What's the impact of coronavirus outbreak on India? It's a mixed bag

There's little evidence that the coronavirus outbreak in China will exacerbate already-weak consumption demand in India. However, pharma, chemicals and electronics businesses may face supply-chain issues and prices will go up by up 10 per cent, CLSA has said in a report.

India could also be a beneficiary of positive flows since it appears to be the least-impacted market, says the report. "A look at India's key imports from China suggests that pharma, chemicals and electronic companies could see supply chains impacting future supplies if there is a prolonged disruption in production activity in China. On the other hand, any shift in global supply away from China could see some beneficiaries in India like garment and textile exporters, which could see busier order books in the short term," the CLSA report says.

Also read: Sitharaman quells fears of coronavirus impact on Indian economy

Indian electronics and white goods manufacturers rely heavily on Chinese supplies, so prices of items like TVs, ACs, refrigerator, etc, like could go up 5-10 per cent beyond supply chain disruptions, the report adds. Commodities like metals, upstream and downstream oil companies, could witness the impact of lower global demand impacting commodity prices, it adds.

Notably, Indian manufacturers use 75 per cent Chinese components for TVs and almost 85 per cent Chinese components for smartphones. Important components such as mobile displays, open cell TV panels, open circuit boards, memory and LED chips are imported from China. Compressors for ACs and motors for washing machines are also sourced from the neighbouring country.

Critical components of Indian brands, which are dependent on China, may also see prices going up 5-10 per cent, the report says.

The coronavirus outbreak has hit the Chinese economy hard with sectors like automobiles, aviation, stock market, among the worst hit. Indian brands are also complaining that there's no commitment from Chinese vendors on when materials will be delivered as their inventory buffer has exhausted. Companies are saying the slowdown of port operations is another threat and if the port shutdown continues, there could be further disruptions.

New coronavirus cases in the Chinese province at the epicentre of the outbreak --- Hubei -- fell for a second straight day. Hubei reported 1,693 new cases as of Tuesday, down from 1,807 the previous day. But deaths rose by 132, up from 93 the previous day. The latest figures bring the total number of cases in China to over 74,000 with about 2,000 deaths.

In India, total six persons -- three in West Bengal and three in Kerala -- have been found positive for the novel coronavirus so far.

Edited by Manoj Sharma

Also read: Coronavirus death toll rises to 2,000 in China; Hubei reports 1,693 new cases