‘SENSEX dropped over 1000 points’, ’NIFTY hit a low of 7,800’, are commonplace news during this time of the COVID-19 pandemic. In a matter of weeks, the deadly virus threat has sliced off close to one-third of the global market capitalization. This has got investors in a nail-biting situation. The spread of the virus has resulted in national shutdowns in many countries with all its citizens in quarantine. Factories are at a full-time halt, bringing production down to base levels. As the infection metastasizes among the human population, medical and economic challenges for investors and policymakers worldwide have been posed.
Most investors at this point, have begun dumping safe-haven assets such as government bonds and cash to stock up on cash. India has witnessed a sale worth about $4.4 billion by FI’s in March alone.
Here’s an update of the impact of the pandemic in the Automobile, Pharma, Electronics IT, Tourism & Aviation, and Textile industry.
The automotive sector has taken a major hit owing to its dependency on the Chinese market. The pandemic induced shutdown in China has affected the Indian auto manufacturing and component industry as imports of various components have been prohibited. As of the 5th of March, inventory levels seemed to suffice the Indian industry. However, as of the 19th of March, the sector has seen an 8-10 percent contraction. It is noteworthy that the fledging Electronic Vehicle industry has been impacted most as China is dominant in the battery supply chain, accounting for over two-thirds of the global manufacturing capacity.
India prides itself on being one of the top quality drug exporters in the world. However, the domestic industry relies heavily on the import of intermediates that give medicines their therapeutic value. As of FY19, India imported over Rs. 24,000 cr worth of these bulk drugs, which accounts for 40% of the domestic consumption. Given that these imports were from China, importers have now run their risk of supply disruptions and unforeseeable price movements. This, in turn, has resulted in turbulence across the industry.
India is a growing consumer of products from this sector while China is the end-to-end manufacturer. From raw material to finished goods the virus affected country plays a major part in the sector. The unfortunate impact of the pandemic has hit the consumers of this industry the most. Sales of top company smartphone makers and electronic companies which have most of their end consumers in India have taken a beating.
IT companies are heavily human resource-driven. Restriction in the movement of people as a result of lockdowns and quarantines are culminating into incomplete projects and non-deliverables of completed ones. The Indian IT industry is also declining new projects from its clients. This has motivated existing global customers of the Indian IT sector to look for service providers in substitute locations such as Vietnam, Malaysia, etc.
Tourism & Aviation:
Tourism and aviation are the worst-hit sectors. The outbreak of coronavirus has forced all domestic carriers to suspend flight operations from India. Although this suspension has been imposed only for passengers, lack of man-power due to the quarantine issue has rendered the remaining flights pointless. Owing to the threat of the virus pan India, tourism has also been halted altogether, resulting in a standstill of all inward and outward travel of tourists.
India exported a major chunk of raw materials to countries’ pan globe. Owing to halting operations the global textile industry has been adversely affected. Factory shutdowns and production stalling have disrupted the export of fabric, year, and other such raw materials from India. This disordering is expected to slow down the export chain by 50 percent, further leading to a severe impact on domestic spinning mills. The slow down is a consequence also expected to impact cotton farmers and man-power in the line.
It’s obvious that the corona pandemic has had and is continuing to have a rippling effect on industries across the board. Further slow down is also expected soon.