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Unemployment Rate in India Rises to 23.4% Amid Coronavirus Lockdown

Professor of Financial Economics and Part-time Value Investor, Transfin.
Apr 8, 2020 4:01 PM 5 min read
Editorial

Unemployment rate shoots up to 23.4% amid coronavirus lockdown. Small and medium-sized NBFCs stare at twin challenges of debt repayment and cash shortage due to the disruption caused by the COVID-19 outbreak. Small businesses struggle to pay wages. Government might come out with bigger stimulus package. WhatsApp limits message forwarding to curb the spread of coronavirus misinformation. 

 

 

BANKING AMID COVID-19

Small and medium-sized NBFCs stare at twin challenges of debt repayment and cash shortage due to the disruption caused by the COVID-19 outbreak.   

A Rocky Road Ahead

Small and medium-sized NBFCs will be the most affected by the disruption caused by the coronavirus outbreak.

 

While large lenders will be able to tap into the RBI’s ₹1trn ($10bn) targeted longer term refinancing operations window, other smaller lenders are likely to face cash shortage. To add to the worries, debt repayment worth ₹2.5trn ($30bn) is coming up for redemption by June.

 

“A lot of players will want to conserve liquidity, so we may see top-rated ones raising new money to pay back old (debt). So obviously, the mid-sized ones will be the biggest hit because they may have to dip into reserves to pay back these liabilities,” said Nachiket Naik, Head, Corporate Lending, Kirloskar Capital. [ET Finance]

 

Brownie Points

Following RBI orders, many banks and NBFCs are asking their borrowers if they want to avail the three-month EMI moratorium. Some others are automatically 'opting-in' their borrowers. 

 

Here's a useful list to check which banks and NBFCs are asking their borrowers whether they want to avail the moratorium, which ones are choosing the default 'opt-in' option and which ones will offer the moratorium only if the borrowers ask for it on their own. [ET Wealth]

 

ECONOMY

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]

 

Small businesses struggle to pay wages. 

Across the country, thousands of small businesses are struggling to pay wages. They have either deferred or cut workers’ salaries and commissions as the lockdown continues. [Reuters]

 

Government might come out with bigger stimulus package. 

The Government might come out with another economic stimulus package to support the economy in these dire times. And this package might be bigger than the one announced last month. [Livemint]

 

 

TECH

Amazon to suspend delivery service for non-Amazon packages.

Cold Feet?

Ecommerce giant Amazon is reportedly halting its delivery service for non-Amazon packages, known as Amazon Shipping, which competes with UPS and FedEx.

 

The move comes at a time when Amazon needs more hands and capacity to handle the surge in its own customers’ orders. [MarketWatch]

 

WhatsApp limits message forwarding to curb the spread of coronavirus misinformation. 

WhatsApp Whispers

Facebook-owned messaging platform WhatsApp is limiting the ability of users to forward chats in an attempt to curb the spread of misinformation in the wake of the coronavirus outbreak.

 

Users globally can now send along frequently forwarded messages they receive to only one person or group at a time, down from five.

 

In a blog post, WhatsApp said its expanding global measures it already had in place so that only one message can be forwarded to one chat at a time. WhatsApp said it has seen a "significant" increase in the amount of forwarding on its messaging platform and that it could contribute to the spread of misinformation. [The Motley Fool]

 

WeWork sues SoftBank after the latter pulls out of $3bn tender offer.

See You in Court

WeWork's owner, The We Company, has sued SoftBank Group - its largest shareholder after the latter terminated a $3bn tender offer for additional WeWork shares agreed with shareholders last year due to 'pending criminal and civil investigations' surrounding the company and its co-founder Adam Neumann. [Daily Mail]

 

 

TESTING TIMES

Online pharmacies witness unprecedented surge in demand, struggle to keep up. 

Step on Gas

Online pharmacies such 1MG, Medlife and NetMeds have witnessed a massive surge in demand amidst the nationwide lockdown. 

 

Orders for several categories of medicines, especially those that boost immunity, have doubled over the past few weeks.

 

However, these platforms are still operating at sub-optimal capacity, as they continue to face issues related to intercity movement of goods and staff shortage. 

 

Meanwhile, some companies such as NetMeds have tied up with Reliance Retail to begin delivery of other essential items. [ET Tech]

 

FMCG supply chains might not be able to keep up with the increase in demand.

A Rollercoaster Ride

Sales of FMCG companies and ecommerce platforms witnessed a sudden uptick in demand by panicked consumers, who over-stocked essential products and commodities in view of the coronavirus pandemic.

 

However, as per a KPMG study, the coming two to three weeks would be a testing ground on how supply chains are able to keep pace with this temporary rise in consumption. 

 

The report suggested that going forward "we can expect companies to explore newer distribution channels focused on a direct to consumer route". [News18]

 

OYO

Offers to house coronavirus frontline staff and foreigners who are stranded overseas. 

The Good Samaritan

Indian budget hotel chain Oyo has offered free accommodation to frontline health-care workers and foreigners who are stranded overseas amidst the pandemic. 

 

Oyo’s Founder and CEO, Ritesh Agarwal, said selected sites from its international network of hotels and homestays would be designated to house health-care professionals, police and army staff working on the frontlines of the outbreak, including in the US and India. Others would be repurposed as “makeshift” isolation rooms for asymptomatic people or those who test positive for COVID-19 but do not show any symptoms. [CNBC]

 

Lays off hundreds of employees in the US. 

But This...

Oyo has reportedly laid off hundreds of employees in the US across divisions like sales, business development and HR since mid-March. 

 

Sources said the company’s capital investment in US hotels has come down to a quarter of what it was spending earlier, in face of the outbreak. [ET Tech]

FIN.

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