COVID-19: 'India can replace China as global sourcing base'

The report titled 'Assessing the impact of the COVID-19' said that several countries face supply distortion of many products due to the outbreak of the novel coronavirus in China.

New Delhi: As several countries face supply distortion of many products due to the outbreak of the novel coronavirus in China, a report by HDFC Bank said that India can turn into an alternative global sourcing base for many items.

The report titled 'Assessing the impact of the COVID-19' said that India has been getting queries from the European Union and the US for textiles, home-ware, ceramic tiles, engineering goods, furniture, among others seeking to replace China as a supplier.

"In relative terms, India seems insulated from the virus and could emerge as an alternative global sourcing base for a number of items," it said.

It noted that an ecosystem should be developed to complete manufacturing rather than just assembly. India should be made a manufacturing destination for global companies.

The report, however, observed that the regulatory mechanism in India, limited production capacity and competition from countries like Vietnam and Cambodia in manufacturing sector are the major constraints for India in becoming China's replacement.

It also said that the pharma, electronic, consumer durable, power and auto industries are expected to be affected due to the supply disruption.

Regarding India's over-dependence for raw material supply from China, the report said "68 per cent of active pharmaceutical ingredients (API) imported by Indian companies from China in FY19".

Around 40 per cent of India's electrical machinery and equipment is imported from China, it said.

On the impact on China's economy, the report said: "We expect growth to recover gradually from Q2 if the impact of the virus is contained over the coming weeks. China growth for 2020 expected to be below 6 per cent."

(IANS REPORT)