Corona virus impact on economy of India.
Impact of corona virus in Indian economy.
Written by Namraj shaa
Coronavirus outbreak was first reported in Wuhan, China on 31 December, 2019. Before reading intimately about the impact, first, allow us to study about coronavirus.
Coronavirus (CoV) may be a large family of viruses that causes illness. It ranges from the cold to more severe diseases like Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). The novel coronavirus may be a new strain of virus that has not been identified in human thus far .
WHO is functioning closely with global experts, governments, and other health organisations to supply advice to the countries about precautionary and preventive measures.
In terms of trade, China is that the world’s largest exporter and second-largest importer. It accounts for 13% of world exports and 11% of world imports.
Impact of Coronavirus on the Indian Economy
Up to an outsized extent, it'll impact the Indian industry. In imports, the dependence of India on China is large . Of the highest 20 products (at the two-digit of HS Code) that India imports from the planet , China accounts for a big 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 planet come from China? For automotive parts and fertilisers China’s share in India’s import is quite 25%. Around 65 to 70% of active pharmaceutical ingredients and around 90% of certain mobile phones come from China to India.
Therefore, we will say that thanks to the present outbreak of coronavirus in China, the import dependence on China will have a big impact on the Indian industries.
In terms of export, China is India’s 3rd largest export partner and accounts for around 5% share. The impact may end in the subsequent sectors namely organic chemicals, plastics, fish products, cotton, ores, etc.
We also can’t ignore that the majority of the Indian companies are located within the eastern a 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 are 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 within the industry is moderate.
According to CLSA report, pharma, chemicals, and electronics businesses may face supply-chain issues and costs will go up by 10 percent. The report also says that India could even 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 isn't taken urgently. it's said that the govt should take some strong fiscal stimulus to the extent of 1% of GDP to the poor, which might help them financially and also manage consumer demand.
In the third quarter (October-December) growth is bogged down to 4.7% and therefore the impact of COVID-19 will further be seen within the fourth quarter.
Ficci survey showed 53% of Indian businesses have indicated a marked impact of COVID-19 on business operations. And 42% of the respondents said that up to 3 months could deem normalcy to return.
Let us have a glance at the sector-wise impact on Indian industry
Chemical Industry: Some chemical plants are pack up in China. So there'll be restrictions on shipments/logistics. it had been found that 20% of the assembly has been impacted thanks to the disruption in staple supply. China may be a major supplier of Indigo that's required for denim. Business in India is probably going to urge affected so people securing their supplies. However, it's a chance . US and EU will attempt to diversify their markets. a number of the business are often diverted to India which may even be taken as a plus .
Shipping Industry: Coronavirus outbreak has impacted the business of cargo movement service providers. As per the sources, per day per vessel has declined by quite 75-80% in dry bulk trade.
Auto Industry: Its impact on Indian companies will vary and depend on the extent of the business with China. China’s business little question is affected. However, current levels of the inventory seem to be sufficient for the Indian industry. If the shutdown in China continues then it's expected to end in an 8-10% contraction of Indian auto manufacturing in 2020.
Pharmaceuticals Industry: Despite being one among the highest formulations of drug exporters within the world, the pharma industry of India relies heavily on import as of bulk drugs. thanks to the coronavirus outbreak, it'll even be impacted.
Textiles Industry: thanks to coronavirus outbreak, several garments/textile factories in China have halted operations that successively affecting the exports of cloth , yarn and other raw materials from India.
Solar Power Sector: Indian developers may face some shortfall of raw materials needed in solar panels/cells and limited stocks from China.
Electronics Industry: the main supplier is China in electronics being a final product or staple utilized in the electronic industry. India’s electronic industry may face supply disruptions, production, reduction impact on product prices thanks to heavy dependence on electronics component supply directly or indirectly and native manufacturing.
IT Industry: The New Year holidays in China has been extended thanks to coronavirus outbreak that adversely impacted the revenue and growth of Indian IT companies.
Tourism and Aviation: thanks to the coronavirus outbreak, the inflow of tourists from China and from other East Asian regions to India will lose which will impact the tourism sector and revenue.
Coronavirus (CoV) may be a large family of viruses that causes illness. It ranges from the cold to more severe diseases like Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). The novel coronavirus may be a new strain of virus that has not been identified in human thus far .
