Coronavirus Impact on Indian Sectors Overdependent on China

07 May 2020
India China Trade Data

Coronavirus (COVID-19), which has claimed thousands of lives in China and other countries, has severely affected global economy, especially Indian industries which are heavily dependent on Chinese materials. The impact of shutdown across China hit hard Indian businesses. The situation for India’s exports to China isn’t bad, but imports to several industries are feeling the strain. According to Export Genius India import data, about 18% of India’s total commodity imports are from China. India recorded a trade deficit of $159 billion in 2019 and it remains a net importer from China including Hong Kong of $56 billion. Although China has been reporting a substantial fall in the cases of Covid-19, it will still take time to recover completely and Chinese companies starting their production units.


In this backdrop, the worst hit industries in India due to coronavirus outbreak in India are electronics, auto components, consumer durables and pharmaceutical.


Electronic sector is in severe stress



As China is the world’s largest producer and exporter of electronics and components, India imports electronic equipment the most from the country. Now production of electronics has been stopped in China due to Covid-19, Indian electronic sector is under severe stress. The entire supply chain is now severely affected and supplies which have already arrived in India require an advanced level of sanitization before they are allowed to be dispatched to various markets. According to industry experts, all electronic equipment will turn dearer by 20-30% in the next 30 days. And this issue will hamper the industry for 3-6 months.


Pharmaceutical industry is also facing the burnt



Pharmaceutical industry is also not far behind facing the burnt from coronavirus outbreak originated in China. According to the Trade Promotion Council of India, approximately 85% of active pharmaceutical ingredient (API) imported by India are from China. India’s overdependence on China for APIs leads to supply disruption of raw material and price volatility.


A market research report on China trade data, China accounted for around 67% of total imports of bulk and drug intermediates in 2018-19. India is hugely depend on fermentation-based APIs/intermediates namely vitamins and antibiotics.


The Federation of Indian Micro and Small & Medium Enterprises (FISME) has said that the import of APIs is critical for pharma industry and its shortage would cripple pharma manufacturing. 

  

Leather industry is also hit



Another sector that has massive levels of essential imports from China is the leather goods manufacturing industry. There are many buyers in the world who strictly adopt the practice of nominating China-based suppliers for their final orders that are made here in India. So, such orders are being negatively impacted due to coronavirus outbreak. According to Council for Leather Exports (CLE) and Agra Footwear Manufacturers and Exporters Chamber (AFMEC), there is a whole lot of enhancements/add-ons related to uniform packaging, labeling, etc. needed for final products and there certainly is going to be an impact on such supplies.


India’s Top Import Partners


China is the second largest import partner of India, which shared 18% value to total imports in 2019. India purchased goods maximum from Middle East countries in the said year. Look at chart and table below to analyze India’s import basket.



Country/Region

% Share

Middle East

24%

China

18%

European Union

16%

USA

7%

Korea

3%

Indonesia

3%

Japan

3%

Nigeria

2%

Malaysia

2%

Vietnam

2%

 


India’s Top Export Partners


Speaking about India’s export partners, China is the fourth largest country, which shared 9% value to total exports in 2019. India shipped commodities mostly to Middle East nations in the said year. See chart and table below to study statistics.



Country/Region

% Share

Middle East

19%

European Union

18%

USA

17%

China

9%

Singapore

3%

Bangladesh

3%

Nepal

2%

Malaysia

2%

Vietnam

2%

Japan

1%

 


Things are not all bad for India due to poor supply of goods and materials from China due to coronavirus. Experts believe that if dwindling imports have led to a crisis situation across many industries, some in exports are expected to get benefited. These exports are carpets, furniture and handicraft materials.

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