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

Julian Brigden: markets are at a huge inflexion point
Investment strategy

Julian Brigden: markets are at a huge inflexion point

Merryn talks to Julian Brigden of Macro Intelligence 2 Partners about the unwinding of the US stockmarket's super-bubble, and the risks and opportunit…
25 Jan 2022
Has growth investing had its day? Don’t be so sure
Growth investing

Has growth investing had its day? Don’t be so sure

Markets – and “jam tomorrow” growth stocks in particular – continue to crash, with some analysts forecasting a 50% drop or more. But, says Max King, a…
25 Jan 2022
A cheap investment trust with a good record
Investment trusts

A cheap investment trust with a good record

This cheap investment trust’s yield of almost 9% may look too good to be true, but should be sustainable, says Max King.
25 Jan 2022
Tax return deadline extended – but don't forget to file
Income tax

Tax return deadline extended – but don't forget to file

HMRC is being slightly more lenient about tax returns this year, but falling behind will still incur hefty fines.
25 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022