China’s rising COVID-19 cases keeping Indian exporters on tenterhooks

COVID-19 cases have been on a steady rise in China since the past couple of weeks, and the situation in the neighbouring country has been keeping Indian exporters on tenterhooks. Any major development in China could once again severely disrupt supply chains and hamper demand of various exports from India. Industry experts anticipate a 40-45% crash in exports to China in FY22 if the COVID-19 surge continues through January.

Also Read: Indian exporters fear of disruption over increasing COVID cases in China

Major goods imported from China included electronic items, organic and inorganic chemicals, medicinal and pharmaceutical products, fertilisers, crude and manufactured and dyeing/tanning/colouring materials. There is a high demand for a lot of raw materials and intermediate inputs, and a limited demand for finished products, such as select capital goods.

According to the commerce ministry data, India’s imports from China during April-October this fiscal stood at USD 60.27 billion, while exports aggregated at USD 8.77 billion. It is notable that the crash in export of iron ore and steel product to China have also been caused by a steep hike in export duties on these products in May to rein in inflation. But the duty hikes were rolled back last month. There is also a crash expected in the export of engineering goods, which make up one fourth of the overall merchandise exports.

As Beijing scrapped its COVID-zero policy earlier this month, the numbers of those tested positive have kept rising. Eric Feigl-Ding, an Epidemiologist and health economist in China, recently posted about the austerity of the situation in China on Twitter. He repeatedly called the situation ‘thermonuclear bad’.

Also Read: Tumultuous times for global supply chain as China’s COVID situation turns bad to worse

In a recent development, it was reported that ports in China, including the world’s biggest – Shanghai Port – are still functioning and the authorities have installed backup plans in place. “However, there is no guarantee that they will remain so in the coming weeks. Order flow has slowed dramatically in many segments, although in some other segments, such as food and pharmaceuticals, they are still flowing in. The situation is very uncertain,” said the chief of a state-run export promotion council.

The fall in overall exports to China until October this fiscal was driven by a plunge in supplies of ores, slag & ash (80.8%), iron & steel (79.2%), aluminium and such articles (83.9%), cotton (94.4%), copper and articles (67.9%) and electrical machinery, equipment, etc (40.1%).

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