Coronavirus - The Economic Impact

The economic impact of the coronavirus on India is likely to be restricted to the current financial year

- Hetal Gandhi

With around 90,000 Covid-19 cases confirmed globally as on March 2, there would be a substantial impact on global supply chains. As China accounts for 16 per cent of global exports, overall trade will be affected in the next few months. In a base case scenario, it would be restricted up to March 31, because as the temperature starts rising in China, the impact of the virus could wane. In a quarantined manner, factory production in China has restarted, though dispatches from ports have not resumed as yet. There is a strong case that stabilization will begin in April.

So, the impact on India is restricted to the closure of the financial year 2020. We have looked at it through four quadrants:

1. Where we are importing raw materials; it will impact production levels in India

2. Where we are importing final products that are competing with domestically manufactured products. There can be some benefits for the domestic industry

3. Where we are exporting globally and China is competing with us; there is an opportunity if we can scale up and fill the gap

4. Where we have exports to China. Although lower than imports, it is worth $29 billion and it will get impacted

One big impact is supply chain disruption. We did an assessment across 15 key sectors in India and found that in sectors like auto components, pesticides and fertilizers, solar panels, pharma bulk drugs, and consumer durables and electronics (including mobile handsets), a large proportion of the raw material comes from China. For example, 18 per cent of our auto component imports and 30 per cent of tyre imports come from China. About 45 per cent of the completely built units of consumer durables and about 67 per cent of electronic components come from China.