India misery clouds supply chain fix

May 04, 2021 | 18:33
The eye-opening events in India are concerning people all over the globe as leaders lose control of the pandemic, leading to tragedy on a massive scale – and the knock-on effects to global supply chains and economic recovery are there for all to see.
1542 p10 india misery clouds supply chain fix
India is one of Vietnam’s top 10 trading partners and the latter is India’s fourth-largest ASEAN trading partner. Photo: AFP

The long weekend holiday was a fairly muted affair in Vietnam compared to normal times as local authorities decided to limit the number of massive events and other gatherings in major cities across the country. Despite another long stint without a single coronavirus case in the community in Vietnam, leaders were taking no chances as events in India over the past month provided the ultimate motivation to remain vigilant in the face of COVID-19.

Having seemingly come through the worst of the pandemic, India permitted mass gatherings in March and into April, including political rallies and the popular Hindu Kumbh Mela festival. The events turned out to be pandemic “super spreaders”, and within weeks India began to record world-record case tallies over consecutive days as hospitals and crematoriums were overwhelmed.

In a warning to Vietnam to not suffer the same fate, Vietnamese diplomat Nguyen Thi Thanh Van, who lives in Hyderebad, told local media, “The Indians were nonchalant and now thousands of people are facing deadly outcomes.”

Van, who contracted COVID-19 a few months ago, added that many Indians still meet, hug, and talk to others.

Local authorities have taken this into account, raising the alert level for the recent holiday weekend and strengthening vows to penalise anyone found to attend a large gathering without taking the proper precautions.

The catastrophe in India is even more striking for the fact that the country has been one of the leaders in producing not only life-saving drugs, but also oxygen. And yet, only a small percentage of the population have been vaccinated, while hospitals have run out of oxygen, and tanks are being sold on the black market for around 10 times the regular price.

Indian Congress General Secretary Priyanka Gandhi Vadra wrote on Twitter that it was “a shameful state of affairs”.

“One of the largest oxygen-producing countries in the world is being forced to import as its leadership fails to deliver oxygen to its own despairing citizens. Why did they double exports in the middle of the pandemic in 2020?” she asked.

Congress leader Rahul Gandhi added, “India still has no COVID-19 strategy. Exporting oxygen and vaccines when our own people are dying is nothing short of a crime. India, which was a vaccine leader, has been reduced to a vaccine beggar.”

In spite of the chaos, last week the Asian Development Bank (ADB) projected that, economically, India sits in good stead to recover well in 2021.

Wider implications

India and China – Asia’s two largest emerging economies – are poised to lead the region’s economic revival in 2021. India is expected to grow 11 per cent this year after shrinking by 8 per cent in 2020, according to the ADB’s Asian Development Outlook report. Growth of 7 per cent is projected for 2022.

“Even with the current severe outbreak, growth will be high in large part because of last year’s big recession in India,” ADB chief economist Yasuyuki Sawada said last week.

Abdul Abiad, director at the bank’s Macroeconomic Research Division added, “We do flag the downside risk from the current severe outbreak. It is a risk that has implications not just for India but for South Asia more broadly and even for developing Asia.”

The outlook will be reviewed in July, Abiad said.

India, known in some quarters as the pharmacy of the world, had already stalled major exports of coronavirus vaccines in the past couple of months. It banned the export of antiviral drug remdesivir and its active pharmaceutical ingredients as the demand rocketed amid a record surge in COVID-19 infections and led to shortages in many parts of the country.

The World Health Organization in November issued a conditional recommendation against the use of remdesivir on hospitalised patients, saying there was no evidence that the drug improved survival and other outcomes in these patients. Many countries, including India, however, have continued to use it.

Previous mass export of oxygen and other drugs in 2020 and into this year have seemingly played a part in the country’s current predicament. However, according to leading Indian business daily Business Standard, such exports may still be “a saviour” to the country’s economy as it tries to fight through the pandemic.

