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Article on impact of lock down on India

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Answered by Anonymous

Answer:

Lockdown in countries like India and Indonesia are more disastrous for human welfare and economies since there is no help for small businesses nor are there unemployment benefits, said Christopher Wood, Global Head of Equity Strategy at Jefferies.

In the latest weekly note Greed & Fear, Wood said the situation in countries like India and Indonesia is in contrast with the US where the Small Business Administration's Paycheck Protection Programme will provide up to $349 billion in forgivable loans to small businesses to pay their employees for eight weeks during the health crisis.

"...in countries such as India, with young demographics, such a lockdown causes more human suffering that Covid-19 itself. This continuing lockdown is, unfortunately, making it ever more inevitable that India will suffer a consumer lending cycle," said Wood in the note on Thursday. Hong Kong-based Wood said there is also a growing risk of forebearance on local lenders.

He is also concerned about the continuing weakness in the rupee amid negative consequence of lower remittances from the Middle East as a negative consequence of fall in crude oil prices.

PORTFOLIO CHANGES

Wood said it does not make sense to own Indian banks in such a macro environment. Wood said India has not really had a negative consumer credit cycle since the inception of his portfolio in 2002 but this is probably about to change.

He has removed HDFC Bank, HDFC Life and ICICI Bank from his Asia ex-Japan long-only portfolio. Wood has introduced a weightage of 3 percentage points in Kotak Mahindra Bank as he believes that the lender has the best history of growing through past negative credit cycles and has raised equity capital this week presumably to prepare for troubled times ahead.

Wood's Asia ex-Japan long-only portfolio has a 5% investment in Reliance Industries, which has been in the news as Facebook is buying a 9.99% stake for $5.7 billion.

Wood said he views Reliance Industries primarily as an e-commerce play and not as an oil refining play.

Reliance is now 12.7% of the MSCI India Index and 13.9% of the Sensex which means that passive funds have to keep buying it, and active managers will be under renewed growing pressure not to be underweight the stock as many of them are, he said.

(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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Answered by sarithavasa35

Answer:

The economic impact of the 2019–20 coronavirus pandemic in India has been largely disruptive. The World Bank and credit rating agencies have downgraded India's growth for fiscal year 2021 with the lowest figures India has seen in three decades since India's economic liberalization in the 1990s.[1][2] The former Chief Economic Advisor to the Government of India has said that India should prepare for a negative growth rate in FY21.[3][4] However, the International Monetary Fund projection for India for the Financial Year 2021-22 of 1.9% GDP growth is the highest among G-20 nations.[5] Within a month, unemployment rose from 6.7% on 15 March to 26% on 19 April.[6] During the lockdown, an estimated 14 crore (140 million) people have lost employment.[6] More than 45% of households across the nation have reported an income drop as compared to the previous year.[7]

Economic impact of the COVID-19 pandemic in India

IMF World Economic Outlook April 2020 Real GDP growth rate (map).svg

Map showing real GDP growth rates in 2020, as projected by the IMF.

Date

March 2020 – present

Type

Global recession

Cause

COVID-19 pandemic-induced market instability and lockdown

Outcome

Sharp rise in unemployment

Stress on supply chains

Decrease in government income

Collapse of the tourism industry

Collapse of the hospitality industry

Reduced consumer activity

Plunge in fuel consumption. Rise in LPG sales.

The Indian economy was expected to lose over ₹32,000 crore (US$4.5 billion) every day during the first 21-days of complete lockdown, which was declared following the coronavirus outbreak.[8][9] Under complete lockdown, less than a quarter of India's $2.8 trillion economic movement was functional.[10] Up to 53% of businesses in the country were projected to be significantly affected.[11] Supply chains have been put under stress with the lockdown restrictions in place; initially, there was a lack of clarity in streamlining what an "essential" is and what is not.[12] Those in the informal sectors and daily wage groups are the most at risk.[13] A large number of farmers around the country who grow perishables are also facing uncertainty.[12] Various businesses such as hotels and airlines, are cutting salaries and laying off employees.[14]

Vendor of greens, essential supply chains and logistics. Life under lockdown. Bangalore spring 2020.

Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group,BHEL and Tata Motors have temporarily suspended or significantly reduced operations. Young startups have been impacted as funding has fallen.[15][16] Fast-moving consumer goods companies in the country have significantly reduced operations and are focusing on essentials. Some defense deals have been affected/delayed due to the pandemic, such as the delivery of Dassault Rafale fighter jets. Stock markets in India posted their worst loses in history on 23 March 2020.[17] However, on 25 March, one day after a complete 21-day lockdown was announced by the Prime Minister, SENSEX and NIFTY posted their biggest gains in 11 years, adding a value of ₹4.7 lakh crore (US$66 billion) crore to investor wealth.[18]

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