Novel coronavirus: With the declaration of coronavirus (2019-nCoV) as a global emergency, the entire world is likely to feel the impact of the massive outbreak that has claimed many lives and infected over 48,000 people in China alone.
The impact could have a ripple effect on all major economies across the world, particularly in the manufacturing sector, since most of them depend on Chinese imports to complete their assembly line.
India’s Minister of Health, Dr Harsh Vardhan, in a press briefing said, “We had declared the novel coronavirus as a health emergency on January 17 itself. In all our airports thermal screening has been activated. The figures from China are: 48,206 affected cases, 1310 deaths. There are 28 countries that are impacted, if we consider Hong Kong, Taiwan and Macau as separate.”
Some economists in India believe that this is not the time to gloat over China’s problems or look at opportunities but to offer help and assistance in real terms since the impact will be felt in India very soon.
Speaking to India Today, Mohan Guruswamy said, “One economy’s shutdown doesn’t benefit another. When global markets slow down, all of us get hit. China today accounts for one-sixth of the global GDP. Seventy per cent of manufacturing exports are from China. Wait for a few months, there will be a global slump. Pharmaceuticals, rare minerals, etc come from China. Slowdown will start affecting everybody.”
The major sectors that would be impacted are automobile sector, pharmaceuticals and technology hardware sector since most of the parts for these products are made in China and all essential chemicals in the pharma sector come from China to India.
According to reports, Hyundai decided to shut down three of its South Korean plants due to shortages of a wiring harness that was no longer available from a supplier in China. If this continues then Indian markets will also be hit severely.
The real brunt of it has not been felt yet since the outbreak happened during the Chinese lunar holiday. With around 7 million workers, mostly assembly line workers slated to return, one will have to see if they would be allowed to resume work.
Wuhan is a major production centre. Hubei province as a whole is a manufacturing hub. With these factories shutting shop, assembly lines will shut down in places like Shanghai, if even one part does not reach them.
Economists are comparing 2019-nCoV to SARS epidemic of 2002-03. While India could have been insulated from the economic impact back then, it is near impossible to do that in today’s age.
“The rest of Asia will not be immune to the spillover effects from China, as it’s economically more deeply integrated with China today than during SARs 17 years ago,” Nomura, an Asia-headquartered financial services group, said in a recent note.
The only advantage that India has, according to Mohan Guruswamy, is that manufacturers store raw material because of India’s “inefficient” systems. So, while India may not witness the hit immediately, she will in due course.