COVID-19 is a new infectious disease that was recently discovered in China and has spread to almost all countries of the world causing a negative impact on their economies, social life and on top of all health. The World Health Organisation has declared it a pandemic which indicates how grave the spread of the virus is. In this article, we shall be focusing on the impact of the pandemic on the manufacturing industry.
According to a Frost and Sullivan report, the impact of the virus on the global economy is expected to be much worse than the 2003 SARS breakout as China is not more integrated and plays a very essential role in the global economy. The disease not having any definite cure and solely relying on preventive measures, most of the countries in the world are in a state of competing for lockdown with little or no citizens going to work. Due to the precautions being carried, the production sector has been suffering a lot as factories and industries have remained shut. Estimates published by United Nations Conference on Trade and Development said that the slowdown of manufacturing in China due to the coronavirus outbreak is disrupting world trade and could result in a 50 billion dollar decrease in exports across global value chains.
IMPACT ON CHINA:
In China, itself many auto-mobile, tech, and travel-related industries were shut down and it has had an adverse impact on China’s economy. The country’s official measure of manufacturing activity – the Purchasing Manager’s Index (PMI) dropped to 35.7 from 50 in January. As of February 2020, the country’s factory manufacturing rate fell to a record low because most manufacturers closed down production to prevent the spread of the virus. Besides this, there were also reports that many factory workers refused to come to work, thus forcing the manufactures to remain closed. China makes up a third of world manufacturing and is the world’s largest exporter, so the PMI drop well below analysts’ expectations will have a knock-on effect on other countries as well. Many big companies like Apple, Jaguar, and Volkswagen depend on China for production and consumers as well.
The dependency that foreign companies have over China for the supply of manufactured goods is becoming a cause for a halt of production in other countries as well. Many international brands get manufactured units from China which the then assemble in their respective countries, but since the spread of the virus this export has been slow and thus companies are suffering the brut of it. In the United States of America, there are some manufacturers who look ahead into the situation and started to look for domestically sourced replacements for the products that they were importing earlier. But there are many manufacturers who have faced a rise in the price of commodities and a decrease in the number of consumers due to fear of infection from imported goods. Another problem that has been arising because of the virus is the breakage of the supply chain. Due to shutdowns in multiple regions, the international as well as the domestic supply chain of many goods and services have been broken, which has led to difficulties in the production process and caused a lot of losses and delays.
IMPACT IN INDIA:
In India, two of the biggest manufacturing companies-Nestle and Coca Cola have temporarily shut down their production with the exceptions of essential items like milk and other dairy products. Besides the big companies, many small industries and cottage industries have been impacted by the nation-wide lockdown that has been imposed by the government. A large number of people are employed as workers in the factories or various different manufacturing units, but because of the lockdown, they all are rendered unemployed and, in some cases, even jobless. According to an Economic Times report, the industry that will be worse effected as a major share of their raw material is imported from China. Delayed shipments from China and a spike in raw material prices are affecting the dyes and dyestuff industry, especially in Gujarat. Nearly 20 percent of the production has been impacted due to the disruption in raw material supply. The automobile industry in India also imports many of its components from China, the shipment of which has been delayed, resulting in a decrease in production. In case the shutdown in China persists, it is expected to result in an 8-10 percent contraction in Indian auto manufacturing in 2020.
According to a United Nations report, a total of 15 or the world’s major economies including India are being affected by the lack of manufactured goods being imported from China. But the manufacture of medical equipment like face masks, gloves, testing kits, etc is being restarted. the entire world is currently demanding the manufacturers of ventilators to quicken their production process and even requesting auto-mobile manufacturers to assist in producing them. With a flattening of the curve in the affected regions of China, production might be more regular. But as for the countries that are still in lockdown, it will take a long while for the industry to restart.
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An aspiring civil servant, a curious mind but also an avid binge watcher- Prerna is currently pursuing BA Prog in English and Political Science from Kirori Mal College. She belongs to Chandigarh but really enjoys the hustle of Delhi. Her favourite pastime is taking naps and recognises herself as a pro at it.