The Quad: A New Chance for India
The coming together of four countries on the common grounds of democratic politics, pluralistic societies and market economies is believed to have been fueled by the aggressive expansionist policy(s) adopted by China.
The Quadrilateral Security Dialogue (QUAD) first came up in the aftermath of the 2004 tsunami in the Indian Ocean to coordinate humanitarian responses to the devastation. While China has chosen to delay any formal statement on the coming together of the United States of America, Japan, India and Australia, a prominent editorial in a Chinese publication has called it America's "hegemonic anxiety".
Few political observers and economic experts have also called out the QUAD as an attempt of the States to re-establish its position in the post-pandemic world with continued McDonaldisation.
The Coming Together of the Quad
Amidst the attempts of the two superpowers (US and China) to establish their strong presence in the Indo-Pacific region, the QUAD offers India an opportunity to closely work with the developed economies and strategise for long-term infrastructure benefits.
The US, Japan and Australia are well-aware of the fact that India is the only substitute in the Indo-Pacific region that can counterbalance Chinese aggression. It is vital to note that India is the perfect state to handle China with its maritime presence along East Africa in the Indian Ocean and its location at the confluence of Southeast Asia.
The four nations of the QUAD have agreed to work in cooperation in order to ensure a free and open Indo-Pacific, which will be both resilient and inclusive. The new areas of collaboration include cybersecurity, infrastructure, space, education and people-to-people relations.
On the ground of cybersecurity, India witnessed the second-highest number of cyber attacks in the world between 2016 and 2018 according to the Nasscom’s Data Security Council of India Report published in 2019. In 2020, India witnessed a total cost data breach of approximately $2 million on average. All of this comes at a time when India is predicted to have a digital economy valued at $435 billion by 2025.
India lacks a national cybersecurity policy and the adequate setup for it, which definitely calls for some assistance from it’s partners, in particular the US. The then Defence Minister Manohar Parrikar’s visit to the US Cyber Command in Fort Meade, MD, in 2016 definitely conveyed a message that both the countries are taking cybersecurity seriously and are working on the same.
The onset of the pandemic has brought the global supply chain to a halt. This looks like a remarkable opportunity for India to shuffle the cards in its favour and redraw the hub for manufacturing and production. While China is aggressively trying to capture the market, at least in the Indo-Pacific region; India can, with the able assistance of its partners, compete at par with its Asian neighbour. In a region dominated by Chinese products, India’s move to voice self-reliance and ‘vocal for local’ has been viewed as ‘brave’.
Additionally, India is being viewed as the next viable option for investment in the post-COVID world as various developed nations have sought to move out their production units from China. Apple establishing a manufacturing base in India in collaboration with Foxconn is an example of this development. South Korea’s decision to shut its operation for Samsung in China and relocate its units to India should be viewed from the same lens.
In order to welcome more such developments, India has begun to identify land parcels. Not only will this uplift the Indian economy with more employment opportunities and infrastructural development, but shall also add to India’s role in the global supply chain.
India’s Supply Chain Resilience
India should view the above-mentioned scenario as a stepping stone instead of a milestone. It needs to explore the partnerships with the QUAD members and European nations that are both strategically and geopolitically aligned.
In the post-COVID world, there is a consensus amongst nations to design trade policies to address vulnerabilities, reduce concentration and manage disruption. India can attract global value chains by leveraging these changes. The three principles - financing for resilience, addressing raw-material dependencies and attracting technology multinationals - will be guiding the country’s supply chain resilience within the QUAD.
To begin with, Foreign Direct Investment (FDI) and Foreign Institutional Investors (FII) in India have come mainly from the capital-rich countries of the OECD and G7 which include the UK, USA, Japan and Europe. These investments are received through financial centres like Mauritius, Netherlands and Singapore.
In order to make India an economic pivot for the QUAD in the Indo-Pacific region, it is essential that these nations commit to financing and supporting India’s entry into the supply chains that are led by them. Objectives such as “enhancing the impact of multilateral public finance” and “mobilisation of private finance for development finance” have been announced by the QUAD.
However, these objectives and the Supply Chain Resilience Initiative remain unsupported by any serious joint funding commitments. India needs to make alterations in its policies which shall make it business-friendly because without the support of capital-intensive industries like telecommunications and automobiles, it will be impossible for India to move forward.
Secondly, seeking entry into global value chains focused on telecommunications, electronics and electrical machinery should be a priority for India. Despite 40% of all FDI in India flowing into these sectors and electronic manufacturing growing at a CAGR (compound annual growth rate) of 23% in the past five years, India is still dependent on China for electrical machinery.
However, recent commitments of $7 billion by the Government of India for large-scale electronics manufacturing shows India’s commitment towards becoming a global hub for Electronics System Design and Manufacturing (ESDM).
Nevertheless, It is unfortunate to note that when India plans to further globalise its economy, most developed nations across the globe have begun to de-globalise by near-shoring or reshoring their economic activities in the post-COVID world. Multinationals corporations now have a choice to diversify their supply chains to manage risks arising from pandemics, climate change and conflicts. In order to choose diversification to India over reshoring, the QUAD needs to convince the multinational corporations of the strategic benefits of investing in India.
Thirdly, it is very important for India to diversify its own supply chains, especially the ones that it is the most dependent on. For instance, the onset of the pandemic revealed the world’s dependency on Active Pharmaceutical Ingredients (APIs), 70% of which were being controlled by China.
Furthermore, the critical minerals that are needed by India for various new-age industries like renewable energy and electronics come from very limited sources. It is quite ironic to read that India has the fifth largest deposits of rare-earths in the world but it accounts for only 2% of the global production.
There exists a very high degree of interdependence and concentration in the supply chains for chips, sophisticated displays and lithium-ion batteries between China, Taiwan, Japan, South Korea and the US. China is the leader in assembly, providing raw materials and fabrication. India has the potential of developing its own base and further collaborating with developing technologies with the investments from the QUAD members.
From the above arguments, it can be concluded that the coming together of the QUAD is critical for India. It is in fact for the very first time that India is placed as an equal partner in a plurilateral organisation of major economies. India should leave no opportunity unexplored to build new habits of cooperation and leverage the old ones.
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