{"id":8794,"date":"2020-04-20T05:13:30","date_gmt":"2020-04-20T05:13:30","guid":{"rendered":"\/blog\/?p=8794"},"modified":"2020-04-20T05:14:25","modified_gmt":"2020-04-20T05:14:25","slug":"will-coronavirus-exacerbate-indias-economic-slowdown","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/wealth-services\/will-coronavirus-exacerbate-indias-economic-slowdown\/","title":{"rendered":"Will Coronavirus Exacerbate India\u2019s Economic Slowdown?"},"content":{"rendered":"\n

India\u2019s GDP growth has slowed down in the last 8 months. In fact,\nexperts would argue that this number has been dropping since the middle of\n2018. GDP growth in\nOctober-December 19 quarter slowed to a near 7-year low of 4.7%. In the same\nquarter of the prior year, the growth was 6.6%. Amid this slowing\neconomic growth, the world has just been hit with the COVID-19 pandemic. <\/p>\n\n\n\n

COVID-19 has already affected the\nIndian stock market by causing severe losses in investor funds. On 28th\nFebruary, the day on which news about COVID-19 turned into a pandemic, there was a 3.5%\ndrop in Indian Sensex, the second-biggest drop in the history of the index.\nHowever, India\u2019s drop in indices is much milder compared to that of the US Dow\nJones, which went 15% under its market highs of the previous month as COVID-19 spread to the\nU.S. <\/p>\n\n\n\n

The US market reacted more viscerally to COVID-19 than India due to the\noverwhelmingly higher number of confirmed US cases in (755) compared to the 6\nIndian cases. However, there is another reason that India\u2019s market seems to be\nless reactive. This is also the argument for why COVID-19 is expected to barely affect its\neconomic slowdown. According to experts, India has very little economic\nexposure to China compared to other countries. In fact, according to Bloomberg\nQuint, India is the least likely Asian country to be economically impacted by COVID-19. <\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Source: Bloomberg Quint (Nomura)<\/p>\n\n\n\n

This has been estimated with the assumption that India will\nemulate its economic reaction to SARS in 2003. The 2003 SARS epidemic in China\nclaimed fewer lives but was more lethal than COVID-19. India was the only Asian country whose\neconomy did not fall but actually grew during the fiscal quarters when SARS was\nrampant. x<\/p>\n\n\n\n

The economic dependence India has on China can be summed in two\nways. <\/p>\n\n\n\n

1. China\u2019s Supply Chains to\nIndia<\/strong><\/p>\n\n\n\n

These supply chains deliver critical commodities like raw\nmaterials, activated pharmaceutical ingredients, antibiotics, and fertilizers\nto India from China. India is directly dependent on China for such items.\nAccording to the percentage of imports that China is responsible for, certain\nIndian industries will be more affected by others. For instance, the Indian\nAuto industry has an extremely high risk of being negatively impacted by COVID-19. This is because\nIndia\u2019s import-dependence for auto-manufacturing raw materials from China is\nhigh. <\/p>\n\n\n\n

However, most other Indian industries are labeled as \u2018moderate\nrisk\u2019 in terms of COVID-19\u2019s\nimpact on them. These industries include pharmaceuticals, capital goods,\ntelecom, electronics, fertilizers, agro products, and textiles. The dependence\nIndia has on China for the supply for these industries is moderate. Therefore,\nwithout the incoming supply chain, India may still be able to secure these\ncommodities from other sources. Hence, the economic risk for these sectors is\nalso classified as moderate.<\/p>\n\n\n\n

2. China\u2019s Share in the Global\nImport of Commodities<\/strong><\/p>\n\n\n\n

Different sectors depend on different commodities to profit. If\nthe prices of the commodities drop, then the sector is negatively impacted.\nChina has different shares on different commodities. For instance, its global\nshare in base metals and ores is an overwhelming 42%. Hence, the metal sector\nis predicted to have a negative impact while all transportation to and from China\nremains shut due to COVID-19.\nDepending on India\u2019s share in such commodities, the outcome could be a mixed\nbag, with net users being affected the most.<\/p>\n\n\n\n

\"Economic<\/figure>\n\n\n\n

For example, there is expected to be a positive influence on\ncertain Indian sectors due to COVID-19. Companies producing pigments, dyes, and basic\nchemicals like polyvinyl chloride are expected to benefit while the pandemic\nspreads. This is because India and China are the major global suppliers of dye\nintermediates. While China\u2019s supply chain to other countries is compromised due\nto COVID-19, the\ndemand may shift more towards India who is now solely responsible for major\nglobal supply. Specialty chemical sectors in India are expected to incur the\nsame benefit. <\/p>\n\n\n\n

In conclusion, while the GDP slows down, the Indian government attempts to counteract its impact by slashed tax rates and providing extra capital to banks for lending. We can expect that the economic impact of COVID-19 will vary for different Indian sectors but experts are not too worried that it will exacerbate the currently lagging economy. This is dependent upon how quickly the spread of the virus is contained. <\/p>\n\n\n\n

Additional Read<\/strong>:- What are the Steps Taken by the Government to Fight Coronavirus in India? <\/a><\/p>\n\n\n\n

In the current economy, it’s time to safeguard your finances while growing your wealth. You can easily do so with research-driven investment solutions from a skilled team of wealth managers at Tata Capital. Get expert consultation in addition to a bouquet of wealth management<\/a> products only on Tata Capital. <\/p>\n\n\n\n

Know More<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

India\u2019s GDP growth has slowed down in the last 8 months. In fact, experts would argue that this number has been dropping since the middle of 2018. <\/p>\n

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