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Business News/ News / India/  Coronavirus contagion could adversely impact India's trade, economy: Experts
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Coronavirus contagion could adversely impact India's trade, economy: Experts

In 2002-03, India’s total trade with China stood at a paltry $4.8 billion which has since expanded more than 18 times to have touched $87 billion in 2018-19

A passenger wearing face mask holds a health advisory cardPremium
A passenger wearing face mask holds a health advisory card

A prolonged 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 since expanded more than 18 times to have touched $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 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 novel 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 death toll in China from the new coronavirus reached 213 on Friday, with overall cases worldwide rising rapidly in an outbreak that the World Health Organization (WHO) declared a global health emergency. The death toll in Hubei, the Chinese province at the centre of the epidemic, had risen to 204 and there were 9,692 cases of infection nationally as of Thursday, Chinese health authorities said. About 100 cases have been reported in at least 18 other countries.

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 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 rose 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 screening at entry at 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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Published: 31 Jan 2020, 09:13 AM IST
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