WHO is functioning closely with global experts, governments, and other health organisations to supply advice to the countries about precautionary and preventive measures.
In terms of trade, China is that the world’s largest exporter and second-largest importer. It accounts for 13% of world exports and 11% of world imports.
Impact of Coronavirus on the Indian Economy
Up to an outsized extent, it'll impact the Indian industry. In imports, the dependence of India on China is large . Of the highest 20 products (at the two-digit of HS Code) that India imports from the planet , China accounts for a big 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 planet come from China? For automotive parts and fertilisers China’s share in India’s import is quite 25%. Around 65 to 70% of active pharmaceutical ingredients and around 90% of certain mobile phones come from China to India.
Therefore, we will say that thanks to the present outbreak of coronavirus in China, the import dependence on China will have a big impact on the Indian industries.
In terms of export, China is India’s 3rd largest export partner and accounts for around 5% share. The impact may end in the subsequent sectors namely organic chemicals, plastics, fish products, cotton, ores, etc.
We also can’t ignore that the majority of the Indian companies are located within the eastern a 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 are 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 within the industry is moderate.
According to CLSA report, pharma, chemicals, and electronics businesses may face supply-chain issues and costs will go up by 10 percent. The report also says that India could even 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 isn't taken urgently. it's said that the govt should take some strong fiscal stimulus to the extent of 1% of GDP to the poor, which might help them financially and also manage consumer demand.
In the third quarter (October-December) growth is bogged down to 4.7% and therefore the impact of COVID-19 will further be seen within the fourth quarter.
Ficci survey showed 53% of Indian businesses have indicated a marked impact of COVID-19 on business operations. And 42% of the respondents said that up to 3 months could deem normalcy to return.
Let us have a glance at the sector-wise impact on Indian industry
Chemical Industry: Some chemical plants are pack up in China. So there'll be restrictions on shipments/logistics. it had been found that 20% of the assembly has been impacted thanks to the disruption in staple supply. China may be a major supplier of Indigo that's required for denim. Business in India is probably going to urge affected so people securing their supplies. However, it's a chance . US and EU will attempt to diversify their markets. a number of the business are often diverted to India which may even be taken as a plus .
Shipping Industry: Coronavirus outbreak has impacted the business of cargo movement service providers. As per the sources, per day per vessel has declined by quite 75-80% in dry bulk trade.
Auto Industry: Its impact on Indian companies will vary and depend on the extent of the business with China. China’s business little question is affected. However, current levels of the inventory seem to be sufficient for the Indian industry. If the shutdown in China continues then it's expected to end in an 8-10% contraction of Indian auto manufacturing in 2020.
Pharmaceuticals Industry: Despite being one among the highest formulations of drug exporters within the world, the pharma industry of India relies heavily on import as of bulk drugs. thanks to the coronavirus outbreak, it'll even be impacted.
Textiles Industry: thanks to coronavirus outbreak, several garments/textile factories in China have halted operations that successively affecting the exports of cloth , yarn and other raw materials from India.
Solar Power Sector: Indian developers may face some shortfall of raw materials needed in solar panels/cells and limited stocks from China.
Electronics Industry: the main supplier is China in electronics being a final product or staple utilized in the electronic industry. India’s electronic industry may face supply disruptions, production, reduction impact on product prices thanks to heavy dependence on electronics component supply directly or indirectly and native manufacturing.
IT Industry: The New Year holidays in China has been extended thanks to coronavirus outbreak that adversely impacted the revenue and growth of Indian IT companies.
Tourism and Aviation: thanks to the coronavirus outbreak, the inflow of tourists from China and from other East Asian regions to India will lose which will impact the tourism sector and revenue.
Shipping Industry: Coronavirus outbreak has impacted the business of cargo movement service providers. As per the sources, per day per vessel has declined by quite 75-80% in dry bulk trade.
Auto Industry: Its impact on Indian companies will vary and depend on the extent of the business with China. China’s business little question is affected. However, current levels of the inventory seem to be sufficient for the Indian industry. If the shutdown in China continues then it's expected to end in an 8-10% contraction of Indian auto manufacturing in 2020.
Pharmaceuticals Industry: Despite being one among the highest formulations of drug exporters within the world, the pharma industry of India relies heavily on import as of bulk drugs. thanks to the coronavirus outbreak, it'll even be impacted.
