India’s lockdown: high stakes for Narendra Modi

By putting 1.3 billion people on lockdown, India's PM, Narendra Modi, could either cement his reputation as a powerful, reforming leader, or trigger widespread upheaval.

“For 21 days, forget what going out means.” Indian prime minister Narendra Modi put his 1.3 billion people on lockdown last week. Officials had become alarmed that a rapid rise in cases of Covid-19 would overwhelm India’s fragile health-care system, says Abhishek Vishnoi on Bloomberg. Policymakers promised to step in with a $22.6bn spending plan, while the Reserve Bank of India has cut interest rates by 0.75% down to 4.4%. The local BSE Sensex Index still fell by 28.6%% between January and March, its worst-ever quarter. 

The stakes for Modi are high, says Sadanand Dhume in The Wall Street Journal. A successful fight against Covid-19 will cement his reputation as a powerful, reforming leader. Yet a serious outbreak could trigger “widespread and unpredictable social and political upheaval”.

Narendra Modi has form when it comes to making bold announcements, notes Amy Kazmin in the Financial Times. In 2016 he invalidated 86% of the country’s currency overnight in an attempt to crack down on tax evasion, but the state was unprepared for the ensuing chaos. This time the pattern is repeating itself. The urban middle class had been advised to rely on e-commerce, but nobody told the police, who have resorted to “beating couriers making deliveries and shutting logistics warehouses”. The plight of India’s army of casual labourers, who rely on daily wages to eat, is far worse. Modi failed to explain how millions of people were supposed to get by for three weeks without work. The informal sector which employs these workers is the backbone of the Indian economy. 

On a price/earnings ratio of 18 the Indian market is now far more reasonably priced than in January. Yet given massive uncertainty about the management of the ongoing lockdown and the epidemic, it may be better to wait and see before jumping in.

Recommended

Bunzl: boring is good for business
Share tips

Bunzl: boring is good for business

Food-service distribution company Bunzl is not a terribly exciting business, but it looks cheap and could be a great investment, says Rupert Hargreave…
30 Jun 2022
Vietnam makes its mark on the global stage
Emerging markets

Vietnam makes its mark on the global stage

Electronics manufacturers are moving into Vietnam, partly in response to manufacturing delays caused by lockdowns in China. The country’s textile indu…
30 Jun 2022
Oil shortage starts to curb demand
Oil

Oil shortage starts to curb demand

The price of Brent crude oil is up by 475% since its March 2020 low. And when oil prices rise, people start to reduce consumption, leading to increas…
30 Jun 2022
Metals prices wobble on slowdown fears
Industrial metals

Metals prices wobble on slowdown fears

The S&P GSCI index of 24 major raw materials has fallen back 9% since mid-June on growing fears of a recession, and copper has hit a 16-month low aft…
30 Jun 2022

Most Popular

Prepare your portfolio for recession
Investment strategy

Prepare your portfolio for recession

A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, sa…
27 Jun 2022
Market crash: have we hit bottom or is there worse to come?
Stockmarkets

Market crash: have we hit bottom or is there worse to come?

For a little while, markets looked like they were about to embark on a full-on crash. And that could still happen, says Dominic Frisby. Today, he look…
27 Jun 2022
What the end of the 1970s bear market can teach today’s investors
Stockmarkets

What the end of the 1970s bear market can teach today’s investors

The 1970s saw the worst bear market Britain has ever seen, with stocks tumbling 70%. Things have changed a lot since then, says Max King. But there ar…
28 Jun 2022