The Covid surge in China has stoked fresh fears of supply-chain disruption among Indian importers across key sectors like pharmaceuticals, electronics, auto components and garments but they don’t seem to be unduly perturbed at the moment.
Senior industry and trade executives told FE that many companies, which rely heavily on China for key raw materials and intermediate goods, have the required inventory to absorb short-term shocks. However, if the current spike in Covid cases stretches beyond January, forcing China to resort to lockdowns in key cities again, supply chains could be impacted, some of them conceded.
Pankaj Mohindroo, chairman of the Indian Cellular and Electronics Association, said, “There could be sporadic challenges due to the new wave but by and large we feel that manufacturing and logistics will come through unscathed.” China has maintained “resilient” supply-chains, despite the pandemic and zero Covid-tolerance policy, he said. Moreover, Beijing recently relaxed its zero-Covid protocols, he added.
Vinnie Mehta, director general of the Automotive Component Manufacturers Association of India, said, “None of our members have flagged any supply-chain issues so far.” Both original equipment manufacturers (OEMs) and auto component makers usually hold inventory in the run-up to the festive season. Moreover, some OEMs resort to shutdowns at this point of time. “So, it’s a bit early to gauge any possible impact of China’s Covid surge. We will probably have more clarity on it around mid-January,” Mehta said.
China was India’s biggest supplier of intermediate goods, worth about $30 billion a year, across key sectors, according to an internal assessment by industry body CII, prepared just before the pandemic struck in 2020. The value of these imports has only grown from that level. In certain segments, the reliance on Chinese supplies is too substantial to be discounted. Beijing, for instance, accounted for 66% of New Delhi’s total purchases of bulk drugs and drug intermediates, worth about $3.4 billion last fiscal. Similarly, it makes up for about 70% of India’s imports of mobile phone components. As such, China remained the largest source of imports, having accounted for 14% (amounting to $60.3 billion) of India’s total goods purchases until October this fiscal.
R Uday Bhaskar, director general at the Pharmaceutical Export Promotion Council, said imports of inputs, including active pharmaceutical ingredients, from China haven’t yet been adversely affected.
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Saket Dalmia, president of the PHD Chamber of Commerce and Industry (PHDCCI) said: “There is not much impact observed on the purchases of raw materials from China as the production process in factories here is running smoothly.” Nevertheless, as the situation in China is worsening, a few sectors could be impacted. These include portable digital data processing machines, parts of cellular phones, photosensitive semi-conductor devices, integrated circuits and parts of radio, Dalmia said.
Narendra Goenka, chairman of the Apparel Export Promotion Council, discounted fears of disruption in the textile and garment supply-chains due to rising Covid cases in China. While the Indian textile and garment industry is largely self-sufficient, certain accessories and a large volume of capital goods for the sector are imported from China, analysts said.
Even small and medium businesses, which often supply to large firms intermediate products made of raw materials sourced from China, haven’t been hit so far by the fresh Covid wave, trade sources said.
Moreover, as PHDCCI’s Dalmia pointed out, India has moved towards enhancing domestic production of even raw materials and intermediate goods and diversifying its supply source. Of course, any such efforts take time to yield the desired results.
Narayani Ramachandran, deputy director, SVKM’s Narsee Monjee Institute of Management Studies (Bengaluru Campus), said: “The looming fear of the spike in Covid-19 cases (in China) hurts the new year sentiments of Indian manufacturers, especially in sectors like organic chemicals, electronics and vehicle spare parts, plastics and toys.”
The possible stringent lockdown in China may pose serious disruptions in the supply chains of computer hardware, electronic components, mechanic appliances and base metals, Ramachandran added.