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.
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.
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.
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.
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
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.
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
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.