Construction, Transport, Chemical Manufacturing May be Worst-Hit Due to COVID-19 Crisis in China

New Delhi: Construction, transport and chemical manufacturing sectors are likely to be the worst-affected by the coronavirus pandemic in China, says a report.

However, India's top imports — crude oil and gems and jewellery — which collectively account for 46 per cent of total imports are relatively insulated from the public health crisis in China, according to the report by ICICI Securities.

The novel coronavirus which originated in China's Wuhan city towards the end of 2019 has so far claimed over 5,000 lives and infected more than 1 lakh people globally. Daily death toll due to the virus is still very high and given the number of infected people, the battle with the virus is far from over, it said.

Since the severity of the virus became known, global financial markets have been on the edge. Although most of deaths are in China, the virus has reportedly spread to about 100 countries and has been declared a pandemic by the WHO.

Out of India's total imports of $507 billion in FY19, 26 per cent of the basket, which comprises iron and steel and inorganic chemicals, is likely to be affected modestly.

"We expect the impact on iron and steel to be moderate because India imports 11 per cent of its iron and steel from China. Also, India's biggest import source country for iron and steel, South Korea imports 20 per cent of its requirement from China.

"Similarly, we expect the impact on inorganic chemical to be moderate as well since India imports almost 15 per cent of its inorganic chemicals from China," the report noted.

Further, there are five import items that heavily depend on China. They are — electrical machinery, machinery and mechanical appliances, organic chemicals, plastics and optical and surgical instruments. These items collectively account for 28 per cent of India's import basket.

"The sectors likely to be worst-affected by the possible shutdown in China are construction, transport manufacturing, chemical manufacturing and machinery manufacturing," it added.

The country exports only 5 per cent of its total export basket to China and hence, the report does not expect major impact on shipments due to coronavirus. However, some export commodities like organic chemicals and cotton could face headwinds as they export sizable share to China, it added.