Indian industry wants import tax cut to tackle coronavirus disruptions

Thursday, 20 February 2020 00:20 - - {{hitsCtrl.values.hits}}

NEW DELHI (Reuters): Indian business leaders are calling for cuts in import duties on antibiotic drugs, mobile parts and other items to help cope with the fallout from the coronavirus outbreak which has disrupted supplies from China, government and industry officials said.

The outbreak of the virus in China has hit India’s manufacturing and exports of medicines, electronic, textile and chemicals as China is the biggest source of intermediate goods, worth $30 billion a year, according to a presentation by the Confederation of Indian Industries (CII), seen by Reuters.

After being shown the presentation on Tuesday, Indian Finance Minister Nirmala Sitharaman said the government would announce measures in the coming days after discussing them with other ministries and the Prime Minister’s Office. She did not elaborate on the measures.

Sitharaman met more than 200 business leaders to assess the impact of the coronavirus and discuss plans to contain the damage.

The government should “remove higher import duties on certain products, primarily imported from China” but available in other countries, the presentation by the CII said.

“The government may offer credit with a backstop facility of guarantee for companies which have the capability to start immediate production of items that can feed into domestic consumption,” it said.

The coronavirus outbreak, which has now killed more than 1,800 people in China, has disrupted supplies of raw material to other countries. “India sources about 65-70% of active pharmaceutical ingredients and close to 90% of certain mobile phone parts from China,” a presentation by another industry chamber, which represents more than 250,000 companies but did not wish to be identified, said.

Ratings agency Moody’s said on Tuesday the coronavirus outbreak added to pressures on growth in Asia, with the impact felt primarily through trade and tourism, and for some sectors through supply-chain disruptions.

Moody’s cut its economic growth forecast for India to 5.4% for 2020 from an earlier estimate of 6.6%, and to 5.8% for 2021 from 6.7%, saying the revisions were also affected by weakening domestic demand.

“Overall, the impact of coronavirus on industry has been moderate so far,” said an industry official, who declined to be named, adding the impact could continue for at least two quarters.

Daara Patel, Secretary General of the Indian Drug Manufacturers Association, which represents over 900 drug producers, said the industry was facing rising prices of raw material and supply shortages.

“The prices of some antibiotics, vitamins and other medicines have gone up by 15-50% following fear of disruption in supply of ingredients,” he said.

The pharmaceuticals industry is concerned that stocks of active ingredients for drugs like paracetamol, ibuprofen, could last for 15 days and for two-three months for other drugs, the presentation by the unnamed industry chamber showed.