The impact of COVID-19 virus containment measures is quite evident in trade and commerce across international production networks. As a typical case, the industrial production in China has mostly sullied, plummeting by 13.5% in January and February combined, as compared to the previous year.

Bend in Trend for India

Far in advance, the Indian government could wake up to the actuality of the worldwide COVID-19 fallout; the country has encountered an epiphany moment. While with the outbreak, Indian trade saw the country’s trade going through a trend reversal that might take years to undo.

With the country’s exports depicting no near signs of a relevant recovery, India’s prime foreign trade bureau announced a circular on 26th February, take notice of which is lowered down the average Export Obligation (EO) for exporters who had availed approvals under the (EPCG) scheme.

IMPACT ON GLOBAL VALUE CHAINS

Over the past two decades, China has emerged as a key component of the global economy. China’s ongoing significance has not only been limited to its status as a premier producer and exporter of consumer products. It has become a dominant supplier of intermediary inputs for manufacturing organizations abroad.

However, with limitations over economic activities and movement of people, Chinese supply to sectors mainly essential medical, automotive, and machinery has substantially been affected. Indeed, the producers in the rest of the world have been disarrayed with impediments on the supply of critical parts from Chinese producers. Thus, the impact of exports of any country is determined by how dependant its industries are on Chinese suppliers.

Impacted COUNTRIES

The depletion in the Chinese supply of intermediate inputs has significantly affected the manufacturing capacity of many countries.

For instance,

  1. European automakers may find it difficult to obtain critical components for their operations n automobile, machinery, and chemicals.
  2. Japanese companies may face a shortage of parts required to assemble digital cameras, automatic machinery, and so on.
  3. The United States may face difficulty in procuring inventories just-in-time for the manufacturing process of precision instruments and machinery.
  4. Taiwan can go through inadequacy in office machinery.

Thus, it is conjectured that the spin-off effects of disarray in Chinese supply will be wide-range across economic sectors and geographies of countries.