Visitors wearing face masks take photos at a park overlooking the Forbidden City in Beijing. (Photo | AP)
Visitors wearing face masks take photos at a park overlooking the Forbidden City in Beijing. (Photo | AP)

Coronavirus adds to the troubles of our economy

India’s pharma, automobile and electronics industries are among those largely dependent on imports from the neighbouring Asian giant.

India’s economic growth story, which after a disappointing slowdown in the first half of the year had started showing a few fragile signs of recovery in recent months, is now faced with a new layer of complication—the impact of the coronavirus on the Indian and global economy. Global supply chains that depend on China, the world’s biggest manufacturer, are already feeling the pinch. The World Bank feels global economic growth in the first half of this calendar year may fall short of the 2.5% GDP growth rate it had earlier forecast, on account of supply and travel disruptions.

India’s pharma, automobile and electronics industries are among those largely dependent on imports from the neighbouring Asian giant. Some 67% of active pharmaceutical ingredients, the raw material that goes into making drugs, are imported from China and stocks for them are expected to run dry in a couple of months unless replenished from alternative costlier sources. Many automobile firms that depend on China for spares supply too have sounded the alarm. The matter has become serious enough for the government to hold rushed meetings to try resolve the crisis.

India’s GDP grew by 4.75% in the first half of 2019-2020 and is expected to grow by 5.25% in the second. But coming on top of constrained consumer demand and a continuing shadow banking crisis, supply disruptions due to the virus scare, especially if the epidemic persists, could cripple even this growth. An ongoing downswing in the global market on account of currency and trade wars has already seen Indian exports weakening. During the first 10 months of this fiscal it declined marginally by nearly 2%. Supply disruptions coupled with weaker demand from China and India’s traditional markets in the West could hit exports further. Unlike in the past when foreign trade made up a small proportion of India’s total economy, it now accounts for 44% of our GDP with increasing integration with the world economy. So, whenever the global economy catches a cold, India is forced to sneeze, with disastrous effects on its domestic growth and employment.

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The New Indian Express
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