Coronavirus — India’s Opportunity to Fulfill the Gap between China in the Global Economy Forbes Report Marc Strewart Follow Feb 13 · 4 min read

India is the world’s fourth-largest economy. It produced $9.4 trillion in goods and services in 2017. But it has a long way to go to beat the top three: China, with a production worth $23.1 trillion, the European Union with $19.9 trillion, and the United States with $17.4 trillion.

India had rapid growth despite the Great Recession. It grew 6.7% in 2017, 7.1% in 2016 and 8% in 2015. From 2008 through 2014, it grew between 5% and 11%. That phenomenal growth rate has reduced poverty by 10% in the last decade.

The coronavirus outbreak in China is threatening to send the global economy into disarray. China operations of global manufacturers like Volkswagen, Hyundai, Toyota, Qualcomm, and Foxconn have almost come to a halt.

For India, it’s both an opportunity and a threat. While a retreating China will open opportunities for Indian manufacturing, softening commodity prices will ease the pressure on the fisc. But several Indian industries depend on supplies from China. Any disruption in the supply chain could have serious economic consequences.

According to World Bank President David Malpass, coronavirus will affect the economy negatively. Malpass stated that the coronavirus epidemic in Wuhan was likely to affect global supply chains. The World Bank head also stated that supply chains had to be adjusted by India which is nearby Nation which would be helpful to fill the gap and would be able to get goods out “to make the products that the whole world economy is operating on”.

Oil importers across China’s state-owned and private refining sector have struggled to take delivery of purchased crude and gas cargoes — with one buyer declaring force majeure — as quarantines and flight restrictions eroded fuel demand and cut processing throughput by at least 2 million barrels a day. The purchasing process for the crudes on offer was underway and could be finalized by the end of the week.

“India Should see an opportunity for acquiring such cargoes extending for one more month. BPCL is also interested in cargoes that have loaded onto tankers but are still in transit, which China is now unable to absorb.

The Indian refiner received offers for March-loading cargoes of grades including CPC Blend. Separately, sellers were also trying to find alternative buyers for other grades from Brazil and Russia last week after Chinese demand dried up. Trading giants including Vitol SA, Royal Dutch Shell Plc and Litasco SA were asking about hiring supertankers for storage purposes as the industry tries to deal with a glut that’s emerging in Asia.

“But, the coronavirus outbreak in China provides a good opportunity to India to expand trade and follow an export-driven model,” StraitsResearch at the Indian Institute of Management-Calcutta.

“It is very hard to say how this will manifest in terms of India’s trade relations with China. If we go by the experience of SARS (outbreak), India was not affected that much.

China imports a lot of components, parts, assemblies and integrates and then exports them. India has been following the same pattern in terms of mobile manufacturing in the country. So, if one looks from this perspective, it provides a good opportunity for India.

“If we look at what happened in the mobile manufacturing space in India, we have been following the same pattern. So if you look at in terms of the components in some of these network products, its actually an opportunity for us”, StraitsResearch said.

China imports a lot of components, parts, assemblies and integrates and then exports them. “India has been following the same pattern in terms of mobile manufacturing in the country. So, if one looks from this perspective, it provides a good opportunity for India,” StraitsResearch Said.

Facts on India’s Strengths

India is an attractive country for outsourcing and a cheap source of imports. Its economy has these five comparative advantages:

The cost of living is lower than in the United States. Its gross domestic product per capita is $7,200, half that of China or Brazil. This is an advantage because Indian workers don’t need as much income since everything costs less. India has many well-educated technology workers. English is one of India’s official languages. Many Indians speak it. This, combined with a high level of education, attracts U.S. technology and call centers to India. For example, an Indian call center employee only costs $12 per hour. That’s almost half the American counterpart of $20 an hour. According to the Technology Manufacturing Corporation, more than 250,000 call center jobs, as a result, were outsourced to India and the Philippines between 2001 and 2003. India’s 1.3 billion people come from a wide range of economic and cultural backgrounds. This diversity can be a strength or a challenge. Socioeconomic status is largely determined by geography. India’s three main regions each have distinct classes and education divisions. Annually, 11 million people leave the rural areas to live in the cities. Most of them are young and educated. They seek a higher quality of life. The profitable Indian film industry is called “Bollywood.” It’s a portmanteau of Bombay, now called Mumbai, and Hollywood. Bollywood makes twice the number of movies Hollywood makes. The most popular actor in the world is India’s, Shah Rukh Khan. In 2016, Bollywood contributed $4.5 billion to India’s GDP. It generates less revenue than Hollywood’s $51 billion only because its ticket prices are much lower. On the plus side, Bollywood films cost less to make: $1.5 million on average versus $47.7 million in Hollywood.

These comparative advantages mean great opportunities for American business. Foreign direct investment in Indian companies could be very profitable. The Indian middle class is almost 250 million people, bigger than the U.S. middle class. It will continue to drive India’s consumer spending and economic growth.