The coronavirus set to take epidemic proportion in China is certainly a major health concern worldwide. India is a growing economy and capable of filling the void left in world markets with the impact of the deadly virus called Covid-19, on Chinese exports. Like a hydra spreading its venom, the virus has been spreading rapidly affecting world economies after disabling China’s powerful economy. We believe that we are perfectly poised to step in and fill the void if we can go the extra mile.
In India, just as there is a crunch of raw material in certain sectors such as speciality chemicals, electronics, pharmaceuticals and automobile sectors because of the Covid-19 impacting exports from China; there are also chances of a subsequent gain by domestic traders in other segments of the industrial world.
To quote Assocham Secretary General Deepak Sood, “Barring a few segments, a large number of engineering exports from India can fill up the market vacated by China; so is the case with products like leather and leather goods.”
It may sound morbid, but the truth is that India is capable of meeting the void left by China in the world markets. Opportunity is at every corner whether it is our age-old trade practices involving agriculture and carpets or certain other areas. If India can effectively leverage the situation they might even be at par with Chinese exports even when the world supply chain normalises. This should be done strategically and wisely.
The question is how prepared are we to meet this challenge by surging ahead and meeting the deficits in domestic markets and providing for the world’s demand.
India definitely has competition in this scenario and since our Governmental regulations are still stringent, rather because of bureaucratic red tapes in certain quarters it is difficult to move ahead fast enough. There is sufficient opportunity for Indian Businesses to make a kick start in this direction in the absence of aggressive Chinese sellers. However, domestic traders will still be at an advantage. This is especially in the case of imports, although meeting the challenge of exports as coffee, for example, is another story. The future cannot be totally shining and we need to move with caution because pitfalls may appear at every other corner.
“There is a lot that needs to be done. India needs to work on many issues such as taxation, regulatory mechanism, factor markets, the financial sector and data privacy,” says Mr N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy. He adds that certain neighbouring countries as Vietnam and Indonesia would also be trying to cash in on this opportunity and we should be fast enough to capture the markets. He further says, “Historically, we tend to move two steps forward and one step back on reforms.” …..and that is where we need to be cautious despite having a skilled workforce.
The opportunity to spread wings lie largely in the pharma and leather industries. Korea, Singapore, Taiwan and the Far East at large is getting affected by the deadly Covid-19. So the sectors set to gain are textiles if they can push production up to meet the growing gap left by China; leather, manmade fibre, and medical equipment such as masks, plus fertilizers which are homegrown in order to seize the opportunity where there has been an economic derailment due to Covid-19.
The good news is that our ministry now plans to issue fast track licences to drug manufacturers in order to reduce the over-reliance on China and though not immediately this would be a positive step towards not only becoming self-reliant but in the long run exporting to the west, taking advantage of the growing trade disagreements between the US and China.
According to a report by CLSA, pharma, chemicals, and electronics businesses may face supply-chain issues and prices will go up by 10 per cent. It further adds that India could be a beneficiary of positive flows since it appears to be the least-impacted market. Some commodities like metals, upstream and downstream oil companies, could witness the impact of lower global demand impacting commodity prices.
There has been a substantial impact on the chemical industry because China is a major exporter of raw material and with disruptions of raw material many countries are affected and there is hope that the European Union and the US might turn to India for supplies and we need to utilize the same to our advantage.
In the midst of all this there seems to a big structural shift of manufacturing units from China but whether India can compete with its ASEAN counterparts remains to be seen.
To quote our Honourable Finance Minister Ms Nirmala Sitharaman, “several industries, including pharma, chemicals, fertilisers and solar energy promoters and manufacturers, saw an opportunity in the crisis. They felt this would be the best time for them to start up new units, so that India is not dependent on imports from China, and can use this as an excuse to expand capacity.” After all Indian industries are quite resilient despite volatile stock markets and as Eunimart thinks it is capable of handling challenges, turning the tide to its advantage.
To sum up we can keep in mind what Abheek Barua the Chief economist as HDFC Bank said that although India is dependent on China for a lot of its raw materials for industries; it could also emerge “as an alternative global sourcing base” for some commodities keeping in mind that competition could come from countries like Cambodia or Vietnam as India has limited production capacity.
India has already made noticeable advances in medical diplomacy.
So we better put up a united effort to make the best of the shifting business relations and hopefully command a greater chunk of global trade by the time this is all over.