As COVID-19 has played havoc with the Indo-Sino trade, creating headlines. The global economic impact of which is becoming clearer; making the stock markets reach the lower circuits. Access to the outside world has shrunk; almost every county has severed their supply chains with China. Lockdown has shrunken our social life, evening previously spent with friends are now passed plugged into laptops and mobile phones. The lockdown by India imposed has affected the domestic trade too.
As per the official Chinese data, a 12.4% YOY decline in Indo-Sino trade was seen for the month of January and February 2020. China’s export during this period was about 67.1 billion Yuan.
Many sectors have suffered huge losses due to the imposition of the lockdown. The medicines imported from China have seen a huge jump in their prices. Paracetamol imported from china has seen a hike in its price by up to 40%. India imports 70% of its medicines and medical raw material from China. Due to which we will soon see a price jump in medicines.
China has been a leading exporter of electronic products. Televisions and mobile phones whose 75% and 85% of the components respectively are Chinese made, are going to be hit. Supply from China is shut since December 2019, which caused a shortage of cheaper basic products. DAIKIN, a Japanese air-conditioner manufacturing company has already informed its retailers that the company is going to be increasing prices by 5% to 7%. Products which can be made easily in our own country are imported from China because they are cheaper. Discounts earlier received on mobile phones and other electronic items will be cut off and are expected to get costlier, there are expectations that there will be a 20% increase in the price of electronic products.
As India has shut down the exports, it will make the textile industry suffer. India is one of the largest producers and exporters of cotton yarn. India exports about 25% of its annual cotton and cotton yarn to China. The cotton export is being held up completely. The fabric export has seen a sharp decline. The cost of raw cotton has been reduced by Rs.200 to Rs.300, because there is no demand from China.
Toys will get costlier because the toys imported from China which cost about Rs.10, if made in India costs around Rs.17, this is due to machinery. China manufactures toys on a larger scale. Whereas in India the production is on a smaller scale as compared to China, and without the advance machinery as in China.
Out of every 15 diamonds of the world 14 are cut and polished in India. India exports 36% of its diamonds to China, this will cause India to lose around $1.05-1.3 million. India’s gold market saw a 92% decline in demand for this Akshaya Tritiya, the annual spring festival Hindus and Jains for which, consider it auspicious to buy gold. The alloy is mixed with gold to give it strength and durability, the black beads used in mangal sutra, the platinum used to gold rhodium polish are imported from China; this will force the retailers to increase their making charges, resulting in an overall increase in the price of gold and silver jewellery.
India faced a similar slowdown back in 2008 which caused the GDP growth to fall from 9.8% to 3.9%. The Great Recession of 2008 made China the economic powerhouse. This slowdown is due to the lockdown where all the factories and workplaces are closed. It is expected that after the lockdown opens the demand will be back on track, but it will take time because people have suffered a pay cut and are left with lesser money to spend on wants, and due to the shortage of imports from China, people will have to pay more for the same than they paid earlier. Japan has earmarked $2.2billion to help its manufacturers shift production out of China. India can be the next best location after China; because India has a lower labour cost and is easily accessible to other countries.
Thank you!
By Shavin Bohara
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