It reported last week that the global trading environment “is very encouraging, as developed countries have increased the pace of vaccination and are reporting fewer numbers of infections”.

The alarming rise in infections in recent weeks and partial lockdowns in many parts of the country has increased uncertainty regarding the pace of economic revival. However, it added, given the strong possibility of modest-to-severe disruptions in domestic supply chains and contraction in the domestic demand, the best hope for posting reasonable economic growth comes from improved export prospects.

“Developed countries are relaxing the restrictions on economic activity at a faster rate than expected. The US is in the cusp of a booming economy and China has already posted a robust economic recovery. Most countries in East Asia and West Europe have shown strong economic recovery,” continued Business Standard. “So, the global demand for consumer goods, intermediates, and commodities is growing at a fast pace, as their rise in prices show, and most exporters are flushed with orders.”

Last year Vietnam and India were already trying to ramp up bilateral trade, with a total turnover of as much as $10 billion, lower than the $12 billion in 2019 due to the COVID-19 pandemic.

India is now one of Vietnam’s top 10 trading partners and Vietnam ranks India’s fourth-largest ASEAN trading partner, as of last autumn. And with the likely shifts in supply chains post-pandemic, the India-Vietnam trade route could become increasingly important for international businesses.

Nirukt Sapru, on the Global Advisory Board for digital bank Timo, said Vietnamese and Indian efforts to grow trade between both have clearly been working, with bilateral trade rising at the steepest rate ever recorded.

“As Vietnam plays an increasingly important role in global supply chains, its relationship with India is likely to strengthen further – especially with India investing close to $2 billion in over 200 projects in Vietnam. As the study shows, India presents many opportunities for Vietnamese companies seeking new and fruitful avenues for growth,” he said.

Supply chain game

These supply chain changes have been the crucial area that businesses around the globe have been grappling with in order to push recovery forward.

Hans Dau, CEO from management consultants Mitchell Madison Group, explained in December that early in the pandemic, companies simply froze up and lean supply chain risks were dramatically exposed. As the economy bounced back, short-term measures backfired as supply chains were as vulnerable and undiversified as before, but with broken or strained supplier relationships.

“Smart companies should use this crisis as an opportunity not to indiscriminately squeeze incumbent suppliers, but rather to strategically re-source core supply chains for both better long-term pricing and more diversity and robustness,” Dau wrote, suggesting that a desired end-state vision and suitable pricing models are some of the key steps in achieving this.

Willy C. Shih, professor of Management Practice in Business Administration at Harvard Business School, said that pandemic restrictions as well as US-China trade tensions have caused “a rise in economic nationalism”, and as a consequence manufacturers are under greater political and competitive pressures to increase domestic production, reduce or even eliminate dependence on risky sources, and rethink use of lean manufacturing strategies that involve minimising the amount of inventory held in their global supply chains.

“The challenge for companies will be to make their supply chains more resilient without weakening their competitiveness,” Shih told Harvard Business Review. “To meet that challenge, managers should first understand their vulnerabilities – some of which they should have taken long before the pandemic struck.”

According to an Ernst & Young survey carried out in late 2020 of 200 high-level supply chain executives based in the US, only 2 per cent of them said they were fully prepared for the pandemic, with 77 per cent reporting a negative effect to their operations. The survey also found that efficiency and reskilling supply chain workers will be top priorities in the next three years, along with ensuring more supply chain visibility.

“With the need for increased visibility across typically hundreds or thousands of suppliers, we are already seeing a shift from linear supply chains to more integrated networks connecting many players,” the Ernst & Young report stated. “Enabling this sea change are technologies such as Internet of Things devices or sensors that provide valuable data on where goods are in the chain and their condition.”

The report offered five priorities for organisations to focus on in order to strengthen: redefining strategy to take into account trade agreements and country incentives; improve disruption response with real-time monitoring of end-to-end supply chain; reduce working capital, and procurement spending; creating a competitive advantage through sustainability; and driving growth prospects by utilising a digital supply chain.

By Quang Bao

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