Transfin.
HomeNewsGuidesReadsPodcastsTRANSFIN. EOD
  1. News
  2. Explained

Indian Economy Suffers as Unemployment Rises, Services PMI Falls and Lockdown Continues

Professor of Financial Economics and Part-time Value Investor, Transfin.
Apr 12, 2020 5:07 AM 8 min read
Editorial

India services PMI falls to five-month low. Unemployment rate shoots up to 23.4% amid COVID-19 lockdown. Retail inflation likely fell to four-month low in March. 80% of the total confirmed COVID-19 cases in India traced back to 62 districts. ‘Ending Phase’ of the spread in India should start from May 9th. Finance Ministry notifies the Finance Act 2020. Government says it will supply anti-malarial drug hydroxychloroquine (HCQ) after Trump threatens “retaliation”. Supreme Court passes order saying coronavirus testing should be free of cost in Government and private laboratories. Saudi Arabia and Russia reach agreement in principle to cut oil production. Japan declares coronavirus emergency and unveils $1trn stimulus package.

 

 

INDIA IN LOCKDOWN

PM and CMs discuss future course in fight against COVID-19.

Ideating for a Way Out

On Saturday, Prime Minister Narendra Modi had a discussion over video conference with Chief Ministers over whether the nationwide lockdown, which is supposed to end on April 14th, should be extended. A decision on this matter is expected soon.

 

Many states pitched for a lockdown extension. These included Kerala, West Bengal, UP, Maharashtra, Punjab and Delhi. Others like Andhra Pradesh suggested a partial lockdown.

 

States pitch for more economic resources and firepower to fight the pandemic.

States have also sought more resources and economic firepower to battle the pandemic. These include GST money, a year’s moratorium on interest, crop loan waivers, relief for MSME, leveraging MGNREGA, and a larger economic stimulus package. [Livemint]

 

The number of confirmed coronavirus cases in India has crossed 7,000 and number of deaths stands at 249 as of April 11th.

 

Government mulling over plan to narrow lockdown to virus hotspots.

Targeting a Targeted Approach?

An alternative to extending the nationwide lockdown being considered by the Government is engaging in a staggered exit – that is, easing restrictions in some parts of the country while keeping them in place in virus hotspots.

 

More than 80% of confirmed COVID-19 cases in India have been traced to 62 districts representing less than 10% of India’s landmass, according to Government data. These hotspots are concentrated in Maharashtra, Delhi, Tamil Nadu, Telangana and Kerala. [Reuters]

 

ECONOMY

India services PMI falls to five-month low.

Dampening Activity

The IHS Markit India Services PMI declined to a five-month low of 49.3 in March 2020 from February's 85-month high of 57.5 as new business and export demand fell sharply on back of the coronavirus outbreak.

 

Business activity dampened in response to weaker demand as the pandemic reportedly led to a fall in new orders from clients, particularly overseas. [Trading Economics]

 

Finance Ministry notifies the Finance Act 2020.

Taxing Times

The Finance Ministry has notified the Finance Act 2020 after the President approved it on March 27th. 

 

Here's a look at some key changes relevant for the salaried taxpayers that are applicable from April 1st. [Financial Express]

 

Unemployment rate shoots up to 23.4% amid COVID-19 lockdown.

Crisis Central

India’s unemployment curve has shot up. Estimates by the Centre for Monitoring Indian Economy suggest urban unemployment rate has soared to 30.9%. Overall unemployment has meanwhile risen to 23.4%. Only two weeks ago, this number was 8.4%.

 

Based on a rough calculation, about 50 million people might have lost jobs in just two weeks of the lockdown, said Pronab Sen, a Former Chief Statistician of India. [HT]

 

Retail inflation likely fell to four-month low in March.

In the Red

Before COVID-19 hit Indian shores, the economy was being dragged down by low consumption and falling demand. Now, two weeks into the world’s largest lockdown, the country’s retail inflation is expected to have dropped to a four-month low in March on the back of low food and fuel prices – and even lower demand.

 

Inflation is likely to have eased to 5.93% last month from 6.58% in February, an April 7th-8th poll of over 40 economists showed. If this number comes true, it would be the lowest since November – but within the RBI’s target band of 2-6%. [Reuters]

 

FIGHTING COVID-19

80% of the total positive cases in India traced back to 62 districts.

Every Goliath Needs a David

India at present has 3,666 active COVID-19 cases and 109 deaths recorded. 

 

Across the country, 274 districts have reported cases so far. According to Health Ministry estimates, the current rate of doubling of cases is 4.1 days (it would have been 7.4 days had the Tablighi Jamaat congregation not happened in Delhi last month).

 

And while there has been a sharp spike in the number of cases and deaths over the past week, over 80% of the total positive cases have been traced to 62 districts across the country. Therefore, the Government would be undertaking aggressive containment strategy for these identified hotspots. 

 

Likewise, restrictions in these districts are likely to continue even after the nationwide 21-day lockdown ends on April 14th. [Indian Express]

 

‘Ending Phase’ of the spread in India should start from May 9th.

Beginning of the End?

As per an ET report, estimates drawn up by a top Government data laboratory, which was shared with the empowered panel tasked with ensuring adequate medical equipment, forecast that at the current rate, the ‘ending phase’ of the spread in India should start from May 9th.

