“If America sneezes, the world catches a cold,” was an often-repeated saying to show how important the US was in the global landscape. The outbreak of coronavirus and its impact on the global economy shows that it is China which does all the hard work.
Known as the factory of the world, any major crisis in China directly impacts the bottom line of several global multinationals as seen from Apple’s advisory, which states that it will impact its revenues because of the outbreak of Covid-19 coronavirus disease.
Facebook, Tesla, Microsoft, and Amazon have taken measures to prevent their employees to travel to China and now wait nervously to know how big will be the damage to their companies.
In India, the government has woken up a bit too late and has justified it by claiming that the outbreak of the virus will not impact the corporates except for a few like the electronics industry. But this is where the government is missing the wood for the tree.
What is significant to note is that the Indian Government now believes that the outbreak of Covid-19 cannot be taken lightly anymore.
At a recent event, Union Finance Minister Nirmala Sitharaman said if the situation does not improve within the next fortnight, the government will come out with specific measures to help the industry.
A few weeks ago, Central Bank Governor Shaktikanta Das, had claimed that the impact will not be so heavy on Indian companies. We can see this as a flip-flop but with the coronavirus spreading its tentacles across 50 countries across continents, nobody could have predicted its impact.
Stock markets across the world are crashing, business owners are in panic and almost no one knows how long this will last and the impact it will behind.
Here is where the Indian Government should realise, if it already has not, that this outbreak of mega proportion is an opportunity lost. A government that came to power and returned for another term has repeatedly claimed that “ease of doing business” is its prime focus. But the current events show that it has lost its way, focusing on issues that are irrelevant and might damage the economy in the long run.
What has surprised the economists and political watchers is that this government is more left of the centre than the previous governments were.
To give credit to some previous governments, including the one run by the BJP when late Atal Bihari Vajpayee was the prime minister, it did not tinker with the basic structure of the economy or the society. That was enough for the GDP to keep growing, but this is not the case of the current regime.
To put it mildly and to use a cliché, there is no method in its madness in the economic policies and political stands it has been taking. It has viewed large businesses except for perhaps a couple with growing suspicion and because of which it has let loose tax inspectors on big companies.
To appease the corporates who almost rose in revolt against such action, it lowered corporate tax, but no one was taking it at face value. It hasn’t received the standing ovation which the government assumed it would. There have been other tweaks to some existing economic policies, but they have only left the corporates confused.
What does it all mean for the various industries? It is still playing catch up with China in almost every industry. What if the Indian government had relaxed several norms, provided incentives held back a hurriedly written GST and not unleashed demonetization on the unsuspecting industry, the world would have turned to India once China went off the radar?
According to a report, sports companies across the globe source their products from China. Adidas gets 18 per cent of its shoes and 19 per cent of its clothes from China; Walmart, Target and toy-maker, Mattel all get most of their products made in the Dragon nation.
A South China Morning Post article stated that China is the largest exporter of textile and clothing, accounting for one-third of the trade in the world. The next in line is not India but Bangladesh.
If Prime Minister Narendra Modi wants to create those 10 million, which he promised in his party’s manifesto in 2014, he should have laid the foundation then.
Those policies would have come in handy as the global companies now want to shift factories in Chia elsewhere, as that country is reeling under one crisis after another for a variety of reasons.
To make use of the opportunity, India should have been ready by now and that it has only turned inwards more than ever before shows that its citizens will have to contend with a new normal: a GDP rate which will forever hover between 4 per cent and 5 per cent.