February 27, 2020
Coronavirus may hit global growth, domestic capacity building must be enhanced, PHD Chamber
Disease may hit global GDP by more than USD 250 billion
While apprehending about the spread of Coronavirus disease (COVID) in many countries, Dr D K Aggarwal, President, PHD Chamber of Commerce and Industry said in a press statement issued here today that it is very unfortunate that Coronavirus has severely hit the world’s second largest economy China, leading to a subdued global demand scenario and weaker prospects for exports across the nations.
As China is a major player in global trade, contributing around 13% in world merchandise exports, exporting majorly to USA, Hong Kong, Japan, Korea, Vietnam, Germany, India, Netherlands, among others, the impact on global trade would undermine the growth prospects of the world economy.
Disruptions in the global supply chains will not only hit China’s exports but also the exports of the importing countries as they are importing a large chunk of raw materials and intermediate goods from China while exporting to other respective destinations.
The outbreak has the potential to cause considerable global economic and market dislocation, however, the economic impact of the disease will depend on its duration and severity, said Dr Aggarwal.
The continuous spread of Coronavirus may impact global growth by 0.3 percentage points which becomes more than USD 250 billion.
At this juncture, we need to boost our domestic consumption demand and domestic capacities to mitigate the likely impact of Coronavirus on global trade, added Dr Aggarwal.
Sectors such as pharmaceuticals, solar and iron and steel have been facing disruptions in imports of raw materials from China due to the outbreak of the virus, he said.
However, the fundamentals of the Indian economy remain strong and businesses will adjust consequently in the backdrop of robust economic reforms undertaken by the Government to create a strong and resilient economic environment in the country, said Dr Aggarwal.
Focus must be given to strengthen India’s supply chain to its top 10 export destinations including USA, UAE, Hong Kong, Singapore, UK, Germany, among others where China has also its significant contribution in their respective imports.
China increased its presence in the total imports of USA from 8.8% in 2001 to 21.7% in 2018 whereas India was able to increase its share in USA’s imports from only 0.7% to 2% during the same period. Further, China increased its presence in the total imports of UAE from 7.3% in 2001 to 18% in 2018 whereas India’s share in UAE’s imports decelerated from 11% in 2001 to 7.3% in 2018.
Going ahead, India should strengthen its supply chain to regain its lost market share as the country is moving up in terms of Ease of Doing Business and competitiveness of businesses along with market access opportunities, said Dr D K Aggarwal.
The significant efforts undertaken by the Government to create a level playing field for the Indian Industry by enhancing competitiveness of domestic goods and services are highly appreciable.
The recent cut in corporate tax for domestic firms will significantly accelerate investments in manufacturing, open up new employment opportunities and kick start economic growth trajectory of the country, said Dr Aggarwal.
Domestic capacity building at this juncture will not only mitigate the impact of Coronavirus but will also provide an opportunity to increase our presence in global exports particularly towards our top export destinations.
PHD Chamber of Commerce and Industry