China’s economic activity has almost come to a standstill since January as businesses remain shut to prevent their workers from the novel respiratory virus (2019-nCOV or COVID-19) outbreak, which has already claimed over 1,300 lives and caused over 48,000 infections.
Disturbance caused by the flu-like virus has affected key sectors like global tourism, trade, manufacturing and export/import. But the biggest jolt has come from the shutdown of many businesses–from major retail chains to automobile and smartphone manufacturing firms–in China.
As a result, countries that have a high dependency on China for goods have suffered. Market experts fear that the world’s reliance on China will continue to hurt global growth until the virus is contained.
Commenting on the possible risks, Sunil Damania, CIO, MarketsMojo.com, said there are a couple of risks that the world needs to navigate due to coronavirus outbreak.
“There it is a great danger that world economic growth could take a beating due to the virus as China accounts for 12 per cent of world’s GDP growth rate,” Damania said.
Economists predict that the virus outbreak in China could reduce global GDP by almost 0.3 per cent.
But with no sign of a breakthrough in containing the virus, analysts at S&P say Chinese production activities are likely to remain subdued for nearly two quarters before a revival.
Spotlight on India
This puts global growth at risk and foreign companies with business interests and investments in China may decide to park their money elsewhere.
Economists say the disruption caused by the virus in China could pave way for more foreign investments in countries like emerging economies like India, Bangladesh, and Vietnam as the world looks to reduce dependency on China, the largest manufacturing hub in the world.
Experts feel that India has a good chance of becoming an attractive manufacturing hub given the present situation., provided the government tweaks some of its trade policies to bring down commodity prices.
H Nemkumar, Head – Institutional Equities, IIFL, said the ill-fated coronavirus outbreak in China has offered India with an opening to revive the ‘Make in India’ programme.
In a recent interview with the Economic Times, Nemkumar said global companies are always looking to diversify their sources of supply and India has always been up on their radar.
He also gave Vietnam’s example which has gained a huge growth boost due to higher density of electronics manufacturing.
Moreover, Chief Economic Advisor Krishnamurthy Subramanian said on Wednesday the coronavirus outbreak provides a “good opportunity” for India to expand its exports.
“The coronavirus outbreak in China provides a good opportunity to India to expand trade and follow an export-driven model,” Subramanian said at the Indian Institute of Management-Calcutta.
“India has been following the same pattern in terms of mobile manufacturing in the country. So, if one looks from this perspective, it provides a good opportunity for India,” he added.
His comments come after a recent surge in order queries received by Indian traders across domains. Trade analysts expect more investment opportunities for emerging economies in the backdrop of the coronavirus outbreak in China.
It now remains to be seen whether the government can ease policies and pitch India as a strong investment destination for major companies around the globe.
Source – India Today