Coronavirus Outbreak: What's At Stake For Indo-China Trade

The global death toll is reportedly nearing 500 and apart from the severe loss of life, there are also fears of businesses and Indo-China trade suffering due to the outbreak.
Coronavirus Outbreak: What's At Stake For Indo-China Trade
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Entrepreneur Staff
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On Wednesday, the third case of novel coronavirus was confirmed in India, with another student from Kerala who returned from China’s Wuhan university testing positive. Kerala has already declared the virus a state disaster and operations are underway across the country to keep this in check.

The global death toll is reportedly nearing 500 and apart from the severe loss of life, there are also fears of businesses and Indo-China trade suffering due to the outbreak.

Last week, the Engineering Exports Promotion Council (EEPC) urged authorities to comprehend and review the possible impact of the outbreak on trade with engineering exports to China showing strong growth in the current fiscal year.

EEPC data shows that Indian engineering exports to China increased by 27.60 per cent to $1.77 billion during April-December from $1.33 billion a year earlier.

“In fact, China has emerged as our 10th largest export destination for engineering goods, dominated by iron and steel as also industrial machinery,” said EEPC Chairman Ravi Sehgal, adding that the government had directed the Ministry of Shipping to initiate entry screening at international ports that get traffic from the East Asian country.

Trade Impact

Indian exports to China grew 25.6 per cent to $16.75 billion in the previous fiscal year from a year ago and were projected to grow around 4 per cent this year, said Pushkar Mukewar, co-chief executive officer at Drip Capital. The firm helps small and medium exporters get working capital.

However, if the spread of the new coronavirus forces a prolonged lockdown, retail consumption and raw material demand are expected to fall, according to Mukewar. “Seafood exporters in Kerala are already feeling the pinch, and prices of commodities like soybean and cotton are also facing uncertainty. China is a huge driver of international trade, and an extended lockdown of the country because of the outbreak is likely to cause trouble for exporters in India and elsewhere.”

“Since Coronavirus has originated in animal-based food, it will affect the seafood industry. India's seafood exports to China are worth almost $1 billion,” said Prabir Chetia, head of business research at Aranca, a global research and advisory firm. He said there may also be more stringent norms imposed on food exports from now on, leading to an increase in costs.

Apart from food, the tourism and travel industry would also be affected both ways, according to him. “In 2018, almost 10 million Chinese people travelled to India and this number surged up in 2019 by a large percentage. However, with this threat many Chinese tourists will have to cancel their plans, affecting airlines, hotels, and retail which thrive on tourism.”

Chetia, however, feels that China would be able to contain the virus within a few weeks considering their experience of dealing with similar outbreaks (SARS, 2003), strong governance and the fact that it began during the holiday period and most factories were already shut.

Micro, small and medium enterprises (MSMEs), who import equipment or raw materials from the country, have also been affected. Yash Dawar, owner of Mumbai-based KMY Industries which makes lighting products, imports nearly 50 per cent of all his raw materials from China. Dawar had to recently cancel a scheduled trip to the country.

“The suppliers in China said it was not the safest time for us to come, and that there could be a further delay of at least 15-20 days,” said Dawar. 

As the delay period increases, the prices of those components would go up. Dawar said the margin difference could vary anywhere between 10-50 per cent, depending upon the product. His company sells 8,000-10,000 lights each month. According to him, some of the components that he uses are scarcely made in India and if the delay is prolonged, other than pricing issues, there would be a major supply concern as well.

But amid this gloomy trade environment, there are some who have benefitted as well.

Medikabazaar, an online platform for medical supplies and equipment, said it had witnessed a more than 10x growth in demand for face masks, particulate respiratory masks, protective suits among other things since the news of the outbreak came in.

In the last few weeks, the Mumbai-based company has received multiple queries from China, Japan, Singapore and even India, among other countries, and has increased the procurements of related items to meet demand.

“As our team of professionals keep tracking national and international health scenarios and due to our robust relationships with national and international vendors, we were better prepared for such exigencies,” said Medikabazaar’s founder and CEO Vivek Tiwari.

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