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India’s effort to recover from the most severe economic slowdown in years is being hampered as the coronavirus weighs on growth, disrupts industry and the disease starts to spread within the country. Until recently, India was the world’s fastest-growing large economy. But growth has tumbled in the past two years, reaching a six-year low of 4.7 per cent in the last quarter of 2019, according to revised data from the national statistics office. The prolonged slowdown has led to plunging investment, job losses and increasing poverty.
“We have been slowing and there is no real sign of recovery,” said Shumita Deveshwar, director of India research at TS Lombard. “Add to that the coronavirus and the potential implications . . . there is a big cloud over India.” The revised statistics office figures also showed that growth peaked in late 2017 — earlier than expected — and included a sharper drop in investment than previously believed. “The most worrying aspect of the new data is that the latest numbers show little sign of the slowdown abating,” said Shilan Shah, a senior economist at Capital Economics.
Economists had expected growth to pick up in the final quarter last year, helped in part by better data for manufacturing and tractor sales. But hopes of a rebound are now fading as the coronavirus spreads, prompting agencies and analysts to cut their growth forecasts for the country. For much of the last month, India seemed to have escaped the outbreaks with just three confirmed cases — all Indian medical students studying in China — by the end of February. But this week, Indian authorities confirmed 22 new cases, including 16 Italian tourists. They have spent more than a week travelling widely across the desert state of Rajasthan, where it is feared they may have spread the virus before they realised they were infected.
The OECD on Monday estimated that India’s gross domestic product would grow at 5.1 per cent in the 12 months to March, down from its previous estimate of around 6 per cent. Also on Monday, Fitch trimmed its growth estimate for the same period to 4.9 per cent from 5.1 per cent. India’s economy is less integrated with China than those of many of its Asian neighbours, which analysts say has helped limit the immediate pain. But China is a vital supplier to large industries such as car manufacturing and pharmaceuticals, which are starting to feel the pinch. India sources more than 70 per cent of pharmaceutical ingredients, around a quarter of car parts and the bulk of supplies for electronics from China, according to Nomura. Many businesses say supplies are running low. Harsh Goenka, chairman of RPG, a conglomerate that produces products from car tyres to pharmaceuticals, said its supplies of chemicals and other raw materials sourced from China would last until around the end of the month. Recommended Ian Goldin Coronavirus shows how globalisation spreads contagion of all kinds The group previously bought pharmaceutical ingredients from suppliers around Wuhan — the Chinese city where the virus outbreak originated and where economic activity has ground to a halt — and has struggled to find alternative sources. An attempt to obtain raw materials from Singapore was hampered after it could not find ships to transport the cargo. “In India, the reaction has been slow,” Mr Goenka said. “There are so many negative factors at play, now you have one [the coronavirus] which is very overwhelming.”
The latest figures as the outbreak spreads How markets woke up to the threat How dangerous is the coronavirus and how does it spread? Subscribers can use myFT to follow the latest ‘coronavirus’ coverage Venu Srinivasan, whose company TVS is one of India’s largest makers of motorcycles and scooters, said the business had lost about 10 per cent of production in February owing to a lack of Chinese-made parts for the vehicles’ fuel injection system. He added that TVS has now managed to find a new supplier. But Mr Srinivasan said he was bracing for India’s recovery to take longer than anticipated. “One would have expected a V-shaped recovery, but instead you have an L shaped recovery,” he said. “It’s been the long haul.” Additional reporting by Amy Kazmin in New Delhi
India’s effort to recover from the most severe economic slowdown in years is being hampered as the coronavirus weighs on growth, disrupts industry and the disease starts to spread within the country. Until recently, India was the world’s fastest-growing large economy. But growth has tumbled in the past two years, reaching a six-year low of 4.7 per cent in the last quarter of 2019, according to revised data from the national statistics office. The prolonged slowdown has led to plunging investment, job losses and increasing poverty.
“We have been slowing and there is no real sign of recovery,” said Shumita Deveshwar, director of India research at TS Lombard. “Add to that the coronavirus and the potential implications . . . there is a big cloud over India.” The revised statistics office figures also showed that growth peaked in late 2017 — earlier than expected — and included a sharper drop in investment than previously believed. “The most worrying aspect of the new data is that the latest numbers show little sign of the slowdown abating,” said Shilan Shah, a senior economist at Capital Economics.
Economists had expected growth to pick up in the final quarter last year, helped in part by better data for manufacturing and tractor sales. But hopes of a rebound are now fading as the coronavirus spreads, prompting agencies and analysts to cut their growth forecasts for the country. For much of the last month, India seemed to have escaped the outbreaks with just three confirmed cases — all Indian medical students studying in China — by the end of February. But this week, Indian authorities confirmed 22 new cases, including 16 Italian tourists. They have spent more than a week travelling widely across the desert state of Rajasthan, where it is feared they may have spread the virus before they realised they were infected.
The OECD on Monday estimated that India’s gross domestic product would grow at 5.1 per cent in the 12 months to March, down from its previous estimate of around 6 per cent. Also on Monday, Fitch trimmed its growth estimate for the same period to 4.9 per cent from 5.1 per cent. India’s economy is less integrated with China than those of many of its Asian neighbours, which analysts say has helped limit the immediate pain. But China is a vital supplier to large industries such as car manufacturing and pharmaceuticals, which are starting to feel the pinch. India sources more than 70 per cent of pharmaceutical ingredients, around a quarter of car parts and the bulk of supplies for electronics from China, according to Nomura. Many businesses say supplies are running low. Harsh Goenka, chairman of RPG, a conglomerate that produces products from car tyres to pharmaceuticals, said its supplies of chemicals and other raw materials sourced from China would last until around the end of the month. Recommended Ian Goldin Coronavirus shows how globalisation spreads contagion of all kinds The group previously bought pharmaceutical ingredients from suppliers around Wuhan — the Chinese city where the virus outbreak originated and where economic activity has ground to a halt — and has struggled to find alternative sources. An attempt to obtain raw materials from Singapore was hampered after it could not find ships to transport the cargo. “In India, the reaction has been slow,” Mr Goenka said. “There are so many negative factors at play, now you have one [the coronavirus] which is very overwhelming.”
The latest figures as the outbreak spreads How markets woke up to the threat How dangerous is the coronavirus and how does it spread? Subscribers can use myFT to follow the latest ‘coronavirus’ coverage Venu Srinivasan, whose company TVS is one of India’s largest makers of motorcycles and scooters, said the business had lost about 10 per cent of production in February owing to a lack of Chinese-made parts for the vehicles’ fuel injection system. He added that TVS has now managed to find a new supplier. But Mr Srinivasan said he was bracing for India’s recovery to take longer than anticipated. “One would have expected a V-shaped recovery, but instead you have an L shaped recovery,” he said. “It’s been the long haul.” Additional reporting by Amy Kazmin in New Delhi
