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The Impact Of Coronavirus Pandemic On Indian Economy

The struggling Indian economy with the rise of unemployment, rising interest rates and fiscal deficit affected further by the anti CAA protests could be severely affected.

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Covid 2019 a.k.a Coronavirus was declared a public health emergency of international importance on 30th Jan 2020. With the offensive virus affecting over 83000 people across 52 countries, the pandemic fear of insurmountable proportions has gripped the world resulting into an impending collapse of the global financial markets and India is no exception to that! Though the reported cases in India are only 3 and no case of deaths as yet as compared to the fatality in China and elsewhere, it could pose a significant challenge to the Modi government due to its complexities integrated to the world economy. And if the remarks by the IMF MD are to be looked at closely, those two are far from being motivating.

The struggling Indian economy with the rise of unemployment, rising interest rates and fiscal deficit affected further by the anti CAA protests could be severely affected. While there was a modest rise in Q3 (4.5% to 4.7%), the disrupted global trade has resulted in the nervousness of the Indian markets which has wiped out Rs 5.5 lakh crores of investor wealth. 

CHINA’s SHARE IN TOTAL IMPORTS TO INDIA

Organic Chemicals                                           37%

Inorganic Chemicals                                        13%

Electronic imports                                            45%

Medicinal & Pharma                                       36%

Dyes                                                                 28%

Source: https://commerce.gov.in

The early trends of fall in the Indian financial markets bring back the haunting days of the 2008 financial crisis. Economic pandits have already expressed their concern about the global impact of Coronavirus on the Indian economy. This week the Dalal Street has already seen a humongous loss with Coronavirus virus affecting each critical sector including Banks, pharma, IT and infrastructure, Energy. Indian industries depending on Chinese imports are the worst affected. In imports, the dependency of India in China is huge. Of over the 20 products that India imports from abroad, China holds a lion’s share. India’s total electronic imports account for 45% of China. Around 1/3rd of machinery and almost 2/5ths of organic chemicals is purchased from China, by us. Around 65% to 70% of active pharmaceutical ingredients come from China! In terms of export too, India’s 3rd largest export partner is China. Hence overall the virus would definitely affect the core sectors, thereby impacting market, business & trade. Expert analysts are in fact suggesting a Global financial crisis and India would not be far away from the same, considering we are an emerging market.

What is of concern here is the deep impact that it would have in the medicinal & pharma industries, considering that I am from the healthcare industry and our patient treatments are the antidotes that we prescribe. According to the data available with Pharmexcil, the cost of simple paracetamol has gone up from INR 250-300 /kg to 400-450/kg. The prices of vitamins and penicillin have shot up by 40-50%. With pharma companies facing the likelihood of disruptions, Niti Aayog is in discussions with top drug and policymakers to discuss options for domestic companies dependent on China for APIs (Active Pharmaceutical Ingredients)

While all seems to be bleak but if our government support businesses providing interest-free loan and tax waivers to the SME and MSME sector primarily depended on China. Opposition parties have still not called for any talks with the government over their preparedness and strategies for tackling Coronavirus nor have they discussed any possible tax relief measures to the affected companies in lieu of persistence low employment and decline in economic growth. As per the RBI governor, banks must prepare themselves against the impact of coronavirus slowing global growth which will add to the stress of the Indian corporate balance sheets. IMF has already reduced the global growth forecast from 2.9% in 2019 to 3.3% in 2020. Banks should, therefore, be prepared to face these challenges effectively.

Whether the Indian economy fall is actually in response to panic or Coronavirus pandemic or other internal distracting factors, only time will tell, but till then let’s be prepared to fight Coronavirus and strengthen preventative measures against Coronavirus. After all, prevention is better than cure!!

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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coronavirus outbreak coronavirus economy

Dr Inder Maurya

The author is Founder & CEO, Foreign OPD.

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