Damaged reputation

India's Covid crisis has implications for supply chain and soft power

The exploding number of Covid-19 cases in India, together with the stretching of the health care system in large parts of the country, has led to not just a humanitarian catastrophe but also severely strained global trade and indeed India’s worldwide soft power. India is deeply involved in providing both labour and goods for many of the world’s most crucial industries. One such, the shipping industry, has only just recovered from a week-long obstruction in the Suez Canal. But now Indian crew members — and indeed crew members of other nationalities who serve in ships with Indian crew or that have stopped at Indian ports — are coming down with Covid-19. In the cramped confines of merchant shipping, an entire ship can become infected, such as one that arrived in South Africa from India recently in which 14 Filipino crew members wound up Covid-positive. As a result, several ports — including Singapore, Asia’s shipping hub — are barring crew changes that involve Indian personnel; some are outright keeping ships coming from India out of their harbours. The supply chain disruption as a result of India failing to control its pandemic is vast.

Some other sectors will also be similarly impacted. Indian textiles and garments exporters, for example, are operating in many cases with less than half their workforce, and thereby are failing to live up to just in time contracts. Garments exports fell by a quarter last year, according to some estimates. Global banks and accounting firms have found that their back-office and online services are very fragile with many of their Indian employees or contractors testing positive. They have thus sought to diversify away from India in many of their services requirements. This represents major long-term damage to Indian prospects in these sectors. Concerns about broken contracts in any sector should be seen as a threat to all Indian companies that are connected to global markets. The effect of broken contracts is amplified, given that so many countries around the world are still waiting for their promised vaccine shots from India. This is a hit to India’s soft power, which is perhaps greater than the hoped-for benefits of Vaccine Maitri.

Questions about Indian systems and reliability are bound to be asked. For example, Hong Kong in mid-April suspended flights to and from Indian destinations after dozens of passengers on a flight from New Delhi were revealed to be Covid-positive — in spite of having negative test reports before boarding. The inevitable conclusion that global partners come to is that Indian systems of oversight and control are porous or fallible. Combined with the unavoidable impression that the Indian state has failed to manage the second wave effectively, these problems with both keeping contracts and with Indian systems lead to a significant escalation in the perceived risk of doing business in India or with Indian companies. This potential national cost of the mishandling of the second wave of the pandemic needs to be fully internalised by India Inc. It is a deeply unfortunate consequence of the current situation, and will only be remedied by sustained effort to repair India’s reputational damage.