Critical minerals in India could provide valuable alternative to China © Photo by XAVIER GALIANA/AFP via Getty Images
Critical minerals in India could provide valuable alternative to China © Photo by XAVIER GALIANA/AFP via Getty Images

Could the US and India collaborate on lower risk supply chains?

22 March 2023

Cooperation on creating alternative supply chains within key areas may enable the US and India to reduce their dependence on China, according to the US Chamber of Commerce.

The pharmaceuticals and minerals sectors particularly stand to gain from a re-prioritisation.

In a blog, US Chamber of Commerce SVP for international policy John G Murphy, and US-India Business Council managing director Alexander Slater, urged closer ties between the US and India in order to build alternative supply chains.

US President Biden remarked on the importance of India, the world’s fastest growing economy, in May 2022 when he signed the Indo-Pacific Economic Framework for Prosperity (IPEF) – an economic initiative which aims to offset Chinese power.

IPEF aimed to strengthen activities between a dozen initial partners: Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.

In the report, the Chamber of Commerce said: “The IPEF negotiations offer an avenue to strengthen supply chains in areas of strategic significance, such as ensuring access to the life-saving medicines and critical minerals needed to safeguard Americans’ health and accelerate the energy transition.”

The supply chain for patented drugs is geographically diversified and not dominated by a single country. However the supply chain for generic drugs — which account for 90% of all drugs – relies heavily on China for its inputs.

The report added: “The US, India, and the global business community have expressed concern over this arrangement, which makes access to generics vulnerable to geopolitical risk.

“Making the diversification of the production and sourcing of their precursors a priority for the IPEF agenda represents an opportunity for Americans and Indians alike.”

Solutions to creating a viable and more diverse supply chain for principal pharmaceutical inputs, known as active pharmaceutical ingredients (APIs), include guaranteed price contracts for manufacturers in the US as a means to stimulate production.

The report said: “Indian generics manufacturers, which include many of the world’s largest, are keen to reduce their dependence on inputs from China and are making substantial investments to this end.”

It added that cooperation between the two governments and their industries could be the driver to accelerate supply chain diversification, a factor that would have benefits beyond pharmaceuticals.

For instance, developing clean energy technologies at scale in both countries will require a significant expansion of mining for critical minerals, including for lithium, copper, nickel, cobalt and graphite. It argued that mining production worldwide would need to expand by 500% over the next decade to provide the required inputs for successful decarbonisation.

However, India could prove a valuable alternative to China in the supply of essential raw materials, such as lithium products, and help breakdown the latter’s dominance.

The report said: “China represents as much as 80% of the production of several critical minerals, with its dominance of the processing of these commodities even greater. Fortunately, India has one of the world’s largest deposits of lithium, a critical component for batteries for electric vehicles and other clean energy technologies.”

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