India appear as an important contender in global supply-chain diversification: Bofa

According to BofA Global Research, India is emerging as a strong challenger as an alternative supplier as the world is looking to diversify its supply chain after the pandemic. For India, there are two roadblocks: high logistics costs and the infrastructure gap to become a powerhouse and an export hub. The report says India is a large exporter of intermediate goods and is gradually improving its export market in favour of consumer goods and advanced manufacturing value adds which will move it up to the global value chain.

As per the World Bank data, India’s GVC output as % of total output is at 3.17% and is already the 5th largest in the world behind China, the US, Japan and Germany. India has achieved this by making some changes in its policies like the declaration of 461 districts as export hubs which are managed by export promotion committees. Besides that, there a production-linked incentive schemes (PLIS) and major ports built as part of the Maritime Vision 2030.

Now, India is working to address the two major blocks: high logistics cost and infrastructure gap that will help India to become the contender in the global supply chain. At present, the logistics cost of India is one of the highest in the world, which is around 13.5% of GDP but the target is to bring it down to 7.5% by 2029.