Amid Intense Competition India Emerging As A Leader In Global Supply Chains: Steven A Altman

India has the necessary ingredients to become a key player in the emerging global supply chains, says a senior US business school professor.

The expanding share of exports in the country’s gross domestic product (GDP) vis-a-vis China already points in this direction, says Steven A Altman, Adjunct Assistant Professor at the New York University Stern School of Business.

Swarajya caught up with Altman, who is also the director of the DHL Initiative on Globalisation at the university, and who was recently in New Delhi for the release of the global parcel delivery service’s annual Global Connectedness Report 2024.

Excerpts:

Is the intense debate around the future of globalisation owing to the phenomenon getting reoriented to be now driven more by the East than the West, which was the case initially?

Your question connects to this debate about the backlash against globalisation. And globalisation has long been controversial in a lot of parts of the world. [Since] we have loyalties to our own countries, in some ways that’s understandable.

If you look at the current public opinion data, globalisation has more opposition in Western economies. But if you go back a couple of decades, there was more opposition in the developing countries against concerns around exploitation and so on.

But if I try to connect that briefly to the theme of global connectedness, it’s about the contrast between three pieces: predictions of deglobalisation, policies around globalisation and the actual performance of globalisation.

While some have been predicting deglobalisation, the actual globalisation, based on increased inflows into countries, is not going to reverse. And that’s the point that we want to make as that changes the nature of debate in [several] important ways.

Even as the impact of the Covid 19-induced slowdown has retracted, how do you see new challenges such as conflicts in Ukraine and the Middle East, inflationary pressures and prospects of a recession in the developed Western economies impacting the global supply chains?

I would separate them into two sides: military conflicts and inflationary pressures as they both push in opposite directions. We did a report several years ago on the enablers of globalisation and what countries could do to participate more.

The first foundation is peace and security. The violent conflicts that we see pose an important risk. On the other hand, globalisation is more of a contributor to fighting back against inflation. However, if we raise more barriers to trade that will raise inflation because that means we are not getting goods from the cheapest and most efficient sources.

Princeton University [economic] historian Harold James has the thesis that the kind of challenges we are facing with inflation and supply chains today, in the beginning, produced worry about globalisation.

Eventually, the solution to these involves more openness and more connections to other countries. Because if we want to get costs down, diversify and become more resilient, we can get those things by connecting across countries rather than building up barriers.

You may have [some] controversy but ultimately you solve the problem by getting the goods from the most efficient sources.

Also, amid all the talk around the China Plus One Strategy. How do you see it impacting globalisation as well as global supply chains?

We are seeing the China Plus One strategy moving along. Most companies that are in China aren’t exiting the country but are [also] looking at other locations to build capacities to both diversify and have business models that are better positioned going forward. Ultimately, this is another way that globalisation continues to advance.

Globalisation isn’t about putting everything in one place, it’s about becoming more diversified. That’s the direction we are going to continue to see in supply chains. India has a great opportunity there and we are starting to see some significant momentum.

In 2023, India attracted the second-largest amount of announced inward greenfield FDI (foreign direct investment) among all countries. That means countries are announcing more plans to invest in India than in any other country except the US.

This big increase in the share of investment going to manufacturing points directly to India’s growing role in [global] supply chains. India has the scale and a lot of other key enablers to be an important participant.

Yes, there are strong competitors out there like Vietnam but there’s no reason why India and the Indian companies shouldn’t have a big part of that. There are already some very promising signals. Many companies are growing their operations in India to serve both the domestic and export markets.

A fact that was news to me is that India’s exports as a share of GDP of goods and services combined are now higher than China’s! That means India is now an economy that is more oriented towards exporting overall goods and services than China, which is a very notable development. This development, which happened a couple of years ago, is quite exciting.

How do you see the proposed India-Middle East-Europe Economic Corridor — possibly the most ambitious infrastructure project announced since the Marshall Plan after the Second World War —influencing the global economy?

Since this is still a new announcement, we have to see how the implementation rolls out. If the vision is implemented in the way it’s been articulated, this will be very beneficial for the whole supply chain from India through to the Middle East to Europe.

It will help support diversification, growth and efficiencies. However, the conflict that is raging in the Middle East is a challenge and I hope fervently for it to be resolved for this plan to be realised.

Finally, if I were to ask you to identify the most significant changes or transformations in globalisation that have been creating new business opportunities since 2020, what would they be?

The two big ‘Ds’ of digitalisation and diversification! The Covid-19 pandemic has accelerated ‘digitalisation’. That’s an important step towards the very fast growth of e-commerce. This has the potential to be important both within countries and between countries as the possibility to grow services trade increases significantly because of more work being digitalised.

More remote work can become [part of] services trade if you have an increase in offshoring. The other side is ‘diversification’. We now have much more focus on diversification in supply chains and that will ultimately be beneficial though it does involve challenges along the way.