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Impact of Coronavirus on Indian Economy

By Finserv MARKETS - Mar 26,2020
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Coronavirus impact on Indian markets

As the global Covid-19 death crosses 14,500, the global economy is silently suffering. This medical crisis has come upon us in the background of a global slowdown owing to trade tensions between the US and China. The expected global effects have further slowed down trade and supply chain disruption. This has far-reaching repercussions for India, China’s neighbor and long-standing trade partner.

How India’s trade with China will be affected

India’s net imports from China stand at 56 billion dollars. We import consumer durables, electronics, auto components, pharma bulk drugs, etc. 67% of our electronic components and 45% of our consumer durables are imported from China. Plus, China is India’s third biggest export partner.

In the midst of the pandemic, factories in China have shut down. A huge impact of Coronavirus on Indian economy is expected because Indian industry does not have the capacity to manufacture and make up for the loss. The GDP of China is expected to fall by 1-1.25% and the global GDP by around 0.5%.

Coronavirus impact on Indian markets

Source: India today

According to reports, electronics, pharma, chemicals, might face supply chain problems and prices will rise by 10%. India’s GDP can go below 5% in FY2021, unless strong policy actions are taken.

Impact on Indian trade

China was India’s top most import source with $70.39 billion worth of imports. With no supply from China, India’s manufacturing of telecom, pharma, mobiles, and other sectors will be badly hit. Alternatives have to be found for these manufacturing units.

India’s merchandise exports mostly go to China, Italy, UK, Germany, and the US. Trade has collapsed in all of these destinations and supply chains have fallen. Even before the pandemic, export credit had contracted by 23%. There is no telling how long the lockdown will go on and show the worst of Coronavirus impact on markets. Exporters are in need of fiscal relief and credit to keep capital, workers, and operations running.

On the up-side, China’s lowered manufacturing capacity could be an opportunity for India to increase global supply.

Coronavirus’ impact on markets (sector-wise)

  • Chemicals

A number of chemical plants in China have shut, and 20% of production has been affected because of fall in supply of raw materials. However, the US and Europe could now turn to India, giving us a possible advantage.

  • Shipping

Impact of coronavirus on Indian economy can also be seen in the cargo shipping industry, with per day dry bulk trade per vessel declining by a staggering 75-80%.

  • Automobiles

Currently, there seems to be enough inventory with Indian industries. However, the shutdown in China is expected to result in a 8-10% decline in Indian automobile manufacturing this year.

  • Pharmaceuticals

India imports a lot of bulk drugs, and this will have a major impact with the global slowdown despite being amongst the top drug exporters in the world.

  • Textiles

India also exports yarn, fabric, and textile raw material to China, which will fall because of the factories being shut. The total impact is predicted to be worth $64 million.

  • Solar power

Shortage of solar cells and panels being imported from China may have an impact on India’s solar power industry.

  • Electronics

The biggest impact of coronavirus on Indian economy will probably be seen in the electronics sector. Manufacturing will take a hit with a stoppage of raw material supply from China.

  • Aviation and tourism

Inflow of tourists from China and the rest of East Asia will reduce. Plus, the ensuing global slowdown will impact purchasing power and make people travel less.

Impact on Indian markets

Coronavirus’ impact on markets is so severe that some of the biggest economies in the world are being adversely affected. India is amongst the top 15 countries being hit. The impact in numbers is pegged at $348 million. A manufacturing slowdown in any part of the world tends to cause a ripple effect. With multiple major markets suffering at the same time and the US GDP also expected to fall, India is poised for a major crisis.

Conclusion

Tougher times loom ahead of us as individual citizens as well. While the government does its best to revive healthcare and later, the economy, we, too, must be prepared on our own. A crucial plan that we can add to our financial planning is health insurance. Lending products such as medical loans can also come in handy in such situations so that you can solely focus on yourself and your loved ones.

Lastly, it is important to keep ourselves safe and secure. It will not only help us, but also help the nation by reducing the strain on healthcare systems and by fastening the recovery process.

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