BackCoronavirus contagion could adversely impact India's trade and economy: Experts
A prolonged prevalence of the Coronavirus contagion in China could adversely impact India’s trade and economyIn 2002-03, India’s total trade with China stood at a paltry $4.8 billion which has now expanded more than 18 times to $87 billion in 2018-19
PremiumA prolonged prevalence of the Coronavirus contagion in China could adversely impact India’s trade and economy as it has become highly dependent on its Northern neighbor with exponential expansion of trade linkages since the outbreak of the SARS virus in China in 2002-03 that caused 349 deaths.
In 2002-03, India’s total trade with China stood at a paltry $4.8 billion which has now expanded more than 18 times to $87 billion in 2018-19. India exported mostly raw materials and industrial inputs to China such as organic chemicals ($3.2 billion), mineral fuels ($2.8 billion), cotton ($1.8 billion), ores ($1.2 billion), plastic materials ($1.1 billion) in 2018-19. On the other hand, the major items imported by India during the same period include electronic items ($20.6 billion), machinery ($13.4 billion), organic chemicals ($8.6 billion) and plastic items ($2.7 billion).
Tanvee Gupta Jain, economist at UBS said potential similarities between the Coronavirus and SARS in 2003 have led many investors to question the extent of the impact on India's economy. “At this early stage, we see only negligible economic impact but uncertainty on the eventual impact implies that India is not immune. India's tourism (travel services exports) contributed only 1% of GDP in FY19. Share of tourist arrivals from China is also less than 3% in total. China is India's third-largest goods export partner (US$17bn, 5% share in India's goods exports). Any likely slowdown in growth in affected Chinese cities could result in a further drag on raw material demand from India and thus could drag exports further," she said in a report released on Thursday.
The Economist Intelligence Unit in a report said a virus of SARS-like proportion could reduce China’s real GDP growth in 2020 by 0.5-1.5 percentage points which could bring down global growth by at least 0.2-03 percentage points.
Ajay Sahai, director general and chief executive officer at the Federation of Indian Export Organisations said if the epidemic lasts longer than one month, then it could impact India’s electronics and pharma industries adversely. “Electronics companies normally have very short inventories. If it continues for month or so, it may impact India in a negative way. We also have to be careful because we are dependent on China for some crucial raw material such as bulk drugs. If that supply is disrupted, we will have some cause of concern. We should start exploring the options, even if we don’t have to use it. We should be ready with our Plan B," he added.
Engineering Export Promotion Council chairman Ravi Sehgal said that the council has urged the government to review possible impact of the deadly virus on India’s trade as China is among the top 10 destinations for engineering exports.
Indian engineering exports to China increased by a significant 27.6% to $1.77 billion during April-December, 2019 from $1.33 billion during the same period a year ago.
The high level review meeting chaired by the Cabinet Secretary has directed the Ministry of Shipping to initiate entry screening at the international ports having traffic from China.
"With disruptions reported in China due to transport and travel restrictions in several cities, we are trying to ascertain the exact impact on the trade," Sehgal added.
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