Can India step in to fill the void left by an ailing China?
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As Darwin theorized, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.” Let us act decisively as circumstances change and demonstrate the leadership our country needs during this stressful time.
The coronavirus, set to take epidemic proportion in China, is most certainly a major concern and despair hangs like a heavy pall over the New World where every second means millions of dollars.
It may just be that India, a fast-growing economy with multifaceted resources is capable of filling the void left in world markets with the devastating impact of the deadly virus called Covid-19 on Chinese manufacturing, exports and population in general. It may sound insensitive, but when the going gets tough, the tough get going! That is exactly the resolve we need to have to survive this catastrophe and keep trade and industry from suffering any further as Covid-19 wreaks havoc on the global economy.
Like the mythological Hydra spewing its venom, the virus has been spreading rapidly affecting the global population after destabilizing China’s powerful economy. Experts think we are capable and need to step in and fill the void that has been created due to the shutdown of major industries in China right now.
There is a crunch of raw materials in India in certain sectors such as speciality chemicals, electronics, pharmaceuticals and automobiles because of the Covid-19 impacting the supply chain in China. There are also chances of a substantial 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.”
The truth is that India can step up to meet the void left by China in the global 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 combat the situation with speed and foresight, we may even be at par with Chinese exports even as the world supply chain normalises. This should be done strategically and wisely.
The question is how committed are we to meet this challenge by making up for the deficits to increase trade & commerce volume.
India has competition in this respect and since our Governmental regulations are still stringent and because of bureaucratic red tapes in certain quarters, it is difficult to move ahead fast enough to avail the opportunity that presents itself. There are sufficient opportunities for Indian Businesses to make a kick start to compensate for the absence of 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 like coffee, for example, is another story. The future cannot always be shining and we need to move with caution because pitfalls 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 further said that certain neighbouring countries such 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 our wings lies largely in the pharma and leather industries. Korea, Singapore, Taiwan and the Far East at large are getting affected by the deadly Covid-19. Sectors set to gain are Textiles, Leather, man-made Fibre, and Medical equipment such as masks and Fertilizers if they can push production up to meet the growing void left by China and seize the opportunity.
The good news is that our Ministry of Environment now plans to issue fast track licences to drug manufacturers to reduce the excessive dependence on China and although it will not be implemented immediately, this would certainly be a positive step towards not only becoming self-reliant but in the long run increasing exports to the West by taking advantage of the deteriorating trade relations between the United States and China.
According to a report by CLSA, “…pharma, chemicals, and electronics businesses may face supply-chain issues and prices will go up by at least 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 this opportunity wisely to our advantage.
In the midst of all this there seems to be a substantial 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, fertilizers and solar energy promoters and manufacturers, saw the 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, the Indian economy and industries are quite resilient despite volatile stock markets and we think it is capable of handling challenges and 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 while keeping in mind that competition could come from countries like Cambodia or Vietnam as India has limited production capacity. So with the great minds all focusing on monetizing this opportunity, can success be far behind?
As Darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.” Let us act decisively as circumstances change and demonstrate the leadership our country needs during this stressful time.