The disruption in China has impacted the Indian manufacturing sector greatly, especially the automobile, pharmaceuticals, chemicals, and electronics industries as well as micro, small, and medium enterprises (MSMEs). A lockdown in India’s major export destinations such as Europe including China is also impacting India’s export earnings.

According to a to a preliminary estimate by the United Nations Conference on Trade and Development (UNCTAD) published on March 06, India is among the top 10 economies to be most affected as slowdown of manufacturing in China disrupts world trade due to COVID-19 outbreak. The trade impact for India is estimated to be around US$348 million, with the chemical sector expected to take a big hit – of about US$129 million. Meanwhile, Moody’s Corp, an American business and financial services company, has cut the economic growth forecast for India to 5.3% for 2020 from an earlier estimate of 6.6%.

Additionally, with the World Health Organisation (WHO) declaring Europe to be the new epicentre of the Covid-19 outbreak, exports to the European Union (EU), which is India’s largest exports destination, are affected.

During 2019, India’s exports to the EU stood at $55.7 billion, contracting by 2.9% from the preceding year. Among major items, India exports chemicals, machines, garments, gems and jewellery, iron and steel and pharmaceutical items to the EU.

In China, though most factories and manufacturing units have now started to resume their operations, many might not run at capacity due to multiple challenges, including a smaller returning workforce or tentative restrictions in regional movements. This could lead to delayed timelines for delivery of products and components, which mean it will take time to completely normalise the supply disruption.

“Job losses mainly in labour-intensive sectors such as gems and jewellery, handicrafts and carpets are already happening,” said Sharad Kumar Saraf, President, Federation of Indian Export Organisations (FIEO). “One sector which is doing okay is garments. The sector has got some respite as some Chinese orders came to us. But overall, it’s a very depressing scenario. Even in other countries, buyers are going very slow,” Saraf added.


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