Coronavirus jolt to industry

The deadly coronavirus outbreak in China is not only causing jitters among people, but also industry and trade around the world. Global tech giant Apple estimated that it would miss its revenue forecast for March quarter as the virus epidemic would impact iPhone supplies globally.

Most of its manufacturing partners in China shut down operations due to the COVID-19 threat. Global rating agency Moody's lowered growth for Asia-Pacific (APAC) region to 5.2 per cent for 2020, citing the impact of the epidemic. It further said China and India would experience severe impact.

China accounts for 16 per cent of global GDP, consumes over fifth of metals globally and controls 40 per cent of global apparel and textile trade. The COVID-19 which forced China to close over 10 of its major cities and hundreds of factories has led to disruption in global supply chain.

No surprise International Monetary Fund (IMF) said that the novel virus could damage global economic growth this year. IMF MD Kristalina Georgieva estimated that global growth would fall by 0.1 to 0.2 per cent on the account of COVID-19.

As Moody's said, the impact is also likely to be significant on the Indian economy as the country's key sectors like electronics, pharmaceuticals, solar, chemical and capital goods heavily rely on Chinese imports for raw materials and cheaper imports of finished products.

Prices of paracetamol, the most commonly used drug for fever in India, have gone up by 40 per cent thanks to supply chain disruptions in China. The cost of azithromycin, an antibiotic, went up by 70 per cent.

Indian pharmaceutical companies depend on China for bulk drugs which are used in the manufacture of medicines. Pharma industry is likely to face shortages in raw materials if supplies are not restored by next month.

Apart from medicines, prices of LED bulbs are also expected to go up by 10 per cent from March as manufacturers are facing supply shortages of electronic components due to widespread shutdowns in China. Electronic drivers including chips which account for 30 per cent of components used in LED lamps are imported from China.

The industry also sees adverse impact on other lighting products whose prices may also go up by eight to 10 per cent. There could be a severe impact on smartphone sector as well.

Finance Minister Nirmala Sitharaman on Tuesday said that Centre would initiate measures to reduce impact of coronavirus on the country's industry. That's a good move. But it's not enough.

Global economy received similar jolt in 2003 when severe acute respiratory syndrome (SARS) originated in China and ignited global panic. A novel strain of coronavirus was behind that epidemic.

Therefore, India should go back to its drawing board and devise strategies to reduce Indian industry's dependence on Chinese imports. It should give a newer impetus to 'Make-In-India' initiative and enhance the manufacturing sector's contribution to GDP.

That's essential because the country will benefit in two ways if it reduces imports from China. The country can save precious foreign exchange, thus reducing current account deficit.

Besides, increase in manufacturing activity will create large number of new jobs which India needs badly. Hope the country's leadership thinks on these lines.