International trade and supply chains are at stake, and there is an urgent need to secure the global value chain for sustained long-term growth, World Economic Forum President Borge Brende said on Friday.
"The trade system has to be adjusted for climate change and has to be more inclusive, but we will also have to find ways of trading with each other," he said at the B20 Summit India 2023 in New Delhi. "Open trade and strong global value chains are prerequisites for future prosperity."
Calling for diversification of supply chains, Brende described "friendshoring" as a worrisome concept for global economic trade.
Friendshoring is a growing trade practice where supply chain networks are focused on countries regarded as political and economic allies. The buzzword has emerged from recent economic crises and strains on global supply chains caused by the Covid-19 pandemic and Russia's invasion of Ukraine. The U.S. government, for example, stressed its intention to obtain components and raw materials from "friendly" nations to increase the security of domestic production. Apple Inc.'s move to relocate some of its iPhone production to India from China was also seen as such a move.
Brende warned that the decoupling of world economies would lead to an 8–10% fall in global gross domestic product.
"This is more than what the worst depression had led to," he said. "So, there's a lot at stake, and India, during its presidency, would play a key role in securing the global value chains, a key engine of future growth."
Opening up domestic economies to global competition will not only help boost domestic manufacturing but will also boost exports, Brende said at the session on inclusive GVCs (global value chains) for resilient global trade and investment.
Global growth is sluggish, with the WEF expecting 3% economic growth this year. But there is a lot of optimism in India, which has been the fastest-growing economy for three years in a row, according to Brende. "We, at the World Economic Forum, believe that India will become the third largest economy in the world in a few years and a ten trillion-dollar economy in a decade."
The Indian economy is currently ranked fifth and is behind the U.S., China, Japan, and Germany. Brende highlighted that India's economic growth would likely be higher than that of most large economies in 2023–24.
This year, India will contribute 16% of global growth, B20 India Chair N Chandrasekaran said, citing a casual chat with the WEF President on the sidelines of the summit.
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