1. India’s GDP growth rate has dipped to its lowest in recent times, do you think restricting our global trade due to COVID-19, will it be helpful to our country’s economy , Justify your opinion in 50 words
Answers
The global spread of the coronavirus (COVID-19) has sent shockwaves through global equity markets. The impact, however, has been unevenly distributed, providing opportunities for investors. We offer our outlook on Indian equities. Overall, we believe that despite near-term volatility, the country’s robust foundation—built on structural reform, the domestic nature of the market, and prudent monetary and fiscal policy—should help it to navigate the current challenging market environment.
The COVID-19 pandemic is an unprecedented global health crisis, and its impact is likely to dominate global markets and policymakers’ attention at least in the near term.
Until February, India was relatively less affected by COVID-19 than other countries. After the World Health Organization declared it as a pandemic, the Indian government imposed several restrictions¹ and subsequently announced a nationwide lockdown on March 24 that’s scheduled to end on May 3. The total number of confirmed cases in India has reached 29,451.² This aggregate number is still low on a per capita basis given India’s substantial population. While there may be concerns that the case number is underestimated due to the low per capita testing level in India (around 492 tests per million people), the percentage of positive results (infections/tests) remains low at 4.4%, despite the testing of mostly higher-risk cases.³
The lockdown seems to be working as the five-day compounded daily growth rate in infections has slowed to 7.0% (April 27) from 18.0% (March 31). In terms of geography, the infections are quite concentrated: On April 21, there were 61 districts—out of total 717 districts in India—that had more than 50 cases.⁴
We acknowledge the vast uncertainties associated with a pandemic; however, there are some positive signs emerging in India: (a) a lower incidence of positive test results, (b) a falling rate of growth in new infections, and (c) quick identification of hotspots and the robust measures taken to stop the spread of the virus.
In the near term, we still expect the number of new infections to rise, albeit at a decelerating pace. That said, over the next month, we expect to see a gradual exit plan from the lockdown. Indeed, some businesses have already been allowed to resume operations with social distancing for some of the lesser affected districts.