China shutdown ripples across Indian sectors from drugs to electronics

NEW DELHI: India, the world’s second-most populous nation, is facing the ripple effects of shutdowns in China with production of medicines to mobile phones being hit as supply chain disruptions prolong.

Prices of paracetamol, the most commonly used analgesic, have jumped by 40% in India, while the cost of azithromycin, an antibiotic used for treating a variety of bacterial infections, has risen by 70%, said Pankaj R Patel, chairman of Zydus Cadila.

The pharma industry could face shortages in finished drug formulations starting April if supplies aren’t restored by the first week of next month, he said.

The coronavirus, which has killed more than 1,000 people and stoked fears of a broader slowdown in China, has disrupted global supply lines after factories there slowed production and people were restricted from moving in and out of the country.

As manufacturers based in China restart factories, nations such as India that depend heavily on imports of some raw material and intermediate goods from the mainland continue to face uncertainty.

Patel sees a substantial increase in prices of active pharmaceutical ingredients – the basic substance used to make drugs – in the short- to medium-term.

India, one of the largest suppliers of generic drugs to the world and home to about 12% of all manufacturing sites catering to the US market, relies on China for as much as 80% of API requirement.

Pharma isn’t the only sector hit by China’s production pause.

Mobile phones

Some Indian manufacturers of mobile phones are facing disruption to production on account of the shutdown in China, according to Pankaj Mahindroo, chairman of the India Cellular and Electronics Association that represents companies including Foxconn, Apple Inc, Micromax Informatics Ltd and Salcomp India.

“The impact is already visible,” said Mahindroo. “If things don’t improve soon, production will have to be stopped.”

Inventory with manufacturers would last for about two weeks and production will start suffering when they run out of critical components like printed circuit board, camera modules, semiconductors, resistors and capacitors, Mohnidroo added.

India imported electronic goods worth US$55 billion in the year to March 2018.

According to a government report, production of cellular mobile handsets reached 225 million units during that period, as compared to 60 million units in 2015.

Xiaomi Corp’s India unit is working to explore alternative supply channels for components and raw materials, a spokesperson for the local unit said.

The immediate impact is that the short supply might cause some negative pressure on prices.