India a Supply Chain Hub

India’s specialty chemicals sector is standing at a critical crossroads. A new report jointly released by PwC and Assocham titled “Indian Chemical Industry: Enablers to Make India a Growth Hub for Chemicals” makes a compelling case for urgent government intervention. According to the study, to truly anchor specialty chemical supply chains in India, the Centre must roll out attractive incentives and enforce safeguard duties. The report points out that while the domestic chemicals industry shows immense potential for growth, it is grappling with multiple challenges. Chief among them is the increasing commoditisation of specialty chemicals, a trend that is steadily squeezing profit margins. As competition intensifies globally, India’s manufacturers find themselves pressured to offer lower prices, often at the cost of quality and innovation. But that’s not the only headwind. Adding a layer of complexity is the impact of reciprocal tariffs, particularly those imposed by the United States. The PwC-Assocham report notes that these tariffs have disturbed cost structures and are beginning to weigh down the global competitiveness of Indian chemical exports. As these changes ripple through supply chains, companies are facing supply disruptions and rising input costs. It’s a situation that demands strategic action if India is to emerge stronger in the global specialty chemicals market. The solution, according to the report, lies in a multi-pronged approach. First and foremost, India must focus on becoming cost-competitive in the global arena. This involves a serious rethinking of supply chain strategies, streamlining operations, reducing inefficiencies, and perhaps most importantly, tapping into export subsidies. By offering well-calibrated incentives, the government can empower Indian chemical companies to match and surpass global peers in both pricing and quality.

The global economy is currently grappling with a complex phenomenon: stagflation within supply chains. This situation is characterized by the simultaneous occurrence of stagnant economic growth, persistent inflation and high unemployment, all exacerbated by disruptions in supply chains. Recent data and events highlight the multifaceted challenges contributing to this scenario. 1. Tariff-Induced Inflation and Supply Chain Strains The reintroduction of aggressive U.S. trade tariffs in 2025 has significantly impacted global supply chains. President Donald Trump's administration imposed a 145% tariff on Chinese imports, a substantial increase from the previously proposed 60%. This move has led to a $500 billion tax burden on American importers, affecting various industries. Companies like Procter & Gamble and PepsiCo have reported increased production costs and have raised prices on consumer goods. Procter & Gamble, for instance, faces up to $1.5 billion in annual costs due to these tariffs and has adjusted its pricing strategies accordingly. Similarly, Unilever and Nestlé have indicated potential further price increases amid rising ingredient costs and market uncertainties. 2. Labour Disruptions and Port Strikes Labour unrest has further strained supply chains. In October 2024, over 47,000 port workers across the U.S. East and Gulf Coasts initiated a strike, demanding better wages and opposing automation. This strike affected 36 ports, including major hubs like New York, Savannah and Houston, which collectively handle nearly half of U.S. imports. The Anderson Economic Group estimated that the U.S. economy lost $2.1 billion from a one-week strike, with significant impacts on perishable goods and transportation sectors. The strike highlighted vulnerabilities in just-in-time delivery models and underscored the need for diversified sourcing strategies. 

