Fast spreading SARS adds to India's economic worries

Monday, 14 April 2003, 19:30 IST
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NEW DELHI: Against the already war-clouded backdrop, a fast-spreading acute pneumonia that has hit many countries, mostly in Asia, has come at a bad time for the already jittery Indian economy. Although the war in Iraq seems to be drawing to a close sooner than expected, experts say the deadly Severe Acute Respiratory Syndrome (SARS) may sap investor confidence and hurt domestic economic recovery prospects. "In economic terms it (SARS) could not have arrived on the scene at a worse time. It will definitely have an impact on the Indian economy," warned economist D.H. Panandiker. "India's exports to Southeast Asian countries have grown steadily in the last few years. If consumer spending in that region takes a hit due to the spread of the virus, it will also affect Indian exports," Panandiker said . "Had the Indian economy been on the upswing prior to the outbreak of SARS, this blow probably would not have made much of a difference. But the fact is it comes as a double whammy for the economy already stressed by the Iraq war." The economic ripples of SARS, which has spread fastest in Hong Kong and China and killed over 100 people worldwide, are spreading globally, almost as quickly as the disease. The potentially fatal SARS is threatening businesses across the globe as travel fears spread worldwide. Business activities in countries like China, Singapore and Malaysia have been badly affected. Although India has, so far, remained untouched by the virus, observers here say the virus may deal a blow to Indian industry as firms cancel business trips, conferences and product launches. "Unfortunately, the SARS effect is concentrated on Asia, which has so far been the fastest-growing region in the world," said an analyst with the New Delhi-based think tank National Institute of Public Finance and Policy. "If major Asian economies slip into recession as a result of sharply lower business activity and consumer spending, it will have an echo on other economies in the region like India." The World Health Organisation (WHO) last week warned travellers to postpone visits to Hong Kong and China's Guangdong province due to SARS, the first time the agency has issued such a warning. "We are all relieved that the Iraq war seems to be coming to an end sooner than expected," said Ashok Soota, president of the Confederation of Indian Industry (CII), the country's leading business lobby group. "Now we have got a new spoiler on the scene, SARS. It is going to have an impact on the economy in its own way. At the moment it is difficult to quantify the impact but it will certainty have some impact," he added. "SARS today is one uncertainty factor because the affected region is closer to us." Soota, however, said that CII was not lowering its projection of six percent economic growth in the current fiscal year on hopes that things would be brought under control soon. The government has lowered the economic growth target for the fiscal year ending March 2003 to 4.4 percent from an earlier estimate of 5 to 5.5 percent following a sharp dip in agriculture output. Indian corporate houses have started cancelling trips to several business fairs across East and Southeast Asia, including a major one in China, in the wake of the WHO warning. CII has called off its participation at the Canton Fair in China's Guangdong province. Standard and Poor's said the outbreak of SARS was proving to be more damaging to economic activity than the U.S.-led war on Iraq. Shares of Infosys Technologies, India's largest listed software exporter, plunged over 25 percent Thursday after it projected a conservative business outlook for the current fiscal year on expected delay in commercial deals, partly due to SARS. "Outsourcing is gaining momentum. This is a positive trend, but on the other side you have macro-economic factors like the uncertainties relating to the U.S. economy," said Nandan Nilekani, CEO and managing director of Infosys. "And nobody knows the severity of the impact of the Iraq war and SARS on the industry."
Source: IANS
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