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Impact of Covid-19 on global industry & scope of India to attract China-Returned countries

Covid-19, the latest pandemic as declared by the W.H.O has been creating havoc the world over. People infected with this virus are found to be dying within few days. Health experts have also acknowledged the fact that there are reported many cases where patients did not experience any kind of symptoms. With mass deaths registered the world over, a panic situation has developed, where respective governments of almost all countries have been imposing longer periods of lockdown. Even citizens are barred from getting out of their homes, so as to render the virus ineffective, which is highly contagious.

Its impact on global industry

With people locked in their homes and shops, malls & all other non-essential institutions closed, almost all industries have come to a standstill. This is barring pharmaceutical companies and others tagged in the essential item group allowed to carry out its less than normal functions. Many industries have simply shut down their gates asking employees & workers to stay back home, either with partial or no salary. This is evident the world over. Many small & even big companies including aviation, manufacturing and the like have already started going into the recession mode and ready to cut back on their employee strength significantly. The U.S. already has experienced huge job loss and major unemployment problems, which is found to be much more than that of the last recession. With remedy & vaccines still months or years away, the future seems to be bleak for industries, everywhere.

Impact of Covid-19 in China on industries & scope of India to attract new industries

It was in China last September’19 that Covid-19 virus had started infecting people, supposed to be from the Wuhan market. This virus is said to have emerged from bats sold in the market as food. It was China which had initially called for a stringent lockdown in Wuhan area as well as other provinces. Moreover, China is engaged in a trade war with the United States right much before the pandemic outbreak. This coupled with continuous lockdowns caused by the pandemic has compelled many American, European, Australian and Asian companies to look for other regions to shift their production unit based in China. The shift of manufacturing units from China is considered to be more long term & structural in nature.

According to reports, around 76% of the companies are aggressively looking forwards to shift their supply chains. This is regarded to be a response to China’s protectionist policies like trade tariffs. Apart from this, another 66% reported moving production facilities.

Such companies have been looking at other ASEAN countries including India to relocate their units. In India, the sectors have been divided into services and manufacturing oriented. Around 10% are considering India to be the next incremental investment avenue. India being a large democratic country & having huge market, manufacturers are likely to be interested in setting up their base here. The current government has also being doing its best to bring new foreign investments to the country. For this, they have already started to restructure the foreign economic policies and increasing infrastructure threshold in the country. The Indian government is quite confident that the better infrastructure combined with easily available, cheap & intelligent resources can be a welcoming sign for the new industries coming from China.

With the United States government backing the Indian government, global manufacturers including large Original Equipment Makers (OEMs) have already started discussion with Indian companies to identify feasibility to shift part/entire supply chain to this region from China. Industry experts do expect tremendous growth opportunity as well as migratory development in supply chain.

Some demand is also availed from Indian firms which were previously depended heavily on China to source components.

Covid-19 outbreak & emerging industries

Although a good number of manufacturing companies are witnessing temporary closure due to the outbreak, there are few which are noticed to have increased scope for growth in the long term. This virus led infection according to the experts is likely to be there for some time and health experts have suggested some ways & means to keep it at bay. Hence, the industries revolving around hygiene are expected to be the ones to witness a boom in the coming years.

·         Hand sanitizers: By 2025, the Indian market for hand sanitizers is expected to cross $43 million. The growth of hand sanitizer manufacturing plant is rather attributed to people understanding the importance of overall wellness & leading a healthy lifestyle. Demand for sanitizers has only increased manifolds with Covid-19 outbreak, something that was never seen before. This market is categorized by spray, foam, liquid & gel.

·         PPE Kit: With Covid-19 on the rise, there is a huge demand for PPE kit among the medical segment as well as from the Corona warriors. Healthcare industry is all set to witness a robust growth and is considered to be among the main growth driver to help grow PPE market in the country till 2021. Market growth prediction by 2021 is likely to be over 13% CAGR.

·         Disposable face mask and surgical mask: With Covid-19 infection spreading from one person to another through contact, wearing face & surgical masks like N-95 has become a compulsion. By 2025, it is expected t reach around $95 million, with 6.1% CAGR registered from 2018-25.

·         Disposable and surgical gloves: Increased concern about Covid-19 infection & awareness about hygiene & safety has helped disposable & surgical gloves to witness significant demand. The Indian market by 2025 is projected to reach about $760 million.

·         Wet wipes: Wet wipes are being increasingly used in consumer & industrial applications, combined with increased awareness about cleanliness & hygiene. This in turn has promoted growth for wipes globally. Disposable wet wipes market in India is nascent and is anticipated to cross over Rs. 1,500 Crore.