As the global economy continues to reconfigure itself in the aftermath of the pandemic and rising geopolitical tensions, India finds itself at the crossroads of opportunity and risk. The evolving dynamics of global supply chains, triggered largely by the U.S.-China trade war, Russia’s conflict with Ukraine, and shifting trade alliances, have led to significant supply chain realignments. India, with its vast manufacturing potential and demographic advantage, is emerging as a preferred alternative to China. However, this repositioning comes with its own set of challenges—most notably, the increasing risk of being drawn deeper into global trade conflicts. The Supply Chain Pivot Towards India In recent years, global companies have been diversifying their manufacturing bases to reduce over-dependence on China, a strategy known as "China Plus One." India, alongside Vietnam, Mexico, and Indonesia, has become a natural candidate for this diversification. Multinational giants such as Apple, Samsung, and Tesla are exploring or expanding their production in India. The government's efforts to support this shift through initiatives like Production Linked Incentive (PLI) schemes, "Make in India," and infrastructure upgrades have further strengthened India’s position. However, as India integrates more deeply into global supply networks, it must also navigate the rising complexities of global trade politics. Tariff battles, sanctions, and protectionist policies are becoming more frequent, and India’s increased participation in global supply chains might expose it to retaliatory trade actions from major economies. The U.S.-China Rivalry: A Double-Edged Sword for India India’s growing alignment with the United States and its strategic partnerships with countries like Japan and Australia under forums such as the Quad make it a critical player in the Indo-Pacific region. These alliances are fostering trade cooperation and technological collaborations, especially in sectors like semiconductors, defence manufacturing, and clean energy. However, experts warn that as India grows closer to the U.S., it could be perceived as siding against China, thereby complicating its diplomatic stance. “India is walking a tightrope. On one hand, it wants to leverage its position as a manufacturing hub; on the other, it must maintain a non-confrontational trade policy to avoid being seen as taking sides,” says Dr. Abhijit Banerjee, an international trade analyst based in Delhi. Risks of Retaliatory Trade Actions India has already faced its share of trade friction. The U.S. removed India from its Generalized System of Preferences (GSP) in 2019, citing market access issues. Meanwhile, India's trade deficit with China remains significant despite calls for reducing dependence. As India starts producing more high-value goods such as electronics and auto components, it will compete directly with Chinese and Southeast Asian exporters in global markets. This competition could provoke trade spats or non-tariff barriers from competing countries. Moreover, India's decision to stay out of the Regional Comprehensive Economic Partnership (RCEP), citing concerns over Chinese imports, has distanced it from the world’s largest trading bloc. While this protects domestic industry in the short term, it also limits India's influence in regional trade rule-setting.  

Prime Minister Narendra Modi’s recent visit to Saudi Arabia comes at a very important time for India and the world. As global tensions rise, especially in the Middle East due to the ongoing Palestine-Israel conflict and challenges in maritime security, Modi’s presence in Saudi Arabia shows India’s increasing role as a peacebuilder, trade partner, and strong regional player. This visit is not just about strengthening ties with one country, it is a reflection of how Modi is shaping India’s position on the world stage. Addressing the Palestine Conflict with Balance and Maturity One of the major highlights of this visit is PM Modi’s approach towards the Palestine conflict. While many world leaders take sides, India under Modi has taken a balanced stand. He supports peace and dialogue instead of violence. His meeting with Saudi officials shows that India is willing to be part of the solution in this long-standing issue. Saudi Arabia is a key player in the Arab world, and by aligning with them on peace efforts, Modi sends a strong message that India cares about humanity and stability in the region. This is important for India’s image. Earlier, India was not seen as a major voice in international conflicts. But now, with Modi’s diplomacy and clear communication, India is being seen as a trusted voice that speaks for peace without losing its own interests. Strengthening Maritime Security: A Strategic Move Another major area of discussion was maritime security. With increasing attacks on commercial ships in the Red Sea and Gulf region, ensuring safe trade routes has become urgent. Modi’s visit highlights how India is stepping up to protect not just its own interests but the wider international shipping routes as well. India has a strong navy and growing partnerships with countries like Saudi Arabia can help build joint operations to secure maritime zones. This will protect India’s imports and exports and boost its economy. Modi understands the importance of the Indian Ocean and Arabian Sea in global trade. By focusing on maritime security, he is making sure India becomes a key player in ensuring safe seas. Boosting Trade and Investment: A Win-Win Partnership Trade and investment are the backbone of India-Saudi relations. Modi’s visit focused on expanding this partnership. Saudi Arabia is one of India’s top suppliers of oil, but the relationship is now going beyond just energy. Both countries are discussing investments in infrastructure, digital technology, and even startups. Under Modi’s leadership, India has created a strong image as a business-friendly country. The Saudi government and private companies see India as a fast-growing market. Modi’s “Make in India” and “Digital India” campaigns have made the country more attractive for foreign investors. Saudi investment into Indian companies and infrastructure will create jobs and help India grow faster.