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It has been over six months of turmoil, which this world is going through. From the closure of Survival transportation (metros and local trains) to complete lockdown and unlocking process, the cyclic effect of this pandemic has led to a never imagined state of tumult for every living being. Even the most established and flourishing businesses have received such an unprecedented blow in the form of this world pandemic.
The stages of the spread got delayed miraculously with the drastic steps taken by the government. However, on the flip side, these extreme measures took a toll on every niche of Indian industries. Complete closure of international movement of both humans and procurements hampered the rolling stock supplies, eventually slowing and limiting the production processes. From a broader perspective, six months is not a period long enough to change the face of Industrial supply chains. However, the newly established norms have pushed us speedily towards a self-sustaining ecosystem.
The origin of the virus being identified to China and further cross-border tensions at LAC has led to a dire complete ban on imports from the country. The restriction on the logistics due to pandemic got new backing when the government decided to curtail all relations with urgency due to China's unsolicited movements towards Indian territory at the Borders in the Ladakh region.
It was a knee-jerk reaction affecting the supply chains at a paramount level. The Indian industry is facing a reverse impact, in the short run at least, as the Imports from China are more than four times the exports. On the other side of the picture, this paradigm shift might prove to be an anchor step in creating a self-reliant India paving the way for it to become a world leader!
An Overview
We need to address the core issues of the trade setup between India and China to understand the consequences and probable solutions for bridging the gap in supply chains.
1. A complete ban led to supply chain blockage for most industries because about 15% of total imports in India come from China.
2. Currently, the cheapest supplies for sectors like automobiles, construction, pharmaceuticals, power equipment, heavy machinery have been coming in from China.
3. In the Construction segment, steel sheets, chemicals, flooring materials, steel panels are all sourced from China due to factors like:
- Technology,
- Cheaper availability,
- Uninterrupted supply,
- And most importantly, permission to rebrand it in Indian name.
4. Indian companies might not have the immediate potential to fulfil the gap in the procurement cycle. However, Giants like BHEL now have the revival opportunity to be a pivotal step in indigenous production of heavy machinery in India.
5. India is the second-largest producer of steel in the world. As these Chinese supply chains have now warped, it can be used as a blessing in disguise for Indian Industries to stop the over-dependence on the Dragon land for the imports!
6. The holistic approach by the government by supporting through the Atma Nirbhar Bharat Campaign is going to be a game-changer in the whole transition.
Time to Act
Companies and entrepreneurs across the country have been discussing the possible and positively viable measures for the gradual shift.
1. The overall change in the mindset of the construction industry is the need of the hour.
2. The manufacturers of formwork and all other construction raw materials have to make sure that they adopt the "Make in India" principles to create a self-reliant new ecosystem.
3. It is necessary to approach Indian Manufacturers and suppliers for the procurements, even if they face short term cost escalation. More demand will increase production, which in turn will start overall cost reduction and set the ball rolling on the favorable side.
4. The influential establishments have to play a vital role in creating awareness in their respective bays about the need for the transition and the government policies that will help them to shift the epicenter from China to India.
5. Develop new trade agreements with other countries for procuring technology that is unavailable until we can start home-production.
At Knest Aluform, we have been able to sustain this blow because of the virtues that we stand for. Our forethoughts and planning have been the strength that kept us going. We served with on-time deliverables due to optimization of stock and maintaining the correct inventory. As a crucial part of the Construction Industry, Knest is now working rigorously to achieve the highest level of being self-reliant and working with the indigenous resources for procurements.
Last few years we have seen some breakthroughs with the Make In India Campaign. The effects of the pandemic can be aligned with the campaign and used for Indian Market's advantage. Although it will need complete integration of the Government's support and equal adoption of policies by the industries, it seems achievable with the grit that we have as a strong Nation!
A road-map of import substitution and innovation and manufacturing at the local level needs to be encouraged.
Import substitution
The first step comes with becoming self-reliant and reducing the over-dependence on imports. We need to operate through import routes that are closest cost wise to China, such as Korea and Singapore.
The trade agreements, the levy of import duties can be rearranged to curb the movements for products routed through countries that have free-trade agreements with India.
Policies & Measures
With the support of government policies and incentives in the form of financial packages and uncomplicated loan conditions will be a primary step to draw even small manufactures towards this movement.
Production linked incentives, better FDI routes and stage-wise import policies can be rolled out for controlling imports from China in any form.
MSME
Involvement of MSMEs along with large manufacturing groups, horizontal as well as vertical integration of raw material processes, subsidies to manufacturers based on local procurements are also some of the reforms that can help to promote positive zest towards Atma Nirbhar Bharat movement.
Concluding with a view towards an optimistic horizon, that will shape the future of the state of the economy.
The real-estate sector might see a surge in fewer walk-ins resulting in fewer launches, and extended timelines. That is the time when managing demands in a way that leads to overall price reduction will be a challenge that we will jointly be ready to face.
The construction sector will also be a proud witness of a never imagined exemplar shift to a new ecosystem of an Atma Nirbhar Bharat!