·         Liquid hand wash: With Covid-19 virus increasing awareness among people about cleanliness & hygiene, liquid hand wash market is all set to witness tremendous growth in the future.

·         Hospital: With regards to employment & revenue, healthcare sector is considered to have become the country’s largest sector and this year 2020, it is expected to cross $372.

Hence, the plan among different companies based in China has indeed given India a tremendous opportunity to benefit from it and to become a global leader.

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Opportunities for Chemical Industries post COVID-19

Industry overview

The chemical manufacturing process can be considered to be integral to the Indian economy. It has become part of lives of Indians in various ways. We are linked to this industry inextricably, be it the drugs, garments, cars & furniture we use. This industry here is both knowledge & capital intensive. It does play a significant role to meet people’s basic needs and to improve their lifestyle.

On a broad segment, it is classified into Specialty, Bulk, Agrochemicals, Fertilizers, Polymers & Petrochemicals. The Middle East being the world’s greatest source for petrochemical feedstock is close to the country. This boosts economies of scale in India’s favour and has helped foster large & small scale chemical business here.

Positive outlook & consistent value creator

The chemical industry in India can be termed to be a global outperformer with regards to ROI. It has resulted in enhanced expectations to boost continual, sustained growth of bottom and top line.

According to industry experts, the growth is sure to continue in the near future. Chemical companies are benefitting from increasing demand in the domestic market from the chemical end-use sectors.

Chemical manufacturing process & Current Scenario

In India, it is highly diversified & covers over 80,000 commercial products sold in the market. Here, chemical industry is delicensed besides several hazardous chemicals. FY 2017-18 witnessed a market size of about $163 billion. By 2025, industry experts expect it to cross $304 billion, due to increasing demand, especially for chemical products. The coming five years is likely to witness increase by about 9% approximately per annum.

India’s chemical industry in the global market

The country’s chemical story can be considered to be one with lots of promise and exemplary performance. The chemical industry has been consistently referred to as a value creator. It is rather a hub of opportunities attracting global investors even during periods of global uncertainties. With world-wide chemical industries being affected by certain trends, the chemical manufacturing business plan is only expected to grow big. The future of Indian industry including its trade performance depends on how significant players tap & prioritize this value.

·         By volume, India is considered to be Asia’s 3rd largest producer & 6th in the world.

·         With regards to polymer, it is the 3rd largest consumer & world’s 4th largest to produce agrochemicals.

·         Global chemical industry contribution made by India is around 3.4%. This is apart from 10.3% share of chemical product exports. Thus, globally in exports, it is ranked 14th, exclusive of pharma products.

·         Indian specialty market has witnessed a growth of about 14% in the last five years. Experts expect its market size to touch around $70 billion by 2020.

·         Dye intermediate & dyestuff production ranges for about 16 percent of the world’s production. Thus India can be stated to be a globally strong dye supplier.

·         100% FDI is allowed by the Indian chemical sector under automatic route. However, few hazardous chemicals are an exception.

·         Over 2 million people have been employed by the Indian chemical industry, thus generating employment opportunities & benefits.

·         69% of total global production of Alkali chemicals is perhaps the largest share.

·         During FY 2017-18, total petrochemical & chemical production in the country was around $7,44,607.71. The coming 5 years are likely to generate $100 billion in the petrochemical industry at 10% CAGR.

Future Scope after Covid-19

Covid-19 outbreak the world over has only presented the Indian economy with new roadblocks. This outbreak is rather viewed by experts as an avid opportunity for industries to restructure in India. The world is currently trying to overlook China to meet their demands for chemical products & by-products. This in itself presents a wonderful opportunity for Indian chemical manufacturing process to witness tremendous demand in the long term. The EU & US has been trying to diversify its markets to mitigate China risk. India can take full advantage of the same.

There has been a slight increase in demand for packaging materials due to pandemic outbreak. This is to prevent contamination of medical products, personal care, medicine & food. Thus significant demand is witnessed for chemicals associated with packaging industry.

Sustained growth

Macro outlook of India is full of long term optimism. Chemical companies have taken this optimism in a positive way, especially pertaining to long investment cycles. The current GDP of the country is an all time low due to Covid-19 & global financial crises. It can however, prove to be a short term challenge for Indian large & small scale chemical business.

With the promotion of ‘Make in India’ initiative, the chemical industry is likely to have a significant impact upon the Indian economy. In the long term, the country’s economy is expected to grow rapidly under able leadership at the centre. Thus, growth of Indian chemical industry and its playing a significant global role is very much anticipated.