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The n-CoV fallout

India Inc could be in a spot of bother if the outbreak prolongs

Impact note | February 2020

 

The new scourge across towns


The deadly novel coronavirus (n-CoV) epidemic is taking lives1 and has now become a global emergency. Epicentre China2, especially the province of Hubei and eastern parts, are worst hit. Key industries here are coming to a grinding halt. With the weather getting warmer over the next two months, we expect the impact of the outbreak to subside in China by April 2020. That is the base case. In the worst case, the epidemic might well extend through the first quarter of fiscal 2021, intensifying the severity of impact. If not contained quickly, the epidemic will have a knock-on effect in the world economy and disrupt global supply chains. China is the world’s second largest economy and a major trade partner for many countries, including India.

 

CRISIL tries to assess the extent of economic casualty of the outbreak, especially for India, as things stand. In the base case, CRISIL believes n-CoV’s impact for India will be a mixed bag.

 

The outright bad: For Indian importers, supply disruptions in key segments is the biggest threat. On the other side, exports to China are taking a hit, too. Export-import trade between the India and China (including Hong Kong) was $115 billion in calendar year 2019 (refer to Annexure for details).

 

Some factories in Hubei province have reopened post Chinese New Year but these units are yet to scale up to their full potential due to labour shortage. Shipping and air transport operations to many Chinese cities remain suspended from and to India, or are operating with low frequency. That’s delaying shipments between the countries.

 

Consumer durables, electronics, solar panels would be most hit, as these heavily depend on imports from China, with no immediate alternatives available.

 

Besides, some impact on exporters of products such as cotton yarn, sea food, petrochemicals, gems and jewellery is inevitable, given that China is among the biggest markets for these products.