Has India stumbled upon a chance defence against coronavirus? Nomura economist thinks it has

SOURCE: ET

Does India have a serendipitous bulwark against the deadly virus that is ravaging parts of China and spreading to several other regions of the world? As it turns out, some people do think that could be the case. In an interview, Robert Subbaraman, chief economist at Nomura, said Asia is by far most exposed to contracting the virus, but within Asia, India is the least exposed to economic fallout from the coronavirus.

The reason: India’s aversion to joining Asia’s sophisticated supply chain for production, where China is the epicentre, may be what is saving the country from coronavirus. India has been slow to get involved in Asia’s very sophisticated supply chain for production across countries where China is the epicentre. This has helped India from feeling the real damage of the coronavirus, which has brought many industries, in and outside China, to a standstill.

“India does not have a strong links with China in terms of visitor arrivals and so forth in some of these other Asian countries but also the economic spill-overs from China onto India are not severe,” Subbaraman said.

India and the virus
The outbreak of the virus in China has hit India’s manufacturing and exports sectors. Among those hit particularly hard are medicines, electronics, textiles and chemicals. China is India’s biggest source of intermediate goods, a sector that sees bilateral trade worth $30 billion a year.

The Indian government is seized of the threat. Finance minister Nirmala Sitharaman said the government would announce measures soon to help cope with the effect of the virus. The FM met more than 200 business leaders to assess the impact of the coronavirus and discuss plans to contain the damage.

Ratings agency Moody’s said on Tuesday that the outbreak added to pressures on growth in Asia. The impact is felt primarily through trade and tourism, & through supply-chain disruptions.

India’s growth slowed to a near 7-year low of 4.7% in October-December 2019 on continued slump in manufacturing, and now faces the next big challenge of coronavirus outbreak stifling global growth.

Moody’s cut its economic growth forecast for India for 2020 to 5.4% from an earlier estimate of 6.6%, and cut the forecast for 2021 to 5.8% from 6.7%, saying the revisions were also affected by weakening domestic demand.

One economy already down
China’s economy now faces much weaker growth as the spread of the virus has hit production as well as trade.

“China’s GDP growth is going to be at least a halving between Q4 and Q1 this current quarter. So it is looking like this quarter will be 3% year-on-year,” he added.

The business impact of the virus is already being felt in many parts. While the world scrambles to control its spread, the world’s most China-reliant economy, Australia, is reeling from shockwaves. The faltering of Australian trade has now fueled questions over whether the nation is too reliant on the Asian behemoth.

Coronavirus has now affected over 82,000 people worldwide, and caused more than 2,800 deaths. About 30,000 of the affected have been cured, but fear of infections is still rampant and is only growing.

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