Fall in China manufacturing PMI puts India on toes

Fears of the global economy slipping into recession exacerbated with China, the globe's largest exporter witnessing a historic fall in its manufacturing activities, weighed down by the deadly coronavirus outbreak.

In India, though the government has tried to downplay the country's risk exposure to China in the near term, sources said there could be import duty cut on antibiotic drugs, mobile parts and other items to help businesses cope with the shortfall arising out of China.

Sectoral trade data shows China accounts for nearly half of India's electronics imports and a third of machinery from the neighbouring country.

India's exporters of electronics, pharmaceuticals, speciality chemicals and to an extent automobile depend on China for raw material.

“These are facing supply constraints,” trade body Assocham said on Saturday mentioning about electronics and pharma among others, hours after the latest China's manufacturing PMI data for February showed a slump to 35.7 from 50 in January.

PMI or Purchasing Managers' Index is one of the most closely watched indicator of business activities in the world. A figure above 50 denotes the expansion and below 50, contraction in business activities.

Finance Minister Nirmala Sitharaman, who has held several rounds of meetings in the past fortnight with industry groups, who are heavily dependent on China for their manufacturing or export activities, has said, “things may get challenging if it (corona) prolonged for another two or three weeks”.

Pharma, chemical, solar equipment, paints and mobile companies have been facing the heat of the situation and have already complained to the government. Supply disruptions may soon threaten availability of certain life-saving drugs on Indian stores, according to a company executive.

India sources about 65-70% of active pharmaceutical ingredients and close to 90% of certain mobile phone parts from China. Experts have said the full impact of corona will start reflecting from mid-March when it would impact India's industrial production, imports and exports.

Meanwhile, the Commerce Ministry is holding a meeting with exporters on Tuesday to firm up a comprehensive strategy to deal with issues arising out of the virus impact on Indian businesses.

Traders said the markets should brace for another sell-off on Monday after the biggest single-day fall in indices on Friday last, in four-and-a-half years.