Novel Coronavirus set to close China to the world; In India, $100-Billion plus China products market tumbles
The outbreak of Novel Coronavirus in China, if continues unabated for long, may severely hit India’s industry and trade in the coming months as it has become the India’s single largest import source
Novel Coronavirus from China may not have yet impacted life in India, but it threatens to ruin the livelihood of the country’s tens of thousands of traders and businessmen, importing products and components to service a $100-billion plus Indian market for goods made in China. The outbreak of pandemic coronavirus in China, if continues unabated for long, may severely hit India’s industry and trade in the coming months as China has become the country’s single largest import source. China accounts for over 20 per cent of India’s total non-oil, non-gold imports.
Notably, India’s ₹ 1.75 lakh-crore drug industry is critically dependent on the import of active pharmaceutical ingredients (APIs) for antibiotics and anti-inflammatory medicines. China’s coronavirus scare has already hit imports of APIs. As a result, several drug prices in India’s domestic market have skyrocketed. Paracetamol prices have gone up from Rs 260 to Rs. 360 per kg. Nimesulide price has more than doubled to ₹1,100 from ₹ 450. Azithromycin, used for bacterial infections, and montelukast, for treatment of respiratory infections, have increased by some 30 per cent.
If the virus attack spreads or persists, several other Indian industries and trade — such as mobile handsets, smartphones, electronic equipment of all sorts, medical equipment, batteries, organic chemicals, leather products and automobile parts — will be impacted. The major commodities currently imported from China are: electronic equipment; machines, engines and pumps; organic chemicals; fertilisers; iron and steel; plastics; metal products; gems and precious metals; ships and boats; and medical and technical equipment. The user industries and trade are bound to suffer.
Trade and travel together had already helped spread coronavirus to an extent in some 24 countries. The World Health Organisation has declared a global health emergency after coronavirus cases were reported in several parts of the globe.
More countries may add to the list in the coming weeks as China, the world’s largest exporter, is combating hard to retain its export trade in the face of coronavirus outbreak that threatens to stall its economy. A substantial fall in China’s foreign trade this year, following the virus spread, will negatively impact the whole world economy. Imagine China’s foreign trade last year was well over US$ 4.5 trillion. This is as against India’s total GDP of less than $ three trillion.
The Indian government is under pressure from both its Chinese counterpart and India’s powerful trading community and MSME sector, boasting sizeable influence on the ruling Bharatiya Janata Party, to take a rather sympathetic assessment of the situation to protect the business interest. The coronavirus outbreak is giving industry the jitters, especially sectors dependent on Chinese imports. China has already expressed hope that India will not put trade restrictions and limit movement of people in the wake of the coronavirus epidemic in its Hubei province and a few other parts of the country. The government’s response to such unusual suggestions is still not quite clear. It would be a big risk to the world’s second most populous nation, if India ignores the WHO protocol to just accommodate its trade with China.
India needs to be extremely cautious at its ports about import of farm, food and marine products from coronavirus-hit Chinese ports. The Indian port authorities should properly follow all the protocols related with sanitary standards. As this deadly coronavirus is spreading at a fast pace, India should be highly cautious about importing agri, food and marine products from China, said a senior professor at the Indian Institute of Foreign Trade (IIFT). The Indian port authorities must provide protective gears and masks to workforce working at ports, particularly those handling perishable farm and marine product consignments coming from China. India can hardly ignore the fact that China is fast getting isolated across the world, following the outbreak of coronavirus, killing nearly 1,000 people and infecting close to 40,000 others in the world’s second largest economy, just within weeks. More and more countries are putting restrictions on trade and travel with and through China.
In fact, the deadly coronavirus outbreak in China, with no specific medicine or preventive vaccine still under its control, should serve as a warning to countries against trade and economic over-dependence on another country in an emergency situation. It is shocking to note that 60 per cent of India’s leather goods production is dependent on imports from China of such low technology items such as PVC soles, D-ring, tiny locks, zippers and lining. Similarly, it remains inexplicable why the government’s initiatives to boost production of basic drugs or APIs remained only on paper for years. The country’s dependence on China for API imports is the most among all countries, while national strategies to promote local production of such drugs continue to be relegated on paper. API is the basic building block or component of medicine. According to the Directorate General of Commercial Intelligence and Statistics, in 2017-18, India imported $2,993.25 million worth bulk drugs and intermediates. The share of China in the pie increased to 68.36 per cent ($2,055.94 million). Imports were levelled at 67.56 per cent ($2,405.42 million) in 2018-19. Also, overall India's dependence on imports went up by 23 per cent between 2016-17 and 2018-19.
India should quickly diversify its import outlets to save its industry, consumers and economy from trade breakdown with a single partner such as China. This is the biggest challenge before the Modi government. India can’t and shouldn’t depend primarily on a single country for the import of any of its vital needs. Unfortunately, the government has done little to raise the capability of domestic production even of those items within its means. Increased dependence on API import from China raises national security concerns in times like this. Ironically, coronavirus has led to a big fall in the world crude oil prices as few oil-exporting countries are keen to trade with China for the present.