More than 106,000 people have been infected by the coronavirus across the world and at least 3,600 have died as the disease upturns a modest growth in the world economy since mid-2019 and threatens key sectors of India's economy where some see a “silver lining” in China practically shutting down.
Multilateral lending agencies, like the World Bank and the International Monetary Fund (IMF), estimate that the coronavirus will have a long-term impact on global economic growth.
The Asian Development Bank (ADB) estimates that the world's gross domestic product (GDP) could reduce by 0.1%-0.4%, noting that financial losses could range from $77 billion to $347 billion. Growth in China could reduce by 0.3% to 1.7% and in developing Asia, excluding China, by 0.2% to 0.5%, the ADB said in an analysis outlining best- and worst-case scenarios.
The Organisation for Economic Cooperation and Development (OECD), the influential think tank, reckons this year world economy may grow at its slowest rate since 2009 because of the coronavirus.
The OECD has forecast a 2.4% growth for the world economy in 2020, down from 2.9% in November. A longer "more intensive" outbreak could halve growth to 1.5%, it said.
The IMF has promised $50 billion and World Bank $12 billion to fight the disease and its impact.
India: risks a lot, gains some
India's economy hasn't caught the bug but if the coronavirus crisis persists worldwide its plans to revive growth could be disturbed.
India's gross domestic product (GDP) growth fell to an unprecedented 27-quarter low of 4.7% in the quarter ended December 2019 (with the previous quarter’s growth having been corrected) due to contraction in investment and manufacturing output for two successive quarters. GDP growth is set to stagnate at 4.7% in the March quarter (Q4) too, according to the annual estimate by the National Statistical Office (NSO).
According to the United Nations Conference on Trade and Development (UNCTAD), India could lose $348 million in trade because of the coronavirus. India figures among UNCTAD's top 15 economies most affected by the slowdown in manufacturing in China.
India's chemicals sector could lose $129 million, textiles and apparel $64 million, automotive $34 million, metals and metal products $27 million--to list just some businesses.
The sharp drop in oil prices, partly caused by the coronavirus crisis, will help India, which imports almost 88% of its requirement. A $20 per barrel fall in oil prices saves India a sum of almost $30 billion per annum.
Monday morning, brent crude oil prices were quoted at $33 per barrel, a fall of almost 28% from previous close.
Indian rating agency ICRA estimates that a reduction in $1/mmbtu in the pooled gas price for the fertiliser sector could lead to a Rs 1500-Rs 1600/tonne fall in production cost for urea manufacturing units, helping the government's subsidy outgo and lower working capital borrowings for companies.
“A silver lining for the Indian urea industry in this crisis is on the natural gas pricing front. R-LNG, which now meets around 57% of the natural gas consumption for the domestic urea industry, has been witnessing a downtrend in prices," said K Ravichandran, group head and senior vice president at ICRA.
"With the decline in the term LNG prices and the weak spot gas prices, pooled price for the urea players will moderate leading to a lower cost of production and a lower subsidy outgo for the government,” said Ravichandran.
The gains could be for companies making and shops selling such anodyne items hand sanitizers and facemasks. V-Medicos, a medicine shop in Uttar Pradesh's Noida city, is clocking high sales of the two products as people resort to panic buying.
"When there is so much demand, what else do we do?" a sales executive at the shop told news agency PTI about selling Rs 150-masks for Rs 300.
Studies show that the coronavirus crisis could help leather, ceramics, plastics, paper, steel, textile sectors in India. A report by rating agency CRISIL said the domestic ceramics might gain briefly as some marginal business shifts to India from China. The leather and leather-goods industry--operating at 60 per cent capacity--can take up orders the United States and the European Union place in China.
The paper industry may gain, especially in the paperboard segment, and so could plastics when cheap imports from China dry up, said the CRISIL report.
The report said that India's steel industry might benefit from import substitution and textile if low cost manufacturing shifts from China.
Risk to safety net
The gains will be futile if the coronavirus isn't controlled. Growth across Asia-Pacific will slow to 4.0% in 2020, the lowest since the 2008 global financial crisis. A U-shaped recovery was expected later in 2020 but by then overall economic damage could hit $211 billion if the disease persists, according to an article by S&P Global Ratings.
The article said emerging Asian markets, like Indonesia, Malaysia, the Philippines, and India, are insulated because their exposure to Chinese and global supply chains is relatively limited.
That safety net could vanish quickly for two reasons: the coronavirus overwhelming countries' healthcare infrastructure and financial conditions tightening quickly.
"If investors ask for a much higher risk premium for emerging market assets, policymakers will have much less space to cut interest rates and boost public spending," said Professor Stephen Roache of Yale University. This could add to downward pressures on growth.
In India, the coronavirus has upset plans and pockets. Vistara cancelled 20 flights between Delhi and Bangkok, 26 between Mumbai and Singapore and eight between Delhi and Singapore in March.
GoAir has suspended operations to Dammam in Saudi Arabia and some flights to Bangkok and Phuket in Thailand.
Business Standard reported on March 5 Indian airlines have asked the government to waive off landing and parking charges and more time to pay oil-marketing firms.
Consumers chicken out
Poultry prices in India have declined by a third since February as consumers avoid meat despite government and farmers saying that the Coronavirus doesn't spread through chicken and eggs.
Broiler chicken in the benchmark Bengaluru wholesale market was quoted at Rs 61.76 a kg in February on an average, as against Rs 91.58 a kg in January.
Broiler chicken in the Hyderabad and Muzaffarpur in Bihar markets sold at Rs 61.28 a kg and Rs 78.66 a kg in February, compared to Rs 86.28 a kg and Rs 90.13 a kg in January. Egg prices have plunged too.
Data compiled by the Poultry Federation of India shows that the Rs 1-trillion poultry sector employs 20 million people, directly and indirectly.
Similarly, India’s buffalo meat exports halved to 50,000 tonnes in February, leading to a nearly Rs 1,500 crore loss in revenue, according to an exporters’ association.
“As an industry, we have lost a business of close to Rs 1,500 crore, with exports to Vietnam, which largely caters to the Chinese market, not moving,” said Fauzan Alavi, spokesperson for All-India Meat & Livestock Exporters Association. “China market access remains extremely crucial for us.”
There is hardly any sector in the world that will remain insulated from the impact of the Coronavirus. Indian business hasn’t called in sick—that’s an opportunity but it must brace for the bug.
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