Photo: Bloomberg
Photo: Bloomberg

Opinion | Moody’s blues

  • India is moderately vulnerable to China’s coronavirus crisis
  • A wide range of Indian manufacturing facilities are dependent on supplies from China

Moody’s, the global credit rating agency, has slashed its 2020 growth forecast for India’s economy from 6.6% to 5.4%. This is just one of a series of slashing, now that China’s covid-19 outbreak has cast a long shadow on the economic prospects of the whole world. If Moody’s seems particularly downcast vis-à-vis India, it is because the economy is already weak, and its chances of regaining strength look bleaker than its last analysis had suggested. To compound problems of low private investment and poor exports, last year saw credit slow sharply and consumer demand slide in several sectors. Many analysts who expected these downtrends to reverse this year are not so sure anymore. In that sense, Moody’s gloomy view is hardly exceptional.

India is moderately vulnerable to China’s coronavirus crisis. A wide range of Indian manufacturing facilities are dependent on supplies from factories that remain paralysed on the other side of the Himalayas. Plants that were expected to resume production after China’s lunar new year break have not been able to get active, and strict checks and long quarantines imposed on workers even in less affected provinces mean that there is no saying when they will get back to full pep.

Fears have arisen that supply-chain disruptions will outlast inventories by several weeks, perhaps a month or more, and alternative inputs are difficult to arrange for the use of various products. The output of pharmaceutical drugs, consumer electronics, automobiles and smartphones could suffer the most. Importers of inputs would be relieved if they could estimate by when China would get back to business as usual. But covid-19 data emerging from the country is suspected to be too unreliable to model accurately. Officially, daily infections are past their peak (if not deaths), but few outsiders are feeling assured.

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