skill development, and financing will not only strengthen value chains but also foster inclusive growth. Initiatives like the “Make in India” campaign and the Production Linked Incentive (PLI) schemes play a crucial role in enhancing the competitiveness of Indian manufacturing and integrating it into GVCs.

Investing in Sustainability

Sustainable practices are becoming non-negotiable in GVCs. Global buyers increasingly prefer suppliers that adhere to environmental, social, and governance (ESG) standards. Indian businesses must adopt green technologies, reduce carbon footprints, and ensure fair labor practices to align with global expectations. Opportunities for sustainability include using renewable energy sources in production facilities and collaborating with global sustainability platforms to showcase commitment to green practices.

Enhancing Trade and Logistics Infrastructure

Efficient infrastructure is a cornerstone of resilient GVCs. Indian businesses should advocate for improved ports, transportation networks, and digital logistics systems. The development of dedicated freight corridors, multimodal logistics parks, and smart ports under the PM Gati Shakti initiative offers significant potential. Private sector participation in infrastructure development can complement government initiatives and expedite modernization efforts.

Upskilling the Workforce

A skilled workforce is indispensable for managing sophisticated value chains. Indian businesses should invest in upskilling employees in digital tools, supply chain management, and cross-cultural communication to meet global standards. Collaborating with academic institutions and leveraging government schemes like Skill India can help address skill gaps effectively.

Leveraging Regional Collaborations

Indian businesses can capitalize on regional trade and innovation networks to bolster their GVC participation. Frameworks like BIMSTEC, the Indian Ocean Rim Association (IORA), and the Indo-Pacific Economic Framework (IPEF) provide platforms for collaboration in areas like technology transfer, trade facilitation, and capacity building. Focusing on sectors where India has competitive advantages, such as pharmaceuticals, textiles, and IT services, and engaging actively in global standards-setting bodies can further strengthen India’s position in GVCs.

Adopting a Risk Management Approach

Proactive risk management is vital for resilience. Indian businesses should conduct regular stress tests, develop contingency plans, and establish business continuity frameworks to prepare for potential disruptions. Digital twins and simulation models can help visualize and mitigate risks across the value chain, ensuring businesses are better prepared to respond to unforeseen challenges.

Creating resilient global value chains is both a challenge and an opportunity for Indian businesses. By embracing digital innovation, diversifying supply sources, fostering sustainability, and strengthening domestic capabilities, India can position itself as a reliable and strategic partner in the global marketplace. Resilience in GVCs is not just about surviving disruptions but thriving in an unpredictable world. Indian businesses, with their adaptability and entrepreneurial spirit, are well-equipped to lead this transformation.