13.7% of India’s imports at risk as Chinese factories shut by Virus
The Coronavirus Covid – 19 outbreak in China which has sickened close to 65,000 people and led to deaths of nearly 1,500 has dealt a massive blow to the economy and its consequences are likely to be felt in India as well.
In China, Retail car sales fell 22% to 1.71 million units, the worst drop seen till now. Factories in most part of the country is shut in order to stop infections.
One way to look at it is to see the importance of China in India’s foreign trade. China has been India’s largest source of imports since 2004-05, shows data from the Centre for Monitoring Indian Economy (CMIE) database.
In 2018-19, the latest period for which annual data is available, it had a share of 13.7% in India’s total imports.
Any major disruption in the Chinese economy can disrupt these imports and hence both production processes and supply of consumer goods in India.
Tim Nicolle, Founder and CEO, PrimaDollar, said: “Many businesses will find ways to work remotely or virtually if they can – it is the manufacturing enterprises that require large workforces to be present in one location that will be affected seriously. So this means that India will suffer – not just because health care system might get overloaded, but also because efforts to contain the virus will be very disruptive.”
“Can this lead to a rise in prices? Yes, this is the most likely result of interruptions in supply. Moreover, it will also lead to rising interest rates because the policy response to supply-shortage inflation is to dampen demand. Again, let us hope we are wrong, but the data points so far suggest this is direction of travel,” he added.