The effect of coronavirus on the Chinese economy, global demand and supply chains is starting to be felt and the big question now is does this get contained within a quarter or does it go beyond?
Talking about the impact it is having on India's external trade, Mahesh Keyal, vice president of Federation of Indian Export Organisations (FIEO) said, “Indian exports have been very badly impacted. There are two parts – one is the direct exports from India to China - major of the manufacturing facilities in China have either stopped production or are working at a very low level. So, the shipment from India has been put on hold. Moreover, the cargoes, which are reaching China ports are not being cleared out of the port because there is a complete standstill situation for the domestic logistics. There are no fresh enquiries and orders coming from China.
"Two is indirect exports – many raw materials, components and hardware are being imported from China to make finished products in India for selling either domestically or globally. There will be very serious impact on the supplies of these raw materials. So the manufacturing sector will suffer badly,” he said.
According to him, some of the sectors that would be badly impacted are the mobile, electronics, pharmaceuticals, automobiles, chemicals and leather etc., because they are depend very heavily on imports from China.
With regards to exports, Keyal said, “Many marine products, which have been exported have been completely put on hold. Going with the news that the coronavirus outbreak is now under control and no major fresh cases are coming and we think the situation may come under control in a month but it will still leave us down by 15-20 percent on the overall exports from India to China on yearly basis.”
“Overall there can be another 5-10 percent hit on the overall exports because many sectors are importing some or the other components which is used for the purpose of making goods for exports. So those sectors are also going to be impacted,” he further mentioned.
With regards to the automobile sector, he said, “After the rollout of the goods and services tax (GST) the automobile sector has been suffering badly because the commercial vehicle (CV) demand has gone down. Adding to this injury, the supply of the components and certain critical parts from China is now on hold, so the industry is growing at a very low level of the inventory. So, definitely manufacturing is going to suffer. I don’t think that they can make immediate replacement of the source of supply.”
“After coronavirus epidemic comes under control, there will be a slowdown impact in Chinese economy and this will have an impact on the global supply chain. Southeast Asian countries will be more affected but India is not going to remain out of that, it will also bear some brunt out of it,” he stated.