Corona decelerating Indian Economy to a Great Extend
Biplab Das, INN/West Bengal, @Biplaboriginal
On 11 March 2020, WHO declared Novel Coronavirus Disease (COVID-19) outbreak as a pandemic and reiterated the call for countries to take immediate actions and scale up response to treat, detect and reduce transmission to save people’s lives.
As of 31 March 2020 (8:30 PM), according to the Ministry of Health & Family Welfare (MoHFW), a total of 1397 COVID-19 cases (including 49 foreign nationals) have been reported in 27 states/union territories.
These include 123 who have been cured/discharged, 1 who has migrated and 35 deaths. Hospital isolation of all confirmed cases, tracing and home quarantine of the contacts is ongoing.
On 24 March 2020, the Prime Minister announced a 21-day nationwide lockdown: “In order to protect the country, and each of its citizens, from midnight tonight, a complete ban is being imposed on people from stepping out of their homes.”
WHO Country Office for India has been working closely with MoHFW on preparedness and response measures for COVID-19, including surveillance and contact tracing, laboratory diagnosis, risk communications and community engagement, hospital preparedness, infection prevention and control, and implementation of containment plan.
The GDP of China is expected to decelerate by 1 – 1.25 percentage points over 2020 because of less production. In China, various cities and provinces are in lockdown mode.
China accounts for approximately 19.71% of global GDP at purchasing power parity and obviously it will impact the economy globally. Therefore, it is estimated that the global GDP will suffer an impact of around – 0.5%.
This Corona Virus has not just decelerated the economy of China, but also every other country in this world. This has let the Indian Economy also to be disordered to a great extend.
In terms of import, the dependence of India on China is huge, of the top 20 products (at the two-digit of HS Code) that India imports from the world, China accounts for a significant share in most of them.
India’s total electronic imports account for 45% of China. Around one-third of machinery and almost two-fifths of organic chemicals that India purchases from the world come from China.
For automotive parts and fertilizers China’s share in India’s import is more than 25%. Around 65 to 70% of active pharmaceutical ingredients and around 90% of certain mobile phones come from China to India.
In terms of export, China is India’s 3rd largest export partner and accounts for around 5% share. The impact may result in the following sectors namely organic chemicals, plastics, fish products, cotton, ores, etc.
We also can’t ignore that most of the Indian companies are located in the eastern part of China. In China, about 72% of companies in India are located in cities like Shanghai, Beijing, provinces of Guangdong, Jiangsu, and Shandong.
In various sectors, these companies work including Industrial manufacturing, manufacturing services, IT and BPO, Logistics, Chemicals, Airlines, and tourism.
It has been seen that some sectors of India have been impacted by the outbreak of coronavirus in China including shipping, pharmaceuticals, automobiles, mobiles, electronics, textiles, etc.
Also, a supply chain may affect some disruptions associates with industries and markets. Overall, the impact of coronavirus in the industry is moderate.
According to a CLSA report, pharma, chemicals, and electronics businesses may face supply-chain issues and prices will go up by 10 percent.
The report also says that India could also be a beneficiary of positive flows since it appears to be the least-impacted market. Some commodities like metals, upstream and downstream oil companies, could witness the impact of lower global demand impacting commodity prices.
According to CII, GDP could fall below 5% in FY 2021 if policy action is not taken urgently. It is said that the government should take some strong fiscal stimulus to the extent of 1% of GDP to the poor, which would help them financially and also manage consumer demand.
In the third quarter (October-December) growth is slowed down to 4.7% and the impact of COVID-19 will further be seen in the fourth quarter also.
FICCI survey shows that 53% of Indian businesses have indicated a marked impact of COVID-19 on business operations. And 42% of the respondents said that more than three months could take for normalcy to return.