India addresses supply chain risks under IPEF framework

India is evaluating sectors prone to supply chain disruptions under the Indo-Pacific Economic Framework (IPEF), focusing on key areas like chemicals and technology. The IPEF agreement aims to reduce reliance on single sources and enhance production within member countries. Industry input will be collected to address vulnerabilities, with further discussions scheduled for the IPEF council’s September meeting in Washington.

 

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India has launched an exercise to identify crucial sectors that are susceptible to supply chain disruptions due to their reliance on imports, as part of its commitments under the Indo-Pacific Economic Framework (IPEF). This effort focuses on sectors including chemicals, automobiles, pharmaceuticals, advanced technology, electronics, and critical minerals, which are crucial for national security and economic stability. 

According to an official, “Discussions are on to work on sectors where supply chain concentration and vulnerabilities are crucial to be addressed before they become bottlenecks.”

The IPEF Supply Chain Resilience Agreement, effective since February, aims to reduce dependence on single sources, particularly from China, and promote production within member countries.

IPEF, consisting of 14 nations including India, Australia, the US, Japan, and others, represents 40% of global GDP and 28% of global trade in goods and services. Its framework is structured around four pillars: trade, supply chain resilience, clean economy and fair economy.

India is participating in all pillars except trade. The focus on critical sectors is significant because these sectors depend heavily on single suppliers or regions, with limited availability of alternative sources.

As part of this exercise, the Indian government is soliciting input from industry regarding critical imports, domestic production capacities, and supply chain issues within the IPEF framework. The industry has been asked to provide data on these areas, along with proposals for diversification and investment to address supply chain challenges.

The concerns driving this initiative include the large volume of imports needed to meet domestic demand, insufficient domestic production capacity, and the high interconnectedness of critical sectors, which heightens vulnerability to supply disruptions. Additionally, transport constraints, both actual and potential, further complicate the supply chain.

The IPEF supply chain council has established its terms of reference and initial priorities. These issues will be further discussed at the council’s first in-person meeting, scheduled to take place in Washington in September, alongside the Supply Chain Summit. This meeting will focus on advancing the agenda of improving supply chain resilience and addressing the identified vulnerabilities.