Saturday, 4 April 2020

COVID19: Impact on Indian Economy

By CA Shobhit Sinha
Updated: March 21, 2020 6:00 pm

The World Health Organization (WHO) declared the coronavirus outbreak a global pandemic. It has impacted more than 100 countries and is resulting in a global recession as the world’s major economies are witnessing a shrinking GDP in the first quarter and expecting to continue till second quarter of the year

Indian Markets work in tandem with the global market and have started showing the weakness of global interlinkages. Over the previous few weeks, the Indian Stock markets witnessed unprecedented fall. BSE SENSEX touched 26000 level, precisely where it was in year 2014. This has resulted in the massive erosion of shareholders wealth, including Institutional Investors, Pension Funds, Asset Management Companies, Portfolio Investors and Small Shareholders.

There is an increased selling by Foreign Portfolio Investors (FPI), in an attempt to consolidate their global holdings. The resulting panic has a contagion impact as Asset Managers and other stakeholders are also joining the bandwagon to avoid uncertainty, resulting into subsequent market fall and wealth erosion

 

What Does It mean for India?

Over the past few years Indian Economy is trying to recover from its homegrown Banking and NBFC crises. Liquidity is drying in the system and Financial Creditors are finding it difficult to support sub standard Balance Sheets. Issuance of debt notes has been lower as the Issuers notes are not meeting the Investment grade ratings. Cash flows are drying, limiting the ability of the firms to service their debts.

Outbreak of COVID 19 at such a time poses grave challenges for Indian Incorporation. We are part of the Global Economy and one of the major consumers in the world. We aspire to meet the Honourable PM’s vision of $5trillion economy. Any slowdown in the domestic and global demand, directly impacts our consumption, export, savings and Investment Matrix. This not only weakens the domestic growth rate but also contributes to Global Slowdown as well

Key Sectors Impacted: Outbreak is slowly unwinding its Umbrella Impact on a large segment of the Economy through direct or indirect linkages. Flights are halted, business are down, Consumption is low, and businesses are running into red.  Aviation, Hospitality, Tourism, Consumer Goods, Steel, Pharma, Electronics & White Goods, Core Infrastructure Sector, Automobile, Ancillary Industries and Supply chain of Electrical and White Good are facing the sustenance issues


Coronavirus and the new virus ‘Misinformation’


Coronavirus or COVID 19, no doubt is spreading across the world like a wild fire as it has already infected more than 140 countries and killing over 7000 people across the world.

As the infection is spreading, confusion out of ignorance has also led to the spread of misinformation through various social media platforms and which is more dangerous, more than the virus itself.

Countries across the world are now finding it difficult to fight this new menace. Prime Minister of India, Narendra Modi has recently appealed to the citizens, asking them not to pay heed to the rumours surrounding COVID-19.

The scale of the country’s social media usage also complicates its fight against misinformation. India is the biggest market of the Facebook owned application, WhatsApp, with more than 400 million users in a country, which has 468 million smartphone users in the year 2017.

Through its vast social media networks, a wave of incorrect information on coronavirus is spreading. Information such as unverified home remedies to tackle the deadly virus, floating fake advisories instructing people to avoid foods such as chicken and ice, also sharing various conspiracy theories. Thus we can say the android phone of every individual is now being flooded with misinformation.

And therefore, apart from stretching its health system and arranging adequate infrastructural facility, the authorities are taking steps to fight misinformation and fake news, as the number of infection in India has crossed over 50, killing 3 people as part latest record.

Since the outbreak of Coronavirus in China, last December the spread of misinformation through WhatsApp, has also increased globally, though many individual fact checkers and fact checking websites across the world are working tirelessly to debunk as much as possible.

As Eoghan Sweeney of OSINT Essentials have time to time issued advisory for journalists reporting Coronavirus to avoid the spread of misinformation. Like he shared, do’s and don’t for Journalists in the following chart.

Last week, one message, claiming to be an advisory from UNICEF, asked people to avoid ice creams and other cold foods, recommending frequent washing of clothes was debunked as fake news. Another message on WhatsApp recommends heavy Vitamin C intake, yet another message recommends a list of do it yourself detection test for the virus.

On WhatsApp, large numbers of videos purportedly showing scenes from china, like bodies lying on streets, attack on local trains, showing the impact of coronavirus in china are circulating like wild fire. Many of these fake videos have been debunked by fact-checking organisation to be of mock drills, old videos and even scenes from movies.

One recent video showing US President Donald Trump declaring the vaccine was also found to be false after being debunked by a fact-checking agency.

Meanwhile, Facebook has released a statement saying it is “committed to doing our part to tackle viral messages among other things by reducing the number of people you can forwarded a message to.”

The whole planet is passing through a crucial phase now and it is therefore the responsibility of every one of us to just stay calm and stay updated and don’t let your fears drive you to do anything that is irrational and unscientific leading to the spreading of the new virus – Misinformation.

By Jaydeep Dasgupta


Biggest upcoming Challenges:

  • New Blocks of NPA: Pressure on the cash flows of the business may seriously impair their ability to service their debt obligation. This may result into fresh Non-Performing Asset across sectors
  • Slowdown: Any prolong Impact on the corporate growth rate, may result into job losses.
  • Liquidity Challenges: Finding an Investment Grade Opportunities may be more difficult for Lenders and this may impact the entire lending ecosystem
  • Pressure on Farm Income
  • Lower Government
  • Revenues and Flight of Capital

Sweet Spot: Falling oil prices will help the Government to focus more or spending

 

Efforts by the Government:

Modi Government is successfully working on a set of policy measures to combat the economic impact of the fast-spreading coronavirus. The virus, has infected more than 207,800 people and killed over 8,600 people globally, according to the World Health Organization. However due to phenomenal effort of the Government, India has limited impact

 

Government Intervention:

At this point of time, in order to insulate the Economy and as a measure to restore confidence Government should work closely with the Industry and take all the necessary steps to ensure growth and business continuity. Extending lines of credit and widening social security net. Restructuring of loans and provisions of Moratorium. Easing the mandatory CSR limit and relaxing the Promoters buy back norms regulations. Promoters should be encouraged to increase their holdings in the companies for restoring the confidence and easing the tax restrictions on Buyback

 

By CA Shobhit Sinha

 

 

 

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