Export to India industry risk warning to increase the proportion of advance payment as much as possible

India is now the third largest infected country in the world. As the world's fifth-largest economy, India's "lockdown" lasted for three months as a result of the outbreak. Despite the "unlocking 2.0" phase announced on June 30, 2020, and the gradual easing of controls, it will take time to fully "restart" economic activity.

According to a recent report released by the United Nations Conference on Trade and Development, India has lost about $348 million in total trade as a result of the outbreak. Specific to each industry, chemical industry losses of about $129 million, the loss of about $64 million textile and garment industry, car industry lost about $34 million, the loss of about $12 million electronic machinery industry, leather industry losses of about $13 million, metals and metal products industry losses of about $27 million, wood products and furniture industry losses of about $15 million. China is India's largest source of imports, and India's economy has suffered a huge impact, which will greatly increase the risks of China's exports to India. Especially, the risks of automobile manufacturing, photovoltaic industry, textile and garment industry deserve the enterprises' attention.

Automobile manufacturing: Reduce the import of spare parts products

Auto manufacturing is one of the sectors hardest hit by the epidemic in India. According to a recent report by fitch, the international agency, Indian car production fell 13.2% in 2019 and is likely to contract another 8.3% in 2020. Indeed, India's car industry has been in a slump for nearly five years, considered one of the most worrying manifestations of the country's overall economic slowdown. As recently as 2019, India's car market was seen as on the way to becoming the world's third-largest, surpassing Germany and Japan, and that may not happen.

For India to build "Make in India", it has to be the car industry. It is reported that India has started to make a series of trade export support plans, including reducing the dependence on imports, especially from China, and vigorously developing alternative products. According to statistics, nearly 25% of India's total auto parts imports come from China. More than a quarter of India's imported auto parts -- about $4.2 billion -- came from China in 2019, including engine and transmission parts, according to data released by the Indian Auto Parts Manufacturers Association. A number of Indian manufacturers, including Endurance Technologies, Varroc and Gabriel, have said they will reduce their imports of Car parts from China.

In addition, the uncertainty caused by the epidemic has also affected demand in the Indian car market. According to the latest data released by the Indian government, the domestic sales volume of Indian automobile assembly plants in April 2020 was zero, with more than 30,000 vehicles sold in May, down 85.5% from the same month last year. India sold 690,000 cars in the first five months of 2020. As a result, the solvency of Indian car companies has been severely affected, and the collection risks of Chinese auto parts exports to India have risen sharply.

Photovoltaic industry: Module and battery export risk significantly increased

As one of the top three pv markets in the world, India has a huge demand for PV, making it the place for Chinese PV companies to dig for gold overseas in recent years. China is India's largest supplier of solar panels and batteries, accounting for more than 70 per cent of the Indian market. But India's solar power projects have cast a shadow over the epidemic.

India's Karnataka (1.9 GW), Tamil Nadu (1.8 GW) and Rajasthan (1.3 GW) are the top three states in installed capacity in 2019, accounting for about 70% of India's installed capacity of large photovoltaic power stations, according to the 2019 Indian Solar Market report by Research firm JMK Research and Analytics. However, in this outbreak, these three states are also the hardest hit areas, significantly affecting the photovoltaic installation process in India.

At the same time, as the epidemic in India develops and the lockdown continues, cash flow for solar pv developers has also been severely affected, and corporate bank lending for new project development is likely to grow slowly. All of these will have a negative impact on India's solar pv installation in 2020.

The pace of new projects in India has also slowed due to disruptions in supplies of materials and labor, as well as a drop in demand for solar panels and batteries. These may seriously affect our exports of related products to India and lead to a significant increase in risks.

Textile and garment industry: payment default risk has increased

India's fast-growing middle class and increasingly powerful manufacturing sector have made it the world's apparel retail hub. However, with the development of the epidemic and the extension of the lockdown period, India's large shopping malls and non-essential physical stores have been asked to suspend business, coupled with consumer panic over the epidemic and reduced consumption activities, resulting in the recent sharp decline in India's clothing retail sales, textile and clothing industry: payment default risk has increased.

Meanwhile, due to the incomplete recovery of national logistics in India and the Indian government's regulation that e-commerce companies are not allowed to sell and deliver non-essential goods, only essential goods are allowed to be delivered during the "closure" period, the online sales channel of the textile and apparel industry is also facing delivery difficulties. The above operating difficulties will lead to a decline in the payment capacity of Indian import enterprises, and the risk of default will increase.

Near-term exports to India need to be risk-averse

Based on the recent changes of epidemic control measures in India and the impact on relevant industries, China Export Credit Insurance Company has offered three Suggestions to relevant enterprises exporting to India.

First, in the face of India announced recently relaxed epidemic prevention and control measures, restore economic activity to bring new orders, company is cautious, try to choose high quality, long-term cooperation customers, treat ordinary small customer orders, and pay attention to the traffic and transport of goods real-time control, avoid delays will be able to take delivery or shipping costs have risen sharply caused additional economic losses.

Second, it is suggested that enterprises should timely understand the financial status of customers. Even for high-quality customers with long-term cooperation, they should pay attention to the changes of their payment ability and willingness, try to adopt lc and other methods with less risk, and increase the proportion of advance payment in transactions as far as possible.

Third, although India has gradually relaxed epidemic prevention and control measures and resumed business in shops and shopping malls, its policies may be changed at any time due to the uncertain development of the epidemic, and the prevention and control measures may be tightened again. It is suggested that enterprises take precautions against the risk of a rebound of the epidemic in advance.