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With Rise of Subvariant of Omicron the disruption of supply chain can again hurt the economic growth

Updated: Mar 23, 2022

China has again announced a lockdown because the cases of corona are increasing again in China. Under China's zero covid policy, major cities of China like Shenzhen can go into complete lockdown.

China is going through the worst phase of corona infection ever since the epidemic started. As of March 14, a total of 3,402 new cases have been reported in China and these cases are mostly coming out of Shenzhen province. China was successful in controlling SARS-COV-2, which was the original form of Corona, and this control strategy includes the implementation of a strong lockdown and 21 days of quarantine, large-scale testing and vaccination. Because of this strategy, China controlled other forms of corona such as delta, omicron and beta.

The reason for the increase in corona infection in China is the subtype of Omicron, although the study done about it does not suggest at all that it can cut immunity from the vaccine. According to GSIAD, this hidden Omicron variant accounts for 4% of the total corona cases reported since January 2022. Shenzhen shares its border with Hong Kong which has reported nearly 27,000 coronavirus cases on Monday. Hong-Kong's ravia to control the corona was quite loose, so its spread is being seen in the cities of China as well. A team of esports in India is eyeing this situation.

Foxconn, a supplier of Apple Inc. had its factory in Shenzhen, which is now closed and the city is famous for supplying electronic goods to its entire world. The movement of goods has slowed down due to many more lockdowns going on since 2020. Rating from Moody's has said that the global recovery of the supply chain could be around the second half of 2022.

They can happen if port cities remain closed for a long time. Freight costs began to rise during the first year of the pandemic. But Moody's cited the Baltic Dry Index in January, which measures the transportation costs of dry bulk goods by sea, to say that rates fell 14% month-on-month. Prices peaked in September 2021. Although freight rates from Shanghai to Los Angeles on a weekly basis have not changed much since the peak, rates have increased significantly year-on-year, shows the Drury World Container Index.

India imports electronic goods, chemicals and active pharmaceutical ingredients (APIs) from China. About 70 percent of the APIs used to make medicines in India are imported from China. Most Indian companies keep an inventory of at least three months and may be able to weather the storm. Indian firms have diversified their supply chains since the first lockdown. However, prolonged lockdowns resulting from the wider spread of the virus in China or Hong Kong could lead to greater restrictions on travel and, as such, a lack of critical input.

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