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Coronavirus (CoV) is a giant family of viruses that causes illness. It beings from the common cold to more severe diseases like Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV) which are deadly. The novel coronavirus is a new force of virus that has not been identified in human creatures so far.
We cannot deny the fact that the outbreak of COVID-19 in China is going to have a significant impact on the economy globally including economic slowdown, trade, disruption, supply chain, commodities, and logistics etc.
Where World Health Organization is working closely with all the global experts, governments, and other health organizations in order to provide advice to the countries about precautionary and preventive measures against COVID-19.
The GDP of China is expected to decelerate by 1-1.25 percentage points over 2020 due to less production as China’s various cities and provinces are in lockdown mode. China holds for approximately 19.71% of global GDP at purchasing power parity (PPP) and obviously it will impact the economy globally. Therefore, it is estimated that the global GDP will suffer an impact of around – 0.5%.
In terms of trade, China is the seems to be the world’s largest exporter and the second-largest importer. It accounts for 13% of world exports and 11% of world imports. The lockdown affected around 500 million people in the country and that will deeply impact its consumption of goods.
Impact of Coronavirus on the Indian Economy
COVID-19 has will have an impact on Indian industry up to a large extent. In imports, the dependence of Indian economy on China is huge out of the top 20 products (at the two-digit of HS Code) that India imports from the world, China holds for a significant share in most of them.
India’s total electronic imports holds for 45% of China and Around one-third of machinery and almost the 2/5th of its organic chemicals that India purchases from the rest of the world comes from China. China shares in India’s import more than 25% for the automotive parts and fertilizers. Around 65% to 70% of the active pharmaceutical ingredients and around 90% of certain mobile phones are originated or routed through China to India.
However, we can say that due to the current panademic outbreak of coronavirus in China, the dependence of our Country on China for imports will have a significant impact on the Indian industry.
If we talk about exports, China is the India’s 3rd largest export partner and accounts for around 5% share. The impact of corona may result in the following sectors namely organic chemicals, plastics, fish products, cotton, ores, etc.
We can’t ignore that fact that most of the Indian Companies are located in the eastern parts of China. In China, about 72% of Indian companies are located in cities like Shanghai, Beijing, provinces of Guangdong, Jiangsu, and Shandong. etc These Companies work in various sectors, including Industrial manufacturing, manufacturing services, IT ‘s, BPO’s , Logistics, Chemicals, Airlines, and tourism etc.
It has been observed that some of the sectors of India have been majorly impacted due to the outbreak of coronavirus in China including shipping, pharmaceuticals, mobiles, automobiles ,electronics, textiles, etc. and with this impact the supply chain has also been affected due to some of the disruptions associates with these industries and markets. Overall, the impact of coronavirus in the industry is moderate.
According to CLSA report, chemicals, pharma and electronics businesses may face supply-chain crises and the prices are expected to rise by 10 percent. The report also says that India may turn out to be a beneficiary of positive flows since it appears to be the least impacted market. Few commodities like metals, upstream and downstream oil companies could witness the impact of lower global demand which will overall impact the commodity prices.
As per CII, GDP could fall below 5% in Financial Year 2021 if no policy action is taken urgently. It is urged that government should take some strong fiscal stimulus in order to the extent of 1% of GDP to the poor, which would ultimately help them financially and will also manage consumer demand.
In the third quarter i.e. October-December growth to be slowed down to 4.7% and further the impact of COVID-19 will be seen in the fourth quarter.
Also FICCI survey showed that 53% of Indian businesses have indicated a marked impact of COVID-19 on business operations. In return to the response received from the 42% of the respondents have said that it will take up to three months for normalcy to return.
Now let us have a sector-wise look over the impact of COVID-19 on Indian industry
Chemical Industry: Due to the outbreak of COVID-19 some chemical plants have been shut down in China so that there will be restrictions on shipments/logistics. It was found that the 20% of the production has been affected due to the disruption in raw material supply. As China is a major supplier of Indigo which is required for manufacturing of denim material9. Business in India is likely to get affected so people securing their supplies. Therefore, it is an opportunity US and EU will try and diversify their markets. Some of the business can be diverted to India which can also be taken as an advantage.
Shipping Industry: Corona virus outbreak has affected the business of cargo movement service providers. As per the information received the per day per vessel has declined by more than 75%-80% in dry bulk trade.
Auto Industry: Impact of this industry on Indian companies will vary and depends upon the extent of the business with China. However, the China’s business has been majorly affected but the current levels of the inventory seem to be sufficient for the Indian industry. It is expected to have a 8%-10% contraction of Indian auto manufacturing in 2020.
Pharmaceuticals Industry: Though India is one of the top formulations of drug exporters in the world, the pharma industry of India relies heavily on import as of bulk drugs.
Textiles Industry: Several garments/textile factories in China have halted operations that in turn affecting the exports of fabric, yarn and other raw materials from India.
Solar Power Sector: Indian developers may have to face some shortfall of raw materials used in solar panels/cells and limited stocks from China.
Electronics Industry: China is major supplier in electronics being a final product or raw material used in the electronic industry. India’s electronic industry may have to face supply disruptions, production, reduction impact on the product prices due to heavy dependence on electronics component supply directly or indirectly and local manufacturing.
Tourism and Aviation: The inflow of tourists from China and from other East Asian regions to India will lose that will impact the tourism sector and revenue and the lockdown has the major impact which has haulted the operations of each and every industry.
Henceforth the outbreak of COVID-19 has impacted the whole world and has been felt across industries being the World’s second-largest economy China has became standstill. This outbreak has been declared as a national emergency by the World Health Organisation.
