Ever since the COVID outbreak started, the prices of commodities are constantly surging which has given a major shock to the global supply chain management. The rising rate of inflation is taking a toll on the pockets of the middle class and the tax-paying citizens.
With the nationwide lockdown, the main concern of the policymakers shifted to saving lives first. To safeguard the people from the deadly virus, the government imposed a nationwide lockdown which halted the entire economic activities, lowering the GDP. The FMCG’s, MSME’s and retailers were hit majorly.
Global Supply Chain Management
Currently, the global and local supply chain is in the need of flexibility more than ever. Even though several economies managed to bounce back within a few quarters, the growth worries are likely to linger for a while since the sharp increase in prices has become an overwhelming concern for the public.
Presently, the wide mismatch between the supply and the demand has led to an unprecedented surge in inflation, and heavy industries are in search of alternative locations to reduce their dependency on a single nation. The US observed the highest inflation rate in over three decades. Apart from the US, Germany saw 4.5 percent inflation, while Russia witnessed over 7 percent and so on.
Even though India has not reached the stage of stagflation, it has its own set of concerns. The retail inflation amongst all measured by the Consumer Price Index or CPI has decreased within the RBI’s comfort zone, led by the hike in food and fuel prices. The term ‘stagflation’ describes a phase when a country’s economic growth is ‘stagnant’ and suffers from high ‘inflation’.
Typically, inflation in food or fuel prices is seen as a temporary phenomenon as it is affected by short-term/seasonal factors, making the prices fluctuate. For instance, the unseasonal rains during the month of October this year increased the prices of vegetables.
However, if these prices stay up for long, they do tend to seep, called the ‘core’ inflation which ignores the inflation in food and fuel prices, helping in providing more reliable measures. Economists expect inflation to slow down to 3.4 percent next summer and hit 2.6 percent by the end of the year.
Countries like India, with ample amount of resources and workforce, can seize the opportunity to attract FDI, which will not only cater to the demand, but also enhance the supply chain, generating employment, and augmenting India’s per capita income.
Several multinational companies have already injected their capital into India seeing its upskilled and affordable workforce. With the production-linked incentive scheme (PLI), reduction in corporate tax, easing land acquisition and labor laws have further amplified the interest of global players in India.
In the previous financial year, and the first half of the current one, the urban poor faced a high rate of inflation in comparison to the rural poor. If the government improves the logistics like infrastructure, electricity, regulatory hurdles, etc., India can become a potential nation for MNC’s as a global manufacturing hub.