Amid widespread fear that the deadly Coronavirus could dent global economy, finance minister Nirmala Sitharaman, just a few days ago, said that green shoots of economic revival were visible in the country. Is the government underplaying the impact this virus could have on the country’s economy?
China is India’s largest trading partner. In 2018-19, India’s inward shipment of goods from China was over $60 billion, accounting for about 20% of the total non-oil, non-gold imports. Imports from China has practically come to a halt with the spread of the Corona Virus.
Thousands of retailers across the country besides key industries, which import raw materials from China have already started to feel the heat.
However, the Finance Minister tweeted that her ministry will hold a meeting on February 18 to assess the impact of Coronavirus on disruptions to Make in India programme and to the imports and exports.
In the current financial year, India is expected to grow at 5%, the slowest in 11 years — or even below 5% as estimated by the International Monetary Fund (IMF). However, the spread of this killer virus COVID-19 (Coronavirus) has posed fresh challenges to the Indian economy and the government must act fast to arrest its impact. The new virus would make economic recovery even more difficult and even lead to further erosion of jobs.
India imports mobile phones, electronic equipment, chemicals, iron and steel, plastics, fertilizers, textiles among other things. Importantly, India also imports substantial chunk of active pharmaceutical ingredients (API) for production of medicines including antibiotics and lifestyle drugs. This will have far reaching impact on the Rs 1.75 lakh-crore drug industry. Not only will this make medicines more expensive but in many cases there could be shortages too.
While the Indian authorities need a pat on their back as they have successfully managed to contain the spread to this virus in India despite detection of a few cases, the government must chalk out a concrete plan to ensure that the virus does not leave its mark on the economy. The country’s factory output contracted by 0.3% in December primarily due to a decline in the manufacturing sector compared to a provisional growth of 1.8% a month ago. The country’s index of industrial production (IIP) witnessed contraction for three consecutive months in August, September and October. Besides, retail inflation uncomfortably inched upward at 7.59% in January against 7.35% in the previous month.
The Indian economy is in a fragile state and the spread of this new virus has created a flutter across the globe. It is important to take note of this fact and act. There is no time for complacency, Ms Sitharaman.