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Corona virus on the Indian economy

This will largely affect the Indian industry. India’s dependence on China is enormous in terms of imports. Of the 20 most important products (in the two-digit HS code) that India imports from the world, China holds a large share of most.

India’s total electronic imports represent 45% of China. About one-third of the machinery and almost two-fifths of the organic chemicals that India purchases worldwide come from China? For auto parts and fertilizers, China’s share of Indian imports exceeds 25%. About 65 to 70% of the active pharmaceutical ingredients and about 90% of some cell phones come from China to India.

Therefore, we can say that due to the recent outbreak of the coronavirus in China, dependence on Chinese imports will have a significant impact on the Indian industry.

In terms of exports, China is India’s third-largest export partner and represents around 5%. The impacts can lead to the following sectors, namely organic chemicals, plastics, fishery products, cotton, minerals, etc.

We also cannot ignore the fact that the majority of Indian businesses are located in eastern China. In China, around 72% of Indian companies are located in cities such as the provinces of Shanghai, Beijing, Guangdong, Jiangsu, and Shandong. These companies operate in a variety of industries, including industrial manufacturing, manufacturing services, IT and BPO, logistics, chemicals, airlines, and tourism.

The coronavirus epidemic in China has been identified as affecting certain sectors in India, notably maritime transport, pharmaceuticals, cars, mobile, electronics, textiles, etc. In addition, a supply chain can affect certain disruptions related to industries and markets. In general, the effects of coronavirus in the industry are moderate.

According to the CLSA report, pharmaceutical, chemical and electronic companies may face supply chain problems and prices will increase by 10%. India could also benefit from positive flows, according to the report, as it appears to be the least affected market. Some commodities such as metals, upstream and downstream petroleum companies may observe the effects of a drop in global demand, which affects commodity prices.

According to the IIC, GDP could fall below 5% in 2021 if no urgent political action is taken. The government would give the poor a strong tax incentive at 1% of GDP, which would help them financially and also control consumer demand.

In the third quarter (October to December), growth slowed to 4.7% and the effects of COVID-19 became even more marked in the fourth quarter.

The FICCI survey found that 53% of Indian companies said COVID-19 had a significant impact on business operations. And 42% of respondents said it could take up to three months to return to normal.

Let’s take a look at the sectorial impact on Indian industry

Chemical industry:

Some chemical factories in China have been closed. There are therefore restrictions for shipping/logistics. It was found that 20% of production was affected by the interruption in the supply of raw materials. China is a major supplier of indigo needed for denim. Indian companies are likely to be affected so that people secure their deliveries. But it is an opportunity. The United States and the EU will try to diversify their markets. Part of the business can be diverted to India, which can also be used as a benefit.

Maritime industry:

The epidemic of the coronavirus has affected the activity of providers of freight transport services. According to sources, the share per day and by ship in the wholesale trade fell by more than 75 to 80%.

Automotive industry:

The impact on Indian companies will vary and will depend on the volume of business with China. Chinese affairs are undoubtedly affected. However, the current stocks seem sufficient for the Indian industry. If the closure continues in China, Indian auto manufacturing is expected to decrease by 8-10% in 2020.

Pharmaceutical industry:

Although the Indian pharmaceutical industry is one of the main formulations of pharmaceutical exporters in the world, it is highly dependent on the import of mass medicines. It is also affected due to the coronavirus epidemic.

Textile industry:

Due to the epidemic of the coronavirus, several garment/textile factories in China have ceased operations, which in turn affects Indian exports of fabrics, yarns, and other raw materials.

Solar energy sector: Indian developers in China could face a shortage of raw materials for solar modules/cells and limited stocks.

Electronics industry:

China is the best supplier in electronics, a final product, or a raw material used in the electronics industry. The Indian electronics industry may face interruptions in supply, production, and the impact of falling product prices due to the heavy dependence on the direct or indirect supply of electronic components and of local manufacturing.

IT industry:

New Year’s holidays in China have been extended due to the coronavirus epidemic, which has had a negative impact on the revenues and growth of Indian IT companies.

Tourism and aviation:

Due to the epidemic of the coronavirus, the flow of tourists from China and other regions of East Asia to India will decrease, which will affect the tourism sector and revenues.

You may now be aware of the coronavirus. A COVID 19 epidemic had an impact worldwide and was felt in all industries. The second-largest economy in the world, China, has stopped. The epidemic has been declared a national emergency by the World Health Organization. In India, the effects of disruptions in the Chinese supply chain and also as regional players importing from China are being felt.


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