5 Business Sectors Affected Due To Coronavirus Disease Outbreak
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The outbreak of the novel coronavirus, or Covid-19, has caused panic across the world. With over 3,000 death cases reported across the world and 28 confirmed cases with coronavirus symptoms in India, it has become paramount to take precautions in order to not contract the coronavirus disease.
The coronavirus disease is also negatively affecting both the global and the Indian economy. According to the global agency Organisation for Economic Cooperation and Development’s (OECD) latest Interim Economic Outlook Forecasts, India’s growth forecast for the fiscal year starting April 1, 2020 is projected to drop from earlier 6.2 per cent to 5.1 per cent. There is a drop of 110 basis points (bps) in the overall growth forecast for India. There are also fears of businesses and international trade suffering due to the coronavirus outbreak.
For the uninitiated, coronaviruses are part of the family of viruses known as Coronaviridae. The new form of coronavirus which is currently affecting individuals has reportedly originated at the seafood market in the Chinese city of Wuhan. The virus was first reported to the WHO on December 31. The Wuhan market has been shut down since January 1.
The coronavirus symptoms are dry cough, fever and respiratory problem and can range from mild to severe. It is also widely described as a pneumonia-like illness, because of its similarities with pneumonia.
Here is an overview of business sectors that have been affected due to coronavirus outbreak.
Travel, Tourism and Food
The tourism sector might be heavily affected due to the coronavirus outbreak. Amid increasing number of coronavirus cases in China, South Korea, Italy, and Japan, several airlines have already suspended their services in these countries.
According to reports, the Indian government has announced temporary suspension of visas and e-visas granted to people travelling from Italy, Iran, South Korea and Japan, effective immediately. Several airline companies including Vistara and Air Asia, among others, have already canceled flights to China, Iran and are also reducing frequencies of flights to southeast Asia.
Reports also said there has been an increase in cancelation of tickets and hotel bookings as people are backing out from travel plans amid coronavirus disease scare.
Food materials may also become scarce due to reduced imports and exports from affected regions. Speaking to Entrepreneur India, Pushkar Mukewar, co-chief executive officer at Drip Capital, said seafood export business from Kerala have been hit hard amid the coronavirus disease chaos. According to him, China had emerged as the second largest buyer of seafood in the last 18-20 months. “We have seen orders getting cancelled. Even orders that have been shipped out are not being picked up. Some of the offices are closed and port clearances are not happening.”
Electric Vehicles and Automobiles
At a time when the dialogue around electric vehicles (EVs) is speeding up in the country, the sector is once again faced with challenges related to shortage of raw materials. Lithium-ion batteries, which form the core of electric vehicles, are mostly imported from China.
With reduced imports from China due to the coronavirus disease epidemic, electric vehicle players are seeking alternatives. While reports have showed that the automobile industry is expected to record a 10 per cent slowdown due to shortage of raw materials, the electric vehicle space is expected to be the worst affected.
According to reports, while the EV players locally manufacture lithium-ion battery packs, they import battery cells directly from big suppliers such as Samsung, LG, Panasonic and a several Chinese manufacturers due to a lack of manufacturing capacity in the country. Battery cells which are imported in small batches due to time constraints will lead to scarcity in raw materials as imports from China has been reduced.
Market intelligence solution provider Fitch Solutions also predicted that the vehicle production in India may shrink by 8.3 per cent in 2020 as the auto industry may experience supply shortage due to the coronavirus epidemic.
The coronavirus disease outbreak is also expected to heavily impact the global steel industry. According to media reports. Indian Union minister Dharmendra Pradhan was quoted as saying that the epidemic might affect the industry for almost two to three years as China is the largest producer of steel.
According to reports, the demand in China has been impacted more than supply leading to increase in domestic inventory and reduced prices. Weak prices of domestic steel in China and lower iron ore prices outside the country are impacting the global steel segment. The lowering prices of steel has brought down the income of steel producers.
While the global steel industry is facing the heat, Pradhan has encouraged the Indian steel companies to bank on this opportunity and enhance its output, and strengthen its footprint in the global market.
India is the second-largest global producer of steel with an annual output of over 106 million tonne (MT). However, it is much behind China which accounted for 928.3 MT in 2018.
Electrical Appliances and Consumer Durables
The Indian electronic industry is fearing supply disruption and production curtailment. Media reports said consumer electronics companies are planning to increase prices of refrigerators, air-conditioners, microwave ovens and washing machines from March due to supply shortage from China.
According to a report by The Economic Times, large manufacturing companies such as LG, Voltas, Samsung, Haier and Panasonic have decided to hike prices by 3-5 per cent across models.
The smartphone market is also slated to dip as coronavirus disease continues to plague China. “China, the largest smartphone market, will take the biggest hit. Other major geographies will feel the heat from supply chain disruptions,” said Sangeetika Srivastava, senior research analyst with IDC's Worldwide Mobile Device Trackers.
The Indian pharmaceutical industry is also expected to take a hit due to the coronavirus disease outbreak. The medicine industry is feeling the supply pressure with increasing number of people with coronavirus symptoms. Apart from this, medicine prices are also increasing due to shortage of supply of active pharmaceutical ingredients.
According to reports, India imports bulk drugs and active pharmaceutical ingredients (APIs) for production from China to make certain medicines. A Livemint report said prices of paracetamol, a commonly used analgesic, have increased by 40 per cent in India. Prices of azithromycin, an antibiotic used to treat a variety of bacterial infections, has also increased by 70 per cent.
According to experts, the industry may face shortages in finished drug formulations from April if the supplies are not available soon.