 

However, the predictions have not fully taken into account the Tablighi Jamaat episode, where contacts and the extent of spread of the infection are still being traced.

 

India is currently in the ‘acceleration phase’. [ET Politics and Nation]

 

Extra Crunch

Former RBI Governor Raghuram Rajan shared his thoughts about what is probably India's greatest challenge in recent times. 

 

Here's a look at the key recommendations from Raghuram Rajan for India to combat the COVID-19 economic crisis. [@TFinMedia]

 

Government says it will supply anti-malarial drug hydroxychloroquine (HCQ) after Trump threatens “retaliation”.

Banning the Ban

The Government will supply “appropriate” quantities of hydroxychloroquine (HCQ) and paracetamol to neighbouring countries and “other nations badly affected by the pandemic” after US President Donald Trump spoke with Prime Minister Narendra Modi and reportedly threatened “retaliation” if the ban on exports of the drug was not withdrawn. Earlier, the Indian Government had put a hold on exports of the anti-malarial drug saying stocks were depleting. [Reuters]

 

Extra Crunch

What is HCQ? And is it a cure as touted by Trump? Here’s an explainer. [Guardian]

 

Supreme Court passes order saying coronavirus testing should be free of cost in Government and private laboratories.

And Now, This

Yesterday, the Supreme Court passed an interim order to the Centre to make COVID-19 testing free of cost in all Government and private laboratories. It said the question as to whether the private laboratories carrying free of cost tests are entitled to any reimbursement of expenses incurred shall be considered later on. [Moneycontrol]

 

Tech giants develop an opt-in contact-tracing system that can track if someone has been in contact with a person infected by COVID-19.

Big Tech’s Big Partnership

Apple and Google have teamed up to develop contact-tracing technology that can help individuals determine if they have been exposed to someone with COVID-19.

 

The system works as an API that public health agencies can integrate into their own apps. It uses on-board radios on iOS and Android devices to send an anonymous ID over short ranges using Bluetooth. Servers compare your transmitted IDs with other devises’ IDs to search for a match. In case you have crossed paths with someone who was infected in the last 14 days, you will be alerted so that you can get yourself tested. [TechCrunch]

 

CRUDE OIL

Saudi Arabia and Russia reach agreement in principle to cut oil production.

Light at the End of the Tunnel?

Saudi Arabia and Russia have agreed in principle to cut oil production to raise prices, which have reached record lows, after a 23-nation coalition of crude producers engaged in negotiations via teleconference on Thursday. (FYI: Why are Russia and Saudi Arabia fighting over oil supply?)

 

The meeting included representatives from 13 countries in the Organisation of the Petroleum Exporting Countries (OPEC), 10 countries led by Russia, and a handful of other crude-producing nations.

 

The output curbs, if finalised, would see Saudi Arabia cutting production by 3.3m barrels per day (bpd) and Russia by 2m bpd. [WSJ]

 

A final oil supply deal, however, hinges on Mexico joining the cuts.

However, talks were derailed after Mexico abruptly left the negotiating table in protest. Mexican officials argued that stronger players like the US, Saudi Arabia and Russia should be cutting back more than Mexico.

 

Talks presently continue but a final oil supply pact hinges on Mexico joining the cuts, Saudi’s Energy Minister has said. [Reuters]

 

WORLD AFFAIRS

Japan declares coronavirus emergency and unveils $1trn stimulus package.

Emergency Kit

Japan has declared a state of emergency to deal with the rising number of coronavirus cases in the country. The Government has also unveiled what has been described as the world’s biggest stimulius package to support the world’s third-largest economy.

 

“If each of us can reduce contact with other people by at least 70%, and ideally by 80%, we should be able to see a peak in the number of infections in two weeks,” Prime Minister Shinzo Abe said.

 

The Government’s stimulus package is worth 108trn Yen ($990bn). This is equal to 20% of Japan’s economic output. It exceeds the equivalent of 11% of US output for the stimulus package and 5% of output for Germany’s package. [Reuters]

 

New York bans Zoom in schools, citing security concerns.

Zoom Out

Schools are shut, but students are still learning. In New York, the Department of Education has banned the use of video-calling app Zoom for remote learning purposes in a move that will affect 1.1m students in more than 1,800 schools.

 

Officials said “upon further review of security concerns, schools should move away from using Zoom as soon as possible”, adding they would help schools transition to Microsoft Teams, which has “same capabilities with appropriate security measures in place”. [TechCrunch]

 

Worldwide confirmed coronavirus cases cross 1.6m, US worst-affected country with 500,000+ cases.

Corona Update

As of April 11th, the number of global confirmed cases of the coronavirus has crossed 1,696,000 and the death toll has topped 100,000. The US has become the country with the most cases by a wide margin, having crossed the 500,000 mark yesterday. [CNBC]

 

Meanwhile

Lifting coronavirus lockdown measures “too quickly could lead to a deadly resurgence" in infections, the World Health Organisation has warned. [BBC]

FIN.

Want more of what TRANSFIN. Has to offer? How about our Weekly Quizzes? Subscribe to the Quiz Knock Newsletter and get cracking with questions on the top Business and Finance news of the week!