Post Covid-19: Are we ready for the impact on trade & industry?

In India, trade-induced adverse impact of COVID-19 on the supply chains of pharmaceutical, electronics, and automobile industries is bound to be significant. As these industries source imports mainly from China, they are (and will be) severely impacted for weeks to come. Based on the Government of India data, out of total electronics goods imports in India, nearly 40% are from China and approximately 17% from Hong Kong. These imports largely build up components that go into the manufacturing of sub-assemblies and final products. If the trade is disrupted, then production stops; and consumption dries up for many. Besides, it is not far-fetched to expect second-round effects arising from the extended lockdown and expected slowdown.

Dependence on China cannot be eliminated overnight. Some legitimate reasons and cost benefit justify Chinese manufacturing capabilities and subsequent global dependence on China. Now, China has kick-started its manufacturing operations in many areas however, few specific internal drivers are aggravating this trade-induced adverse impact:

  • Shortage of truck drivers and workers to load and unload goods
  • Issues with private ports defying government orders to waive demurrage, or the charge payable to discharge goods within a time
  • Port congestion – which is hurting exports and imports
    Freight forwarding has not been allowed fully in lockdown
    Domestic manufacturers are unable to move them from ports to their factories,
    despite their Chinese suppliers operating at 100% capacity
  • Disruption in courier service, which is key to fulfil trade documentation (E-copies often have limited acceptances in certain formalities)
  • Productivity losses from the health impact on the trade workforce

Many of the above are being addressed, wherever possible. At the same time, most government bodies have been resilient, especially the state governments that are operating on the ground. Punjab is facing the heat as well, no doubt. Be it textiles, bicycles, sports, agriculture, or tourism – COVID-19 has spared nothing. But in addition to the central government’s relief measures, Punjab has been at the forefront of public-private engagement to respond to this global health crisis effectively and quickly. To prevent loss of investor confidence, the State is constantly liaising with domestic and international partners. Road shows and investor meet-ups have now transformed into e-outreach regimes. COVA-app, CM Relief Fund, and many such initiatives among others have been undertaken.

Punjab government is constantly engaging with Export Promotion Councils and trade bodies to address grievances. Industry associations have been advised to organize buyer-seller meets to explore avenues to source import of key components from other countries instead of China. However, because of the spread of Coronavirus to other geographies, this has not materialized substantially. Clarifications have been issued to invoke the Force Majeure clause wherever considered appropriate.

To conclude, just a quick note: The summer season is a peak travel period. Flight travel is strongly advised against – at least for the near term. Airlines have ceased operations, but need money to survive (salaries, maintenance, rentals, etc.). What do they do? Borrow! And the moment they do, they need to repay in some time. The problem here is simply two-fold: Firstly, will they be able to repay? Secondly, by when? But this debt may just be one of the many permanent impacts of the coronavirus outbreak. The argument may be extended to all industries dependent on ‘movement’ across borders – be it people (via airlines) or trade.

Recovery will be prolonged. Everyone needs to be prepared, especially the ones on ground. This is where the role of a proactive government will matter the most!

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