Economic activity has almost come to a standstill in China as major businesses and investors remain spooked about the longer term impact of the novel respiratory virus (2019-nCOV or COVID-19) outbreak, which has already claimed over 1,300 lives and caused over 48,000 infections.
Disturbance caused by the flu-like virus has affected key sectors like global tourism, trade, manufacturing and export/import. But the most important jolt has come from the shutdown of the many businesses--from major retail chains to automobile and smartphone manufacturing firms--in China .
As a result, countries that have a high dependency on China for goods--especially small components and parts--have suffered. Market experts fear that the world's over-reliance on China will still hurt global growth until the virus is contained.
Commenting on the possible risks, Sunil Damania, CIO, MarketsMojo.com, said: "There may be a great danger that world economic process could take a beating thanks to the virus as China accounts for 12 per cent of world's GDP rate of growth ."
"There might be a severe indirect impact on many producers (outside China) who source their raw materials or components from China," he added.
But with no sign of a breakthrough in containing the virus, analysts at S&P say Chinese production activities are likely to stay subdued for nearly two quarters before a revival. Economists also predict that the virus outbreak in China could reduce global GDP by almost 0.3 per cent.
This puts global growth in danger and foreign entities who have investments in China may plan to park their money elsewhere.
Economists say the disruption caused by the virus in China could pave way for more foreign investments in emerging economies like India, Bangladesh, and Vietnam because the world looks to scale back dependency on China, the most important manufacturing hub within the world.
Experts feel that India features a good chance of becoming a beautiful manufacturing hub given this situation, provided the govt tweaks a number of its trade policies to bring down commodity prices.
H Nemkumar, Head - Institutional Equities, IIFL, said the ill-fated coronavirus outbreak in China has offered India with a gap to revive the 'Make in India' programme.
Coronavirus price touches 1,310 in China's Hubei province
In a recent interview with the Economic Times, Nemkumar said global companies are always looking to diversify their sources of supply and India has always been abreast of their radar.
He also gave Vietnam's example which has gained an enormous growth boost thanks to higher density of electronics manufacturing.
Moreover, Chief Economic Advisor Krishnamurthy Subramanian said on Wednesday the coronavirus outbreak provides a "good opportunity" for India to expand its exports.
"The coronavirus outbreak in China provides an honest opportunity to India to expand trade and follow an export-driven model," Subramanian said at the Indian Institute of Management-Calcutta.
"India has been following an equivalent pattern in terms of mobile manufacturing within the country. So, if one looks from this attitude , it provides an honest opportunity for India," he added.
His comments come after a recent surge so as queries received by Indian traders across domains. Trade analysts expect more investment opportunities for emerging economies within the backdrop of the coronavirus outbreak in China.
It now remains to be seen whether the govt can ease policies and pitch India as a robust investment destination for major companies round the globe.
Meanwhile, India also faces a series of challenges thanks to the coronavirus outbreak. as an example , pharma companies, mobile handset, consumer electronics and automobile sectors in India may witness lower production thanks to clogged supply from China.
"If the outbreak continues for extended than anticipated than risk won't be restricted to a couple of sectors, but it can hurt the general Indian economy. The sectors that might be immune are going to be Banks, Insurance, IT as they're going to have fewer headwinds to face thanks to coronavirus," Damania added.