The Corona Virus Conundrum

The outbreak of Coronavirus in the world's second largest economy has jolted the global suppy chain.

Recently, China has been in the news for all the wrong reasons. The dragon nation was about to breathe a sigh of relief as the tariff war with the US was just called off, but Xi Jinping just had an even more grievous problem gazing right into his eyes – the unexpected breakout of the Corona Virus. The impact on global trade and supply chain is evident as industrial activity in China came to a grinding halt, while countries restricted their ships and airplanes from entering the world’s second-largest economy. India being a major trade partner and the neighbour next door is sure to feel the heat. China is a big global supplier of television panels, LED chips, compressors for refrigerators and air-conditioners, motors etc. Since China runs a trade surplus against major economies—like US and India—it is bound to have a larger impact on both trade and domestic industry. India’s exports to China stood at $16.8 billion for FY19, while imports stood at $70.3 billion indicating the impact that coronavirus will have on Indian industry. Indian industrieslike pharmaceuticals, electronics and automobile rely heavily on raw material imports from China, so the supply chain disruption is inevitable.

The credit rating agency Moody, however predicts that Indian ports will have least impact of the virus due to low China-related throughput they handle. The share of China-linked container cargo is less than 5 per cent by volume for the Indian ports. Further Moody expects manufacturers will likely seek alternative sources of supply for components to the extent that supply chain disruptions in China persists.