Covid-19: India begins to catch a cold

While new cases of coronavirus are being reported from different parts of the country, the impact of the global epidemic has started to impact Indian businesses on a real-time basis.

Xiaomi and Realme have called off their respective phone-launch events in New Delhi, while Tata Motors has scaled down production due to the hit on its supply chain.

The travel and airline sectors are also facing a crisis as international summer holiday bookings on popular travel sites have dipped by at least 22 per cent.

Export restrictions have been imposed on certain essential active pharmaceutical ingredients as concerns grow over shortages of medicines, with many manufacturers in China shut due to the coronavirus outbreak.

RBI gearing up

Both the Reserve Bank of India and the Prime Minister have sought to assuage concerns. The central bank said it stands ready to take appropriate actions to ensure orderly functioning of financial markets, maintain market confidence and preserve financial stability.

In a tweet, Prime Minister Narendra Modi said: “There is no need to panic. We need to work together, take small yet important measures to ensure self-protection.”

The BSE Sensex zoomed 480 points after these assurances. Global and Indian financial markets have been experiencing considerable volatility, with the spread of the coronavirus triggering risk-off sentiments and a flight to safe havens.

In February, the Nifty extended last month’s losses to close 6.4 per cent lower from January. The Nifty Midcap100, too, shed 6.8 per cent.

On Tuesday, the rupee slumped 43 paise to close at a 16-month low of 73.19 against the US dollar as investor sentiment remained fragile.

The travel, auto, pharma and electronics sectors are bearing the brunt of the impact from the virus. Tata Motors has effected production cuts for its key models. The automaker rolled out 37,826 units in February 2020 compared to 56,826 units during the same month a year earlier as the Covid-19 outbreak in China has impacted its supply chain.

To mitigate the impact on availability of medicines, the Centre has restricted export of 26 pharmaceutical ingredients and medicines made from them, including paracetamol. But industry experts say they are likely to face shortages if the epidemic drags on.

India on Tuesday suspended with immediate effect visas granted on or before March 3, 2020 to nationals of Italy, Iran, South Korea and Japan, who have not yet entered the country. These foreign nationals may not enter India by air, land or sea, said a Bureau of Immigration advisory.

Meanwhile, the Health Ministry has said six cases were detected during sample testing in Agra. On Monday, Rajasthan Health Minister Raghu Sharma had said that an Italian tourist tested positive for the coronavirus in Jaipur.

Down South, in Karnataka, the State health department began identifying people who may have come in contact with the 25-year-old software engineer from Bengaluru who has tested positive for Covid-19 (coronavirus). The affected person, now in Telangana, is said to be working with a software company;

The silver lining

But it’s not all gloom and doom. India, a prominent global oil importer, stands to benefit from the slide in oil prices. Positive gains are expected with regard to the current account deficit and the rupee.

Neha Anna Thomas, Senior Economist, Frost & Sullivan, said the virus outbreak in China is expected to intensify production disruptions and relocation away from China, and India could reap gains with the right set of policies.

The virus outbreak will also restrain central banks from hiking interest rate hikes in 2020, with a loose monetary policy expected to continue. Repo rate cuts in India, initially forecast for the second-half of 2020, could potentially be pushed up to the first half of 2020.