While the impact of coronavirus on Indian industry has so far been moderate, India’s extremely high import dependence on China means there are significant ramifications for Indian industry. Of the top 20 products that India imports from around the world, the average Chinese share is close to 30 percent. Sectors in India that have been are impacted by the coronavirus in China include shipping, pharmaceuticals, automobiles, electronics, textiles, and solar power. (All information sourced from Confederation of Indian Industry (CII) report, 16 Feb)
Coronavirus and the Electronics Industry
China accounts for 45 percent of India’s total electronics imports and sources close to 90 percent of certain mobile phone parts from the country. Extended supply chain disruption will negatively impact India’s electronics industry primarily in the form of production reduction. The mobile phone industry in India has already started running out of stocks and serious disruptions are expected for this sector of the industry.
Local manufacturing of electronics components is being considered and the CII recommends inviting companies from Japan, Korea, Taiwan, Europe and US that are presently in the supply chain, to set up plants in India.
Coronavirus and the Pharmaceuticals Industry
While India is one of the world’s top drug exporters, the Indian pharma industry relies heavily on imports of APIs (active pharmaceutical ingredients) and intermediates, with some 70 percent of APIs sourced from China. For many critical antibiotics and antipyretics, dependency on API imports from China is close to 100 percent.
While not at crisis level yet, the coronavirus outbreak has resulted in shortages and potential price increases of generic drugs in India, and Indian pharmaceutical companies are now considering supply from other countries.
Currently, Indian manufactures do not have a compelling case to manufacture APIs locally, due to inadequate infrastructure, increased compliances, cumbersome processes for environmental clearances, and lack of incentives and support from the government.
Coronavirus and the Automotive Industry
The shutdown in China has affecting the imports of components affecting both the Indian auto manufacturers and the auto component industry. However, current levels of inventory seem to be sufficient for the Indian industry, at least for now. The impact on individual Indian companies in this sector varies depends on the extent of their business with China. An extended shutdown in China is expected to result in an 8 to 10 percent contraction of Indian auto manufacturing in 2020.
With China dominant in the electrical vehicle (EV) battery supply chain, the impact on India’s fledgling EV industry may be greater. The Indian EV industry is dependent on Chinese imports especially for lithium chemicals used to make cathodes and battery cells, as India seeks to build lithium-ion battery manufacturing plants.
Coronavirus and the Solar Power Industry
Chinese companies dominate the Indian solar components market, supplying about 80 percent of solar cells and modules. The coronavirus situation has led to about delays in Chinese production, quality checks and transport of components. As a result, Indian solar companies have started facing a shortfall of raw materials needed for solar panel production.
Coronavirus and the Export Implications
When it comes to exports, China is India’s third largest export destination and accounts for 5 percent share. The demand-side impact will be felt in sectors including organic chemicals, plastics, fish products, cotton, and ores.
The CII refers to an “unprecedented opportunity” to position itself as a production hub for the world and an alternative to China. However, for this to be successful a number of policy actions need to be instituted urgently. These include forming an inter-ministerial task force with industry participation to create awareness on India as a sourcing destination; encouraging Chinese companies to set up in India; enhancing export credit and insurance schemes; and building up competencies in trade facilitation and logistics to Chinese standards.
Source: https://logisticsviewpoints.com/2020/03/19/coronavirus-disrupting-indian-industry/
