India-Japan-Australia supply chain in the works to counter China.

India, Japan and Australia have begun discussions on launching a trilateral Supply Chain Resilience Initiative (SCRI) to reduce dependency on China, necessitated by Beijing’s aggressive political and military behaviour.

The initiative, first proposed by Japan, is now taking shape, ET has learnt. Dates are being worked out to hold the first meeting of the commerce and trade ministers of the three countries by next week.

Japan through its Ministry of Economy, Trade and Industry approached India recently and pressed on the urgency to take the initiative forward, according to people in the know. Tokyo was in favour of launching SCRI by November, sources said.

The government is moving on the proposal quite seriously, especially in the light of China’s aggressive moves on the Line of Actual Control in Ladakh. Usually, the sources said, New Delhi would consider any such proposal cautiously as it would be seen as an alliance against China.

This time, the government appears to have taken the call at the highest levels to become part of the global supply chain, thus emerging as an alternative to China.

The subject was also one of the key themes of PM Modi’s Independence Day speech on Saturday, where he said that businesses have started viewing India as a possible “hub for supply chains” and that now India must also “make for the world”.

The two-fold objective of the Japanese proposal is to attract foreign direct investment to turn the Indo-Pacific into an “economic powerhouse” and to build a mutually complementary relationship among partner countries.

The idea, sources said, was to also throw open the initiative to the Asean (Association of Southeast Asian Nations) after India-Japan-Australia understanding on the matter.

To begin with, the aim is to work out a plan to build on the existing bilateral supply chain networks. India and Japan, for instance, have an Indo-Japan Industrial Competitiveness partnership, which deals with locating Japanese companies in India.

Those aware with the details of initial deliberations told ET that the purpose eventually is to improve supply chain resilience across the Indo-Pacific, which through such an effort can develop a sound economic profile to its security logic.

SCRI is a direct response to individual companies and economies concerned about Chinese political behaviour and the disruption that could lead to supply chains, according to the sources.

Japanese Prime Minister Shinzo Abe, following the Covid-19 outbreak, has already instituted a $2-billion fund to help Japanese companies shift back from China. Australia and the US, amid growing security and transparency concerns, have already entered into an ambitious agreement to create what’s being called a ‘China free’ supply chain for rare earth materials.