Second pandemic wave threatens India industries, foreign trade

24, May. 2021

People look for transport to take them back to their hometown during a lockdown in Kolkata in the eastern state of West Bengal on May 16, 2021. (Photo: PTI)
People look for transport to take them back to their hometown during a lockdown in Kolkata in the eastern state of West Bengal on May 16, 2021. (Photo: PTI)

By Atul Ranjan

NEW DELHI, NNA - Several industries in India are facing the brunt of supply chain disruptions caused by partial and full lockdowns across the country as it grapples with its worst pandemic wave that has killed tens of thousands weekly since April and caused overstrained health systems to collapse.

Foreign trade in April fell by a couple of billions due to reduced activity. Some economists are concerned that the crisis worsened by border closures might even impact the global economy and supply chain if it is prolonged since India is the fifth largest economy in the world and contributes significantly to world economic growth.

Already, the distribution of COVID-19 vaccines to the world has been slowed down as the country, which produces the majority of vaccines for the world, now needs them urgently to save lives.

The coronavirus resurgence has not affected most businesses in India much so far.

But industries such as auto, auto ancillary and transportation as well as foreign businesses with India exposure or supported by back-office staff in India such as financial and health services are already facing labor and supply chain issues.

They have either temporarily shut down their plants, operating at a reduced capacity or shifting operations.

On May 12, automotive component maker Bosch Ltd., the Indian arm of Germany’s Bosch Group, announced the temporary suspension of operations till May 23 at its Nashik-based plant in the western state of Maharashtra to adhere to the lockdown directive issued by the local government.

“The shutdown of operations will marginally impact the supplies to the OEMs (original equipment manufacturers) as well as the automotive aftermarket segment, which is already stressed with lockdowns as well as supply chain volatilities,” the company said in a statement.

The impact of the shutdown on its business is “difficult to assess at present as the situation continues to evolve,” it added.

Hero MotoCorp is gearing up towards a gradual resumption of operations by starting single shifts at three of its plants, the company said. It will monitor the situation before restarting production at other plants and facilities gradually.

Hemant Sikka, president of the farm equipment sector of the country’s leading automaker Mahindra & Mahindra Ltd., said in a TV interview that the company is unable to procure enough automotive parts as the supply chain has been disrupted.

According to Rajesh Menon, director general of the Society of Indian Automobile Manufacturers (SIAM), disruptions in the supply chain will continue because of movement restrictions in many parts of the country.

Also affected is the country’s pharmaceutical industry which continues to face shortage of product containers and high freight charges which have hampered exports.

Industry players, which source almost 60 to 70 percent of its pharmaceutical ingredients from China, were worried about the impact on the supply chain when China’s Sichuan Airlines temporarily suspended cargo flights to India.

Flights have been largely restored following an appeal by the Indian Drug Manufacturers’ Association (IDMA). Its national president Mahesh Doshi told NNA that Sichuan Airlines resumed flights for Chennai and Bengaluru in the second week of May.

He also said that there are many cargo flights available from China to India including charter services.

“Currently we are not facing any major supply chain-related issues in the country, but container shortages and high freight rates continue to bother us and are in talks with the country’s shipping ministry to resolve this issue,” Doshi told NNA.

According to Mahendra Arya, national president of the All India Transporters Welfare Association (AITWA), an apex organization of India's road transport sector, interstate and intrastate transportation of goods are facing delivery problems due to different sets of rules and guidelines imposed by various states.

“Some states are permitting interstate and intrastate movements of only essential goods, which indirectly means that goods categorized as non-essentials, will not be allowed. There are other states that have put time restrictions on unloading of goods cargo,” he told NNA.

The association warned that such rules can drastically affect supply chains across India as 68 percent of the country's cargo shipment relies on land transport.

Mandatory COVID-19 testing for cargo drivers and handlers demanded by the local government of the western state of Maharashtra also slowed down deliveries. On May 15, it dropped the requirement following an appeal.

A recent report by India Ratings and Research firm said labor supply during the current coronavirus surge is more manageable although there would be a bout of disruptions.

“Unlike the last time, the challenge owing to the reverse migration (of workers) is not visible in a significant way. Industries such as auto, auto ancillary, cotton could face challenges, whereas paper and chemical may stay broadly unaffected owing to the dependence on local labor force,” it said.

However, construction activities will remain constrained by limited availability of key resources although the situation is mitigated by labor retention at construction sites.

At least 30 of the 36 Indian states and union territories have imposed lockdowns of varying severity apart from mandatory localized shutdowns of hotspot areas ravaged by the virulence of COVID-19 and exacerbated by its more contagious and deadly mutant strains.

India has reported more than 25 million COVID-19 cases, with half arising alarmingly in the past two months.

Trade associations and industry bodies have called for more stringent and uniform measures to be implemented urgently nationwide to contain the spread, which had moved from crowded cities to rural areas.

Organizations such as the Indian Medical Association, Confederation of All India Traders and the Confederation of Indian Industry are urging the central government to prioritize lives over economy by imposing a tough nationwide lockdown.

“Sporadic night curfews have not done any good. Life is more precious than the economy,” said the medical association in a statement, adding that lockdown will break the chain of devastating COVID-19 spread.

Delhi-based trade associations had voluntarily shut down their businesses in the capital city in recent weeks.

“The current dismal situation of Covid in Delhi does not allow the traders to open their shops and markets,” said secretary general Praveen Khandelwal of the Confederation of All India Traders last Thursday.

However, health experts say a strict implementation of a nationwide lockdown will remain a challenge.

Virologist Jacob T. John told NNA, “The lockdown sounds good, but the way it's implemented will not be sufficient. What happens is that during a lockdown, traffic is stopped, all shops are closed but people do everything clandestinely. That's no good.”

He stressed that proper social distancing and compulsory mask wearing in public places will still be key to containing the spread of the virus.

Dr Oommen John from the George Institute for Global Health India told NNA that while the overall situation in India is grim and warrants a strict lockdown, there is still a need to strike a balance between life and livelihood.

The balance is what the government is hoping to achieve after the nationwide lockdown last year devastated the economy and livelihood of millions of workers.

Hopes for a strong and quick recovery in 2021 are now fading.

Sonal Varma, India chief economist at investment group Nomura, has predicted the GDP in the current quarter will shrink about 1.5 percent.