Textiles Industry: thanks to coronavirus outbreak, several garments/textile factories in China have halted operations that successively affecting the exports of cloth , yarn and other raw materials from India.
Solar Power Sector: Indian developers may face some shortfall of raw materials needed in solar panels/cells and limited stocks from China.
Electronics Industry: the main supplier is China in electronics being a final product or staple utilized in the electronic industry. India’s electronic industry may face supply disruptions, production, reduction impact on product prices thanks to heavy dependence on electronics component supply directly or indirectly and native manufacturing.
IT Industry: The New Year holidays in China has been extended thanks to coronavirus outbreak that adversely impacted the revenue and growth of Indian IT companies.
Tourism and Aviation: thanks to the coronavirus outbreak, the inflow of tourists from China and from other East Asian regions to India will lose which will impact the tourism sector and revenue.
To combat with COVID-19, Indian Government extended the date of lockdown till 3rd May, 2020. consistent with Du & Bradstreet, COVID-19 little question disrupted human lives and global supply chain but the pandemic may be a severe demand shock which has offset the green shoots of recovery of the Indian economy that was visible towards the top of 2019 and early 2020. The revised Gross Domestic Product (GDP) estimates for India downwards by 0.2 percentage points for the financial year 2020 to 4.8 per cent and by 0.5 per cent for the financial year 2021 to six per cent. Further, it's stated that the extent of the particular impact will depend on the severity and duration of the outbreak.
There are three major channels of impact for Indian businesses consistent with the report namely linkages, supply chain and macroeconomic factors. the info of the Dun & Bradstreet shows that a minimum of 6,606 Indian entities have legal linkages with companies in countries with an outsized number of confirmed COVID-19 cases. And commercial activity within the foreign markets is slow which means a negative impact on the topline of those companies. Sectors that might be much affected includes logistics, auto, tourism, metals, drugs, pharmaceuticals, electronic goods, MSMEs and retail among others
Further, consistent with the planet Bank's assessment, India is predicted to grow 1.5 per cent to 2.8 per cent. And IMF projected a GDP growth of 1.9 per cent for India in 2020 because the worldwide economy is suffering from the COVID pandemic, the worst recession since the good Depression within the 1930s. Also, we will not ignore that the lockdown and pandemic hit several sectors including MSME, hospitality, civil aviation, agriculture and allied sector.
According to KPMG, the lockdown in India will have a sizeable impact on the economy mainly on consumption which is that the biggest component of GDP.
Reduction within the urban transaction can cause a steep fall within the consumption of non-essential goods. It are often severe if disruption causes by the 21-day lockdown and affect the supply of essential commodities.
Due to weak domestic consumption and consumer sentiment, there are often a delay in investment which further add pressure on the expansion .
We can't ignore that post-COVID-19, some economies are expected to adopt de-risking strategies and shift their manufacturing bases from China. this will create opportunities for India.
According to KPMG, opportunities will largely depend upon how quickly the economy recovers and therefore the pace at which the availability chain issues are addressed.
KPMG India Chairman and CEO Arun M Kumar said: "Apart from providing robust safety nets for the vulnerable, attention on ensuring job continuity and job creation are going to be imperative". "And there's urgent got to mobilise resources to stimulate the economy for increased demand and employment".
According to the KPMG report "It is predicted that the course of economic recovery in India are going to be smoother and faster than that of the many other advanced countries".
An outbreak of COVID-19 impacted the entire world and has been felt across industries. World’s second-largest economy China became standstill. Its outbreak is said as a national emergency by the planet Health Organisation. In India the three major contributors to GDP namely private consumption, investment and external trade will all get affected. World and Indian economy are trying to mitigate the health risks of COVID-19 with the economic risks and necessary measures needed are going to be taken to enhance it
To combat with COVID-19, Indian Government extended the date of lockdown till 3rd May, 2020. consistent with Du & Bradstreet, COVID-19 little question disrupted human lives and global supply chain but the pandemic may be a severe demand shock which has offset the green shoots of recovery of the Indian economy that was visible towards the top of 2019 and early 2020.
To combat with COVID-19, Indian Government extended the date of lockdown till 3rd May, 2020. consistent with Du & Bradstreet, COVID-19 little question disrupted human lives and global supply chain but the pandemic may be a severe demand shock which has offset the green shoots of recovery of the Indian economy that was visible towards the top of 2019 and early 2020.
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