Building Resilient Supply Chains for India’s Economic Security

Syllabus: GS3/ Economy

Context

• Recent geopolitical disruptions, particularly in West Asia, have highlighted India’s vulnerability to global supply chain shocks and the urgent need for long-term resilience.

Why Supply Chain Resilience is Critical for India?

• Energy Dependence: India imports nearly 85% of its crude oil and more than 50% of its natural gas requirements.
  • Volatility in global energy markets directly impacts inflation, fiscal stability, and economic growth.
• Food and Fertilizer Imports: India remains heavily dependent on imports of edible oils and pulses, exposing domestic markets to global price fluctuations.
  • The fertilizer sector relies significantly on imported phosphatic and potassic inputs, affecting agricultural productivity and food security.
• Pharmaceuticals and APIs: India imports nearly 65–70% of its Active Pharmaceutical Ingredients (APIs), mainly from China.
  • This creates vulnerabilities in the healthcare sector despite India’s strength in generic drug manufacturing.
• Critical Minerals and Rare Earths: India depends on imports for lithium, cobalt, copper, and rare earth elements essential for electronics, renewable energy, and electric mobility.
  • The global concentration of these resources increases strategic and supply risks.

Initiatives to Secure India’s Supply Chains

• The Supply Chain Resilience Initiative (SCRI) is a trilateral partnership launched in 2021 by India, Japan, and Australia to reduce reliance on single-source suppliers and enhance economic stability in the Indo-Pacific region.
  • It focuses on diversifying sourcing, utilizing digital technology, and sharing best practices to combat disruptions.
• Energy Security Initiatives: 
  • The National Green Hydrogen Mission aims to position India as a global hub for green hydrogen production and export.
  • Strategic Petroleum Reserves (SPR): India has established strategic petroleum reserves at key locations to cushion against global supply disruptions.
  • Renewable Energy Expansion: India’s total non-fossil fuel capacity reached 266.78 GW by 2025-end.
• Food and Fertilizer Security Initiatives: 
  • The National Food Security Mission aims to increase the production of pulses, oilseeds, and cereals.
  • The National Mission on Edible Oils – Oil Palm (NMEO-OP), launched in 2021 aims to make India self-reliant in palm oil.
  • Initiatives to promote nano-fertilizers and bio-fertilizers reduce dependence on imported chemicals.
• India has joined the Pax Silica Initiative to strengthen supply chain resilience in critical silicon-based technologies such as semiconductors and solar components.
• The India Semiconductor Mission (ISM) is a 76,000 crore  initiative to establish a robust domestic semiconductor and display manufacturing ecosystem.
• Production Linked Incentive (PLI) Scheme covers sectors such as electronics, semiconductors, telecom, automobiles, and advanced chemistry cells.
  • It encourages domestic manufacturing and integration into global value chains.

Way Ahead

• Strategic Diversification of Imports: India must diversify sourcing across geographies such as Africa, Latin America, and Southeast Asia to reduce overdependence on specific regions.
  • Long-term supply contracts and strategic partnerships should be prioritised for critical commodities.
• Adoption of AI, IoT, and blockchain should be scaled up for real-time supply chain monitoring and predictive analytics.
• Recycling of critical materials such as lithium-ion batteries and rare earths should be scaled up.

Source: TH