Latest survey conducted by Confederation of Indian Industry (CII) on February 16 suggests that 130-odd Indian companies operating in China are facing real time revenue challenges, due the ongoing coronavirus (covid–19) outbreak. The unplanned costs are putting pressure on retaining employees who are understandably scared of the epidemic. Thus the firms could lose an estimated figure of 15% – 20% as a result.
Crux of the Matter
Indian Firms Hit in China, says CII The findings of the survey titled “Novel Coronavirus in China: An Impact Analysis”, were taken in context of various cities that are under a lockdown with millions of quarantined citizens. Businesses have been closed since January 24 this year. This extended holiday season has reduced their productivity and growth. Without naming the companies, it points out how the movement of people and goods is bound to be controlled for a considerable period, increasing the lead-time of delivery and cost with it. At large, Sectors like industrial manufacturing, manufacturing services, IT & BPO, logistics, chemicals, airlines and tourism have been hit by this. Consequently, the international customers for Indian IT companies in China have started looking for other service providers in alternate locations such as Malaysia and Vietnam. China’s GDP is expected to “decelerate by 1-1.25 percentage point over 2020.” and China accounts for 19.71% of global GDP at purchasing power parity, so the latter will reportedly suffer an impact of -0.5%.
Stay calm and carry on, says RBI Governor The Reserve Bank of India (RBI) Governor, Shaktikanta Das has taken a more calm approach to the aforementioned survey. He was quoted as saying “Even though the global GDP and trade will be affected due to the large size of the Chinese economy, India as a country will have a limited impact.” He added that only a few sectors in India are likely to see disruptions and alternatives are being actively explored to overcome those issues. At the time of the SARS outbreak, China was the sixth-largest economy and accounted for only 4.2% of the world’s GDP. The Asian giant is now the world’s second-largest economy, accounting for 16.3% of the global GDP.
So to fear or not to fear? According to Singapore’s DBS Bank, the Monetary Policy Committee (MPC) of RBI is likely to consider the developments of the supply chain disruptions due to COVID-19 in it’s upcoming conference. In the meantime RBI would review the retail inflation targeting framework behind monetary policy decision as well as its effectiveness and also plans to hold stakeholders consultations including with the government in June 2020. Every policymaker and monetary authority will continuously keep a close watch.
How ready are we in India for the coronavirus? I ask in @SCMPNews : https://t.co/AsnDvrjwfO — Shashi Tharoor (@ShashiTharoor) February 17, 2020
Curiopedia
Past Economic Impact of Epidemics – An interesting study from the World Bank — ‘The Economic Impact of Ebola on Sub-Saharan Africa’ — in 2015 points out that Ebola, which began in Guinea in December 2013 and spread to Liberia and Sierra Leone, pulled down the GDPs of these African countries by several notches.That said, there is an interesting argument that countries and economies that are hit by such calamities tend to fight back faster. Economists Elizabeth Brainerd and Mark Siegler some years ago looked at the 1918 flu epidemic, which claimed 40 million lives worldwide, and found that in America, where 675,000 people died of the flu, growth of income per head between 1919 and 1930 was high in States that were hit the most. More Info
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