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Is India’s Pandemic Crisis As Bad As We Think?

Few of us in the market really trust what we read, and even see, in regard to this last 15 months of a global pandemic. India has replaced Brazil for the new emerging market Covid disaster zone. But how bad is it really?

I’m not there. So in turning to the market, the quick answer is — maybe Covid’s not as bad as we think it is, but the pandemic’s surely pounding India’s economy. It might even be worse than investors think, says Shumita Deveshwar, an analyst from TS Lombard.

Lengthy lockdowns in Mumbai and Delhi have helped bend the virus curve there, but India’s caseload is still high and far more geographically widespread than the first wave. People seem to be under more duress this time around than in the first wave, with some seeing multiple family members hospitalized or even dying from the fast spreading virus first found in Wuhan, China.

High-frequency indicators, such as mobility, demand for electricity, auto sales and jobs, signal sharply weakening economic momentum in the first few months of the year. Downside risks are rising to the previously projected V-shaped recovery.

“We have been scaling back our GDP forecast,” says Deveshwar. It now stands at 9% versus 10.5% in March.

Health experts are forecasting that cases are peaking, and are in decline in crowded Delhi and Mumbai. Unfortunately, they are rising elsewhere so India is reporting infections of around 350,000 cases per day, and apparently this is not due to PCR test overload as India is not testing as much as we did in the U.S.

As has been said by nearly every multilateral institution since the beginning of the pandemic, the lockdowns are leading to massive income loss. Some personal economic bruises will not heal for some time.

Widespread job losses were still being reported as of last week, including in rural areas.

“This suggests that medium- and small-scale firms located in rural areas are facing stress,” says Deveshwar.

Demand for work under the government-funded rural employment guarantee program in April was the highest in 9 months as laborers turn to the state now for help.

A Pew Research Center study estimates that India’s middle income group fell by 32 million people compared to the number it could have reached if the pandemic had not led to lockdowns.

The poor (those who live on around $2 per day) increased by an estimated 75 million, reversing a years long reduction in Indian poverty levels between 2011 and 2019. It’s all gone.

“After months of heavy buying, foreign equity investors have turned modest net sellers of late,” Deveshwar says. Year-to-date, the MSCI India Index is up 5.5%, beating the MSCI Emerging Markets Index by about 300 basis points.

Covid Slowing, But…

The effective reproduction number (the R-naught) –– a key indicator of how fast the Covid virus is infecting people –– has declined below 1 for the first time since mid-February. The latest data put out by the COV-IND-19 study group from the University of Michigan shows the India R-naught at 0.99 as on May 15.

It’s really nothing to write home about, but at least it’s going in the right direction. The national R-naught was a nasty 1.61 on April 1, meaning for every one person sick with SARS-Cov-2, one and a half people on average would catch it, too.

The death toll is just happening in crowded cities like Mumbai, which is interesting.

The Dainik Bhaskar, a Hindi newspaper, sent out 30 reporters along the villages of the Ganges River in Uttar Pradesh state. They found more than 2,000 dead bodies across some 700 miles. The state government says only about 300 are dying daily.

Authorities have been reportedly piling dirt and sand over more than 350 bodies lying in shallow graves in Kannauj, a city of roughly 85,000. Dogs were often seen gnawing at some of the 400 corpses just a short distance from a crematorium in Kanpur, the largest city in UP with close to four million people. According to Dainik Bhaskar daily, dozes of corpses have been seen at times floating down the river. Over 17,500 people have died of Covid-19 in Uttar Pradesh, a state of that is so big, it has more people than Russia (199 million vs 144 million in Russia). To put that into perspective, 114,871 people died of Covid-19 in Russia.

The good news is that active cases, by and large, and in freefall, despite the depictions of morbidity along the Ganges River, and the middle aged connected to oxygen tanks outside small medical centers with little to no room, even on a good day.

Some 18.2 million have been vaccinated but that’s a long way off from even a third of the population, which sits at 1.4 billion people.

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