The latest tensions between China and Taiwan have provided an added alarm to the
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)