Traders say disruption may create a shortage of goods and drive up prices
Businessmen who routinely go to China to place import orders say they are postponing their travels
Indian companies are bracing for production shortages, disruption in shipments and scarcity of critical bulk drugs and life-saving antibiotics amid a travel clampdown in China, which is struggling to contain the outbreak of the deadly coronavirus.
Countries across the globe, including India, have warned citizens about travelling to China, where the coronavirus has left 132 dead and infected more than 5,000 people. Despite measures to limit its spread, the virus has now infected people in 20 countries.
The ripple effect of the travel restrictions could soon hit India, which imports more than $70.3 billion worth of goods from China and exports products amounting to $17 billion. Traders told Mint that the disruption could create a shortage of goods and drive up prices, if the crisis prolongs.
Indian businessmen, who routinely travel to Chinese cities to shop and place import orders for consumer goods, say they are postponing their travels scheduled for the next two months.
In the wake of the disease outbreak, national carrier Air India said it will cancel flights between Mumbai and Shanghai from 31 January to 14 February, while the country’s largest private airline IndiGo said it will suspend flights from New Delhi to China’s Chengdu from 1-20 February. Scores of international carriers, including British Airways, have also suspended flights to the country.
The disease outbreak in the world’s second- largest economy has resulted in global brands including Swatch and Apple shutting stores. On Wednesday, Toyota Motor Corp. halted operations in China until 9 February, joining a growing list of global companies that have cut back on business activities in the country.
New Delhi-based distributor Smit Bangar, who has been importing footwear, apparel and mobile phone accessories from China for over two decades, said he has cancelled an upcoming trip in March. Bangar visits China every two months to buy goods.
“The current situation resembles the 2002-03 outbreak of the SARS virus that killed an estimated 800 people globally," he said. “Business took at least eight months to recover then," said Bangar who runs Skymax International.
To be sure, January is a slow month for exporters in China because business slows down for the annual Chinese Lunar New Year holiday period, which this year was between 24-30 January, but has now been extended by a week.
Therefore, supply of goods such as apparel may not be felt immediately, particularly as businesses usually stock up and place orders in advance. But if the virus spreads and people stop travelling to China, then there would be an impact, said Rahul Mehta, president of the Clothing Manufacturers Association of India.
A Delhi-based trader of kitchen goods, who imports from China, said his stocks will run out in about a month as he has postponed a trip.
Indian drug makers said they are bracing for a possible disruption in the supply of raw materials, majority of which is imported from China.
“We buy antibiotics and vitamins in a big way from them (Chinese manufacturers). As of now, there is no problem but we will have to wait and watch for another 8-10 days more to see if the coronavirus outbreak continues," said Daara B. Patel, secretary general of the Indian Drug Manufacturers’ Association.
Another industry official said the brunt of the impact is being felt by pharma traders, who don’t maintain large stocks. In 2018-19, Indian companies imported bulk drugs and intermediates worth $2.4 billion from China, which was about 68% of the total imports of the raw material.
Food importers have begun halting shipments, including sauces, condiments and noodles used in preparing Chinese dishes.
“They are not wanting to currently import anything from China and also avoid travelling to that region," said Amit Lohani, founder-director at the Forum of Indian Food Importers, adding that there is bound to be a “long-term ripple effect" on business.
Meanwhile, tour and travel operators such as Thomas Cook, SOTC and FCM Travel Solutions offered the option of deferring trips to China or availing of future travel vouchers, refunds and alternative destination booking options.
“Since it’s peak travel season for China due to the Chinese New Year, the coronavirus outbreak has had a huge impact on travel to and from the country," said Rakshit Desai, managing director of FCM Travel Solutions, the Indian unit of Flight Centre Travel Group. “We have seen a dip of 12-13% in leisure and 10-11% in corporate travellers from India to China. After coronavirus cases, travellers are postponing or cancelling immediate travel, which is definitely impacting travel to the South East and China sector," he added.
Travel between India and China is dominated by traders and company executives and is largely concentrated in the cities of Guangzhou and Shanghai. Around 75% of the air traffic to China comes from Shanghai, Guangzhou and Beijing airports.
“The coronavirus outbreak has had direct and adverse impact to our China bookings," said Rajeev Kale, president and country head-holidays, MICE, Visa at Thomas Cook (India) Ltd.