Global value chain (GVC) and Impact of Post COVID-19 Economic State

Updated: Apr 24

During current crisis of COVID-19 we certainly must have felt and seen shortage of what we purchase and consume as resources in a Project or in daily walk of life. The pandemic has painfully reminded us of the vulnerability of the global economic shocks. The recent OECD Economic Outlook projects that “five years or more of income growth could be lost in many countries by the end of 2021”. The US unemployment rate jumped to 4.4 percent in March 2020, the highest since August 2017 and well above market expectations of 3.8 percent, as the Covid-19 crisis threw millions out of work (Source: https://www.macrotrends.net).


When COVID-19 crisis is over and we jump into the so called new normal then governments and any regulatory body would consider developing new trade policies and restrictions in the wake of Security against such unknowns. These decisions can lead towards Localizing value chain in Projects for Resources which is certainly not a favorite for any economist would consider. Global Value chain brings with it many benefits specially in terms of Design, Production and Distribution of goods in Manufacturing Processes. Simultaneously for Information Technology in Design, Code Development to running Platform Operations and OTT Applications or services finally consumed by end users.


While you are reading this article, some major global economies and their stakeholders might be thinking of re-locating their supply-chain and localizing Production which has a little advantage to the cost and benefits reaped from Global Value Chain. With ongoing Pandemic we might always get a biased view in analytical studies and less attempts would be made to correctly project a trade-off between GVC's efficiency and security against such Unknowns.


More localization in Value Chain means more dependency on local resources. This dependency has its own pitfalls during such Unknowns as it is much harder to find substitutes which creates a greater Risk to any products or projects delivery. In Manufacturing language, no one country can or tends to specialize in production of all goods and in Information Technology no one country has enough skilled resources to meet the current demand and produce quality output. As an alternative localization might work in some cases and not all with conversion of assembly lines and supportive International agreement can be achieved as mitigation during such Unknowns.


Author of this Article can be reached at JPBhatia@loadncode.com


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