How The Coronavirus Outbreak Will Impact Indian Economy

How The Coronavirus Outbreak Will Impact Indian Economy

By
Akhila Masapogu, 12-Feb-2020
Coronavirus-Indian-Economy-Assetmonk

The deadly Coronavirus outbreak has left the whole world in a critical situation. Being the second-largest economy of the world, the crisis caused in China due to the virus will be impacting every country on the world map some way or the other.

The extended holiday period of the lunar new year is leading to decreased production across the sectors and this is an indication of greater loss in many countries. Coronavirus compared to the outbreak of the SARS virus in 2002 is going to have a multiplied adverse effect this time as the Chinese economy has become mighty bigger than 2002.

The trade between India and China has grown 37 times in the last 20 years strengthening the relationship between the two countries. So, Imports and Exports of India will witness a downhill trend, and sectors like automobiles and pharmaceuticals are going to be severely affected due to the present situation.

Some sectors that might be impacted due to the coronavirus spread out are:

  • Electronics

India is a major importer of electronics from China and the production halt of this country led to the ceasing of imports and consumers of the particular electronics now are in search of alternate markets.

This will ultimately have long term impacts of decreased manufacturing, increased prices in industries like automobiles, electronics, and trade across the country, in general. Prolonged cut down of manufacturing will have harsh effects in India as the inventories sufficient for 30 days are only stored. If any prolonged import insufficiency goes further, the production of different sectors will be ceased due to the unavailability of inventory.

Manufacturing of a product is a complex process and involves a lot of inventories and the process will be completely stopped even if one required inventory or product is unavailable. So, this way automobile and electronics and many other industries may be affected due to coronavirus.

  • Tourism

Another industry that is majorly going to be affected during and even after the crisis caused due to coronavirus is the Tourism sector.

During recent years, India has emerged as the trendiest tourism place to Chinese travelers and the number of tourists has significantly increased.

But post this period, the situation is going to be different due to various reasons. At least until the rest of the world is assured that the situation is under control, the tourists from this economy giant will not be encouraged. This will take a toll on our tourism industry as the income generated by Chinese tourists will not be much this year.

  • Real Estate

The Real Estate sector might also be a victim of this scary virus. The Real Estate sector of our country receives huge capital in the form of FDI from countries like Singapore, China, Hongkong, etc, every year.

2020 might witness lower FDI’s due to the slowdown of the economy in these countries. Also, RE investments from the investors of these Asian countries might not follow the increasing trend that has been prevalent until recent times.

  • Pharmaceuticals

The pharmaceutical industry has a mixed impact in this scenario. The drawback of the current situation would be the cut down of the imports of medicines from China.

The Trade Promotion Council of India, reports that 85% of active pharmaceutical ingredients are reported from China. So the current situation might cause some disturbances in the production processes of the Pharmaceutical industries.

On the other hand, a brighter situation is that the Pharma companies here can take up the share of Chinese competitors and this way they can balance the loss.

Even during these hard times, we can take advantage of the present scenario as India is a potential replacement for China for global buyers. Indian manufacturers can get into action and fill the gap left by the Chinese production halt. The exports from the country to the western countries might increase and lead to more opportunities for our country. Despite the damages caused to the country by the coronavirus, it is expected to recover and bounce back quickly.

FAQs:

India depends on China for the imports of the automobile and electronics sectors. So the major impact is expected to be experienced by these sectors along with the tourism industry.

The production halt in China due to coronavirus impacted the manufacturing of electronic goods and automobile production.

Due to the banning of international flights for stopping the spreading coronavirus the tourism industry is severely affected. The revenue generated from the tourism industry during the financial year 2020 will be severely affected.

Though there is no much impact on the Real Estate industry expect for the delay in the completion of projects, there FDI’s may also be decreased a little this financial year.

Though the imports from China are stopped currently affecting the pharmaceutical industry, this situation can become an opportunity for India. Indian pharma companies can take advantage of being an alternative solution for manufacturing the medicines required by other countries.