Several Sectors Could Face Supply Chain Crisis if Coronavirus is Not Contained

New Delhi: Sectors across pharmaceuticals, chemicals, automobiles, textiles, tourism and hospitality among others in India are likely to take a hit if the novel coronavirus is not contained in next few months, say experts. 

As the virus, which began from Wuhan in China, is spreading on a daily basis, it has already become a cause of concern for the global economy, considering China’s contribution of about 20% to the world’s gross domestic product (GDP) and the interconnected global supply chains across industries.  

As of Saturday, 1,500 people had died of the virus, officially known as Covid-19 across the world. Of these, all but three have died in mainland China. According to reports, nearly 60,000 people are affected with the virus. China and the world are yet to find a cure for the deadly virus. 

In India, the pharmaceutical sector was the first to tremble with the outbreak of the virus from China as Indian companies procure almost 70% of the active pharmaceutical ingredients (APIs) used for the production of medicines from the neighbouring country. 

While the import of APIs and other chemicals have been stopped since the past 20-25 days mainly due to Chinese New Year holidays, Union Minister of State for Chemical and Fertilisers Mansukh Mandaviya has informed his colleagues at a meeting on Thursday that Indian firms had enough stocks for the next two to three months.

As Commerce Ministry data, China’s share in total imports of organic chemicals, inorganic chemicals, medicinal & pharma products and dyes to India stand at 37%, 13%, 36% and 28%, respectively. 

According to India Ratings & Research analysis, the spread of coronavirus on India, besides pharmaceuticals and chemicals, textiles and automobiles, could also led to supply disruption for critical raw material.

Supply Chain Disruption

The supply chains for various global and Indian industries are linked to China as the country accounts for nearly 11% of global imports, and 13% of global exports, as per data available for 2018. “In a situation wherein the outbreak continues for over two quarters, the impact on China’s industrial activity could be substantial -- both due to a fall in labour availability and consumption demand,” predicts India Ratings. 

Multiple reports suggest that car manufacturing within China has taken a hit due to the outbreak, which is now having a cascading effect on global car manufacturers. According to S&P Global Ratings, the “outbreak will force carmakers in China to slash production by about 15% in the first quarter.”

Qualcomm, the world's biggest maker of smartphone chips, warned that “there is significant uncertainty around the impact from the coronavirus on handset demand and supply chain.”

In 2003, a coronavirus termed as SARS, which emerged in China, had killed 774 before it was contained.

According to a  2013 study by the World Bank, a severe pandemic could cause economic losses up to nearly 5% of global GDP. “A severe pandemic would resemble a global war in its sudden, profound, and widespread impact," noted the World Bank in the report.  However, the Covid- 19 has not been declared as a pandemic by the World Health Organisation.