In the past two months, the rapid deterioration of the second wave of the new crown epidemic in India has become the most high-profile event in the global fight against the epidemic. The raging epidemic has caused many factories in India to close, and many local companies and multinational companies are in trouble.

The epidemic continues to worsen, many industries in India are hit

The rapid spread of the epidemic has overwhelmed India’s medical system. People burning dead bodies in parks, along the banks of the Ganges, and on the streets are shocking. At present, more than half of the local governments in India have chosen to “close the city”, production and life have been suspended one after another, and many pillar industries in India are also facing serious impacts.

Surat is located in Gujarat, India. Most people in the city are engaged in textile-related jobs. The epidemic is fierce, and India has implemented various levels of blockade measures. Some Surat textile dealers said that their business has been reduced by almost 90%.

Indian Surat textile dealer Dinesh Kataria: There are 65,000 textile dealers in Surat. If calculated according to the average number, the Surat textile industry loses at least US$48 million per day.

The current situation of Surat is just a microcosm of the Indian textile industry, and the entire Indian textile industry is facing a rapid decline. The second outbreak of the epidemic has superimposed the strong demand for clothing after the liberalization of overseas economic activities, and a large number of European and American textile orders have been transferred.

From April last year to March this year, India’s textile and apparel exports fell 12.99% compared to the previous year, from 33.85 billion U.S. dollars to 29.45 billion U.S. dollars. Among them, clothing exports fell by 20.8%, and textile exports fell by 6.43%.

In addition to the textile industry, the Indian mobile phone industry has also been hit. According to foreign media reports, more than 100 workers at a Foxconn factory in India have been diagnosed with the infection. At present, the production of Apple mobile phones processed by the factory has been reduced by more than 50%.

OPPO’s plant in India also stopped production for the same reason. The aggravation of the epidemic caused a rapid decline in the production capacity of many mobile phone factories in India, and the production workshops have been suspended one after another.

India has the title of “World Pharmaceutical Factory” and produces nearly 20% of the world’s generic drugs. Its raw materials are an important link in the entire pharmaceutical industry chain that is closely linked with upstream and downstream. The new crown epidemic has led to a serious decline in the operating rate of Indian factories, and the operating rate of Indian pharmaceutical intermediaries and API companies is only about 30%.

“German Business Week” recently reported that due to large-scale lockdown measures, pharmaceutical companies have basically shut down, and the supply chain of India’s drug exports to Europe and other regions is currently in a state of collapse.

Deep in the quagmire of the epidemic. What is the crux of India’s “hypoxia”?

The most disturbing thing about this wave of epidemic in India is that a large number of people died because of lack of oxygen. Many people lined up for oxygen, and there was even a scene of states competing for oxygen.

In the past few days, the Indian people are scrambling for oximeters. Why can’t India, which is known as a major manufacturing country, produce the oxygen and oximeters that people need? How big is the economic impact of the epidemic on India? Will it affect the recovery of the global economy?

Oxygen is not difficult to produce. Under normal circumstances, India can produce more than 7,000 tons of oxygen per day. When the epidemic hit, a large part of the oxygen originally produced was not used for hospitals. Many Indian companies did not have the ability to quickly switch to production. In addition, India lacked a national organization to schedule oxygen. Manufacturing and transportation capacity, there is a shortage of oxygen.

Coincidentally, the media recently reported that India is experiencing a shortage of pulse oximeters. 98% of the existing oximeters are imported. This small instrument used to measure the oxygen content of the patient’s arterial blood is not difficult to produce, but India’s output cannot increase due to the lack of production capacity for related accessories and raw materials.

Ding Yifan, researcher at the World Development Research Institute of the Development Research Center of the State Council: India’s industrial system is lacking in supporting facilities, especially the ability to change. When these companies encounter special circumstances and need to transform the industrial chain for production, they have poor adaptability.

The Indian government has not seen the problem of weak manufacturing. In 2011, India’s manufacturing industry accounted for approximately 16% of GDP. The Indian government has successively launched plans to increase the share of manufacturing in GDP to 22% by 2022. According to data from the Indian Brand Equity Foundation, this share will remain unchanged in 2020, only 17%.

Liu Xiaoxue, an associate researcher at the Institute of Asia-Pacific and Global Strategy of the Chinese Academy of Social Sciences, said that modern manufacturing is a huge system, and land, labor, and infrastructure are necessary supporting conditions. 70% of India’s land is privately owned, and the population advantage has not been transformed into a labor force advantage. During the superimposed epidemic, the Indian government used financial leverage, which led to an increase in foreign debt.

The latest report of the International Monetary Fund shows that “India has the highest debt ratio among all emerging markets”.

Some economists estimate that India’s current weekly economic loss amounts to 4 billion U.S. dollars. If the epidemic is not controlled, it may face 5.5 billion U.S. dollars in economic losses every week.

Rahul Bagalil, Chief Indian Economist at Barclays Bank in the United Kingdom: If we do not control the pandemic or the second wave of epidemics, this situation will continue until July or August, and the loss will increase disproportionately and may be close About 90 billion US dollars (about 580 billion yuan).

As of 2019, India’s overall import and export scale accounted for only 2.1% of the world’s total, far less than other large economies such as China, the European Union, and the United States.

Post time: Jun-01-2021