Coronavirus an opportunity for India to replace China in the global supply chain: Report

The Coronavirus outbreak has sent the global markets into a frenzy with a sharp decline on Friday. The Indian markets, however, recovered from the initial decline to enter the green zone. Importantly, looking into the future, this problem can help India steal a march on China. While several economies around the globe have been hit by the virus, it gives an opportunity to Indian companies to fill the void left by China in the global supply chain, a new report titled 'IMPACT OF COVID-19 ON INDIA INC' from Cyril Amarchand Mangaldas group states.

"Although, a slowdown in raw material supply may hurt certain China-dependent industries, it also presents an opportunity for the Indian companies to fill the void around the globe. Indian businesses can offer to replace China in the global supply chain by building ties with companies looking to reduce dependency on China," the report said.

It added that this could pave the way for more foreign investments in India and promote its 'Make in India' programme.

"Meanwhile, based on the rapid spread of the virus around the globe, the World Health Organization (WHO) continues to upgrade its global risk assessment. In addition to the grave health consequences of COVID-19, the virus is having a major negative effect on international business, disrupting numerous global supply chains. The sectors most affected are Aviation, Shipping, Transport & Tourism, Hospitality, Manufacturing & Retail," it said.

WATCH Zee Business TV LIVE Streaming Online

China is one of the key suppliers to several businesses around the world. The shutdown of the country has led to disruption in supply chain for several industries, including for procurement of raw materials for production.

"Since 18% of India's imports come from China, supply disruptions in key segments is a primary threat being faced by Indian companies. Consumer durables, electronics and solar panels industry, which heavily depend on China for imports, will be largely impacted by the epidemic in the absence of an alternative. Exports to China have also been affected. The impact on Indian exporters of cotton yarn, sea food, petrochemicals, gems and jewellery seems to be inevitable since China is one of the biggest markets for them," the report said.

What should companies do?

The report states that all companies impacted by the COVID19 outbreak would need to consider if adverse financial consequences of business interruption resulting from COVID-19 can be claimed under the insurance policy.

"Companies should review their existing business interruption insurance policies to protect themselves against any losses sustained from exposure to the epidemic. The extent of insurance cover available to Check Your Insurance a company will depend on the specific terms of each policy," the report suggested.

It added that the company may also need to notify to the insurance company any material event which may result in the company being required to make an insurance claim and such notification requirement under the insurance policy needs to be strictly adhered to.