After the Lockdown, Fear and Chaos in India.

Today morning , India’s prime minister, Shri Narendra Modi, ordered to extend nationwide lockdown till 3rd May'2020 to battle the spread of the Coronavirus and urged the public to be kind to professionals on the front lines of the battle against Covid-19. More stringent measures will be implemented until April 20, and efforts taken by local administrations to implement the SOP will be evaluated. If there are positive developments, conditional concessions can be made -- but setbacks will result in a rollback of such concessions. Detailed guidelines will be issued tomorrow. There is no doubt our government is taking all measures in line to reduce impact of coronavirus but the government should now plan about how to restart the economic activity in the low-infection regions with enough precautions since lockdown can't be continued for longer periods. 

As panic about the virus escalates, the middle and upper classes are hoarding food, supplies and medicines without a thought for the millions of poor who stand to starve and die. As almost all shops are shuttered muffled screams of animals left locked in pet store is unbearable.

As always, the poor are the worst affected. As work began to dry up, thousands of migrant workers were forced to head back to their villages. Some of them probably brought the virus with them to the villages that have little access to basic infrastructure, including running water.

Trains and buses were discontinued overnight to put a stop to this. Those who could not make it in time and can no longer afford to live in the cities where they work are attempting to walk for hundred of miles to get home. Many of them have no money left for food, and the few who do cannot find food anywhere.

The only world that I have known is one in which anxieties are reined in by hope. The privilege of India’s middle class is defined by its investment in India’s growth story, its lust for consumption and its quest for a legacy. But India’s economy has been floundering the fall in trade coupled with the lockdown will bring it to its knees. It is unclear how many will still have jobs and businesses by the end of the year. The federation of Indian export organisations has warned that the sector may face 1.5 crore job losses alone due to order cancellation.

Icra Ratings sharply cut the country's GDP forecast amid the COVID-19 crisis and expects the economy to grow at just 2 per cent in the current fiscal.

The Indian economy is likely to witness a sharp contraction of 4.5 per cent (de-growth) during Q4 FY20 and is expected to recover gradually, to post a GDP growth of just 2 per cent in FY21," the rating agency said the rating agency's vice president and sector head (corporate ratings) Shamsher Dewan said, "Amid uncertainty as to when the situation will normalize, we expect a sharp downturn in various indicators of the manufacturing and services sectors from March 2020 onwards."

This primarily includes the discretionary activities like travel, tourism and hospitality; labour intensive sectors like construction, transport and manufacturing of non-essential items; exports; and supporting sectors like electricity, he said.

Domestically, the impact of the coronavirus pandemic could lead to slowdown in domestic demand, erosion of purchasing power due to job losses or pay cuts and trickle-down effect of demand deferral will have a longer-lasting impact on some other sectors, especially where demand is discretionary in nature, it said.

The high impact sectors in terms of risk on account of COVID-19 are aviation, hotels, restaurants, jewellery, retail, shipping, ports and port services.

The medium impact sectors are automobiles, building materials, residential real estates while the low impact sectors includes education, dairy products, fertilisers, FMCG and healthcare among others.

According to the rating agency, in the current scenario, extended demand disruptions are likely to lead to elongated payment cycles.

"Since an entity's liquidity position is of paramount importance to support its credit profile, it is expected that several entities would endeavour to conserve cash, either by invoking force majeure clauses to revoke payments; or by deferring payments to the extent possible," it said.

Consequently, many entities are expected to face working capital blockage as their receivables get stretched and inventory doesn't run-down simultaneously.

The rating agency's head (credit policy), Jitin Makkar, said regardless of the RBI's three-month moratorium, entities with weak liquidity buffers are likely to report significant weakening of their credit profile over the next couple of quarters.

And it is not just the economy that is struggling. A nationwide lockdown strikes at the very roots of civilization — museums, theaters, cinemas, bookshops, schools, universities, libraries, playgrounds, are all out of bounds. Print-newspaper readership is steeply declining amid fears that papers can be carriers of the disease.

Former Reserve Bank of India (RBI) Governor Raghuram Rajan said that the Indian economy is facing the 'greatest emergency' since Independence, more acute than the global financial crisis in 2008-09. The workers could still go out to work during the financial crisis as against the current situation, Raghuram Rajan, professor of finance, University of Chicago Booth School of Business, said in a blog titled 'Perhaps India's Greatest Challenge in Recent Times'.

"The global financial crisis in 2008-09 was a massive demand shock, but our workers could still go to work, our firms were coming off years of strong growth, our financial system was largely sound, and our government finances were healthy. None of this is true today as we fight the coronavirus pandemic," Raghuram Rajan added. Possible measures to fight the expected economic crisis were also suggested by the economist.

The government should now plan about how to restart the economic activity in the low-infection regions with enough precautions since lockdown can't be continued for longer periods, Raghuram Rajan said in the blog. The healthy youth could be lodged in hostels near their workplace, practicing adequate distancing, Raghuram Rajan suggested. "Since manufacturers need to activate their entire supply chain to produce, they should be encouraged to plan on how the entire chain will reopen. The administrative structure to approve these plans and facilitate movement for those approved should be effective and quick - it needs to be thought through now," Raghuram Rajan added.

In any case if this crisis continues, the trust in institutions, and in one another, that glues a society together is bound to come unstuck. Never before has the fate of all human beings been so desperately interlinked, and yet we seem to have been ushered into an unrecognizable world where it might just be every person for himself.

Source:- NY, News18, Google, Biztoday