New Delhi: The coronavirus outbreak will have a limited impact on India but the global GDP and trade will definitely get affected due to the large size of the Chinese economy, RBI Governor Shaktikanta Das said Wednesday.
Only a couple of sectors in India are likely to see some disruptions but alternatives are being explored to overcome those issues, stated Das.
The deadly virus has brought a large part of the world’s second-largest economy China to a standstill and its impact has been felt across industries.
India’s pharmaceutical and electronic manufacturing sectors are dependent on China for inputs and they may be impacted, Das said.
“It is definitely an issue which needs to be closely monitored by every policymaker whether in India or any other country, every monetary authority needs to keep a very close watch,” Das said.
A similar problem, perhaps on a lower scale, occurred last time during the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, Das informed adding that the Chinese economy had slowed down by about one per cent during that time.
At the time of SARS outbreak, China was the sixth-largest economy and accounted for only 4.2 per cent of the world’s GDP. The Asian giant is now the world’s second-largest economy, accounting for 16.3 per cent of the global GDP, therefore, any slowdown in the Chinese economy would impact the global economy.
The RBI governor said that the coronavirus outbreak appears to be bigger than SARS and this time China’s share in world GDP and world trade is much higher. “So coronavirus will definitely have an impact on the global GDP and global trade,” Das pointed out. He also added that every major economy will have to be very careful and must monitor the situation closely.
Talking about the impact of coronavirus on Indian industries Das said certainly the pharmaceutical sector will be hit as it is sourcing raw materials from China.
“Most of the large pharma companies, according to information that we have, always keep stock for three-four months. So, therefore, they should be able to manage, but unless the epidemic is controlled quickly, it can affect the pharma sector,” Das said.
Other areas where India is dependent on China is mobile handsets, TV sets and certain other electronic products. “There again it is important that our manufacturers are able to develop alternative places of sourcing these raw materials. I think that already our manufacturers are discussing with other countries in the Asian region. So, if they are able to quickly access raw materials from these other countries, then to that extent the problem on our manufacturing will be contained,” Das said.
India exports iron ore to China and it could be impacted, he said. “But in economics, something negative in one place always works positive elsewhere. So if your iron ore exports are impacted, then perhaps the raw material supply to our local domestic steel manufacturers will be at reduced costs. So their cost of production may go down,” Das added.