Building resilient and connected supply chain: Role of Trade 4.0

Global supply chains today are spread over geographies as firms source their inputs from different parts of the world. Communication advancements, increased trade agreements, and structural reforms by the countries have played an important role in developing supply chains and have allowed businesses to procure inputs at competitive prices. Global value chains (GVCs) have been an engine of growth for the host countries. GVCs are also a significant driver of industrialisation and development, enabling the adoption of new manufacturing practices, technology transfers and job creation, especially in developing economies. Participation in GVCs, therefore, continues
to be a relevant and viable development strategy for inclusive growth now and in the future.

Global supply chains often suffer from inefficiencies, lack of coordination, and limited responsiveness. The COVID-19 pandemic has brought these limitations to the fore and highlighted the need for resilient and connected supply chains. This is where Trade 4.0 comes into play, leveraging advanced technologies to transform and strengthen trade operations. For India, embracing Trade 4.0 holds immense potential in achieving its ambitious export goals.

Moving to Trade 4.0

Trade 4.0 builds upon the foundations of Industry 4.0, incorporating technologies like the Internet of Things (IoT), artificial intelligence (AI), and cloud computing. These technologies allow producers/suppliers, intermediaries, and consumers to make intelligent and data-driven decisions and thereby make them more flexible and responsive to disruptions. The integration of these technologies into critical trade areas, such as manufacturing, transportation, and sales, brings forth a more connected and inclusive trading system. It also reduces transaction costs, boosts productivity, and enhances sustainability in trade.

Embracing connectivity

Realising the benefits of such connected systems, businesses are increasingly looking for building new and smarter ways of upstream and downstream connectedness, with supply chains as a major strategic driver. India has the ambition to reach US$2 trillion (INR 164 lakh crore) in exports by 2030. By investing in technology within key export sectors like pharmaceuticals, textiles & apparel, food processing, and electronics, which received Production Linked Incentives (PLI), India can create dedicated digital platforms. This also brings competitive differentiation, ensuring all parts of the supply chain work in harmony with each other.

This kind of integration will help manufacturers, suppliers, and exporters and bring them all on one platform for each sector, facilitating more efficient transactions and providing broader access to global markets. This will also help smaller businesses to increasingly participate in the global trade.

Emerging markets reportedly are slow to adopt technology, and small businesses are more sluggish than large companies, quite understandably, due
to the lack of finance needed to adopt digital technology. This over time can
create a divide and certainly, a concern for inclusion unless policy measures
are taken to address that soon enough.

Enabling efficiency and quality with advanced technology

Integrating AI in trade, as part of the digitisation effort, will help the firms on the platforms with market forecasting and trend analysis. Indian exporters will therefore be able to target their efforts more effectively. The analysis will also enable supply chain management, to optimise their logistics and manage inventories more competently. Blockchains, another limb of digitalisation, will help bring traceability in a big manner. That will increase trust in Indian goods, particularly in sectors like textiles and food where provenance is crucial.

IoT and advanced robotics as part of Trade 4.0 can also enable better logistics management and improve product quality. While IoT can help track shipments and help transport goods in the right conditions, advanced robotics can increase efficiency in manufacturing, help reduce costs, and improve product quality, making Indian goods more competitive in the global market.

Policy as the backbone

To fully embrace the opportunities presented by Trade 4.0, India requires an appropriate policy framework and investment. The policy framework should encourage digital innovation while addressing challenges like digital literacy and infrastructure development. Additionally, a skilled workforce will be essential to leverage technology's benefits in industrial development and trade growth.

India has made significant strides in digitalisation, promoting widespread digital payments, and reducing cash dependence. This focus should also extend to trade so that India can boost its export while unlocking the full potential of Trade 4.0.  India should, therefore, formulate favourable policies, continue to invest in digital infrastructure and nurture a skilled workforce to fully leverage the benefits of Trade 4.0. Through this digital revolution, India can strengthen its trade position and thereby propel economic growth in this digital era.

(With valuable contributions from Ankit Kasare)