India should leverage New World Order
The latest tensions between China and Taiwan have provided an added alarm to the Global Recession. The world is economically struggling after the pandemic and the continuous conflict between Ukraine and Russia is accentuating the gloomy situation. Globalisation is now turning to be deglobalisation of trade. Albeit, we will see in the future that the world will be moving back from China, and the immediate effects are not expected to be favorable for the global economy, including India. China has considered the Pelosi visit to Taiwan as a conflict with their territorial integrity. Considering Taiwan as a Self-Ruling party, the PLA has already affirmed to get them back forcefully.
The ripples caused by this visit have not only increased global tensions but also added fuel to the ongoing recession. The impact will give a setback to the economic recovery. With the USD facing a recession because of continuous uncertain events, India is also expected to witness a continuous low in the value of INR. Apart from the geopolitical crisis, majorly the reduction in capital outflows and investment has staggered the economies of India and USA. The rise in inflation, fuel prices, unemployment and recession is also expected to surge the globe. The decline in the supply chain of products and services of semi-conductor will tend to disrupt the industry of automobile. It will also have an impact on the automobile industry and the production and supply of Electric Cars. Taiwan holds 64% of the global market for semiconductors and exports and is a hub for manufacturing automobile parts. This will impact adversely the automobile industries and will have a negative impact on production and revenue and thus on GDP contribution to the economy.
How should India negotiate its way?
It should not be left unnoticed that the US is reflecting its Super Power by eliminating Al Qaeda chief Ayman al-Zawahiri in Kabul, Afghanistan, parallelly conducting diplomatic visits to gain supremacy. These signs are good enough to make it imperative for India to seek their Capability Building and improve its logistical and industrial infrastructure. At the same time, maintaining bilateral diplomatic talks in the partnerships is yet another crucial task for India to lead her economic power. Another important aspect to boost economic conditions is to get into an organized economy and boost investments and savings in banks. The economy needs to gain an organized sector to have investments in the circular economy. The continuous flow of money enables the contribution toward Nation Building. We do expect a major economic recession and even stagflation, yet India's move should be to be observant without any commitment.
The semiconductor crisis in India started in 2020 and many automobile companies are facing crises and shortages in the production of cars leading to the waiting period for customers. Indian mining company Vedanta has planned for investment in two units, yet with the uncertainty in geopolitical situations and socioeconomic status of India, it can be speculated for long-term benefits and short-term cautious move.
Lastly, after having obtained approval for a massive Rs 76,000 crore scheme to set up semiconductor fabs in the country, the Ministry of IT & Electronics is yet to approve the applications. The India Semi-Conductor Mission should quicken the decision which has been pending for almost 6 months. The ISM will further feed many other sectors of India and hence the ministry should reopen the scheme for new applications and should leverage over their production line in Mohali as well.
(The author is the Founder of EvoluTioon Strategies, a Thought Leader, IIM-L alumnus, Speaker, and an Ex Army Officer)