Deconstructing the Business Impact of Coronavirus in India - Part III

Part III

The conclusive part of our ongoing series on COVID-19’s impact on the Indian business environment talks about the downturns faced in the auto and tourism industry, before discussing the possibilities that have opened up in the disruption caused by the virus.

 Auto Industry

You can’t build a car with 99% of the parts. The automobile industry is already facing disruption woes as orders for spare parts and microchip components are being delayed or temporarily suspended. The situation is not helped by the fact that Wuhan, the epicenter of the COVID-19 outbreak, also happens to be a prominent auto manufacturing hub of China. While MG Motors and Mahindra & Mahindra are heavily dependent on Chinese imports and are likely to face production delays, others like Maruti Suzuki and Hyundai may weather the storm for a couple of months. The two-wheeler industry is similarly worried. At present Hero Electric is facing a shortage of battery supplies that are currently sitting in a dock in eastern China, unable to be shipped out.  Compounding the challenge are the new emission norms set to take effect by 31 March 2020, although the Supreme Court may take cognizance of the unforeseen circumstances and extend the deadline.

Tourism

While the foreign tourist arrivals (FTA) from China to India has been marginal, with about 3.1% of all FTAs into India coming from China in 2019, industry experts report that Chinese tourists spend disproportionate to their share and contribute meaningfully to the Indian tourism revenue. Their absence, particularly in the wake of the Chinese Lunar New Year, is likely to negatively impact India’s tourism expectations, as are studies claiming India to be relatively more vulnerable to a COVID-19 outbreak than others due to the high-density population, lack of sanitation, and porous borders.

Miscellaneous

Apart from the aforementioned usual suspects, other industries are likely to face disruptions as well. The leather sector is heavily dependent on Chinese imports for soles and ornaments, while the spice industry is likely to face downturns due to lack of exporting opportunities in chili and cumin to China, one of its largest buyers. Natural rubber, diamond, and seafood products are facing similar downwind as they are forced to seek alternative buyers.

The steel sector, while not immediately impacted, is already concerned about the global price drops in doctor copper, which has already fallen by about 12%. China being the world’s largest steel manufacturing economy, is also a supplier of spare parts to India’s steel sector - which will face the effects of the shortfall in the coming months.

The Silver Lining

As the saying goes: what is normal for the spider is chaos for the fly. Conversely, chaos and disruption often walk hand in hand with opportunity, and this scenario is no different. In the face of muted competition from Chinese firms, buyers - mostly from the US and EU - are turning to India for supply. Indian manufacturers and exporters of ceramics, textiles, and homeware and lifestyle goods have reported a spike in the number of enquiries over the past couple of weeks. Labour-intensive sectors such as garments are also receiving attention from unexpected corners, while the Federation of Indian Exports Organisations has predicted that chemicals, marine products and medium-tier engineering products will be the big winners from this crisis.

COVID-19 shows no signs of decelerating its spread and it is now a race against time as Indian firms scramble to find alternative buyers and suppliers to offset the imbalance. With 82 cases reported thus far, India is now in the crosshairs of COVID-19. It remains to be seen whether a concerted effort by the government and the public can effectively contain the virus before it gets out of hand. 

About the Author :

Mikhil Rialch is a graduate from Leiden University with an MSc. in International Relations and Diplomacy with a keen interest in South Asian Security and Middle Eastern Geopolitics. He works as an analyst at Mitkat Advisory.

 

Published On - Mar 14,2020

Back

©2017 MitKat Advisory Services Pvt Ltd. All right Reserved

Made With Passion:crisis management

Join the Conversation