Economy

Coronavirus impact: Shutdown in China may hit Indian companies hard

Prashasti Awasthi Mumbai | Updated on January 30, 2020

Travel restrictions could hurt imports and exports, smartphone and other device launches may be postponed

As the coronavirus epidemic plagues more than 20 countries across the world, Indian companies with businesses in China may be significantly impacted. Travel restrictions to China could disrupt the operations of Indian companies that import goods and commodities from that country.

According to a report in Livemint, there could be a shortage of life-saving drugs and antibiotics. The launch of smartphones and other electronic devices in India may also get impacted as most of these devices are manufactured in China. Overall, India imports goods worth $70 billion from China. It also exports products amounting to $17 billion to that country.

The report said that Indian businessmen have postponed their regular visits to China for two months. This can get prolonged if the crisis continues.

Another report, by Economic Times, stated that imports from China account for 85 per cent of the total value of components used in smartphones that are assembled in India; in the case of television sets, it is 75 per cent. Chinese vendors have already spiked the rate of the components by 2-3 per cent due to continuous factory shutdowns in their country.

AirIndia, Indigo to suspend flights

In the wake of the coronavirus outbreak, national carrier AirIndia has suspended flights from Mumbai to Shanghai from January 30 to February 14. India’s largest private airline, Indigo, has also cancelled flights between Delhi and Chengdu from February 1 to February 20. British Airways has also suspended its flights to China.

Global brands witnessing shutdowns

The virus outbreak in China has also pushed global brands including tech giant Apple to shut stores across the country. On Wednesday, Toyota Motors and watch manufacturer Swatch also halted their operations in China, adding to the growing list of companies that have paused their businesses.

Exploring alternatives

While China’s business has come to standstill, global companies relying on that country might have to switch to different component suppliers. For example, Apple CEO Tim Cook stated that the company is working on an alternative to fall back on in case the crisis persists in China.

Consumer Electronics & Appliances Manufacturers Association (CEAMA) President Kamal Nandi believes it is rather difficult to find an alternative to China at such short notice. Nandi mentioned that the businesses that rely on Chinese components maintain the raw-material inventory that can last up to 20-30 days, reported ET.

The death toll from the coronavirus in China spiked to 132 on January 29, Wednesday, with nearly 1,500 new cases. This has increased the pressure on Beijing to contain the disease even as US officials are looking at suspending all flights to China, said a Reuters report.

Published on January 30, 2020

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