India faces a terrible choice, says Sadanand Dhume in The Wall Street Journal. Most countries are grappling with a trade-off between “lives and livelihoods”, but in an economy where more than 80% of people live on less than $5.50 a day, lockdowns are proving an unaffordable luxury.
Prime Minister Narendra Modi imposed one of the world’s toughest lockdowns on 25 March. Curbs have been eased recently, yet infections have not peaked and a lack of testing hardly helps: as of 30 April New York state had tested more people for Covid-19 than the whole of India.
Economic carnage
The economic data for April is “shocking”, writes Freya Beamish of Capital Economics. The services purchasing managers’ index (PMI) plunged to just 5.4 last month (readings below 50 imply contraction), a level that implies that the sector, worth half of GDP, “effectively vanished”. The nadir of China’s equivalent gauge was 26.5. GDP is set to fall 20% year-on-year in the second quarter.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Developed countries have served up massive fiscal support to cushion the blow of lockdowns, notes the Financial Times. Until this week India’s support package had amounted to a measly 1.1% of GDP. Some economists say India needs stimulus of at least 5% to mitigate the worst economic and social effects of the pandemic; this week, Modi promised them 10%.
The figure has surprised investors, given that government debt has already reached a comparatively high 70% of GDP. This could “[put] India’s investment-grade sovereign credit rating on the line”, says Una Galani on Breakingviews. “In normal times,” that could unnerve global investors and prompt them to withdraw money from the economy.
But India has a record of being able to embrace tough structural reforms, which bolster long-term growth, in a crisis – witness its embrace of market forces during the balance-of-payments drama of 1991. Modi’s “rare outright parliamentary majority” bodes well this time. There is plenty to do, says The Times of India. The Covid-19 lockdown has empowered bureaucrats, stoking fears of a return to the bad old days of the heavily regulated “licence raj”.
The torrid backdrop has wiped a quarter off the BSE Sensex index this year. The market still trades on a relatively elevated cyclically-adjusted price/earnings ratio of 18.2, but, as Craig Mellow notes in Barron’s, India is usually the priciest major emerging market and valuations have come down.
The risk-tolerant think that this might be an opportunity to buy into the long-term growth of an economy where half of the population is under 25 at a comparative bargain. “Don’t count the country out.”
-
SIPP holders to get cash warnings and be offered default fundsNews Providers will be required to offer investors a default fund and must warn customers of the inflationary risk of cash savings the regulator has said. What the new rules mean for your retirement pot?
-
Zoopla: Asking price discounts hit a five-year high – is now the time to buy a property?
News Zoopla’s October House Price Index shows sellers are accepting discounts of 5.5% on average to secure a sale – we reveal where homeowners are taking the biggest asking price cuts
-
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
-
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The top funds to invest in - November 2023
Tips Investors are focused on income strategies and FTSE heavyweights. We look at what investors have been adding to their portfolios in the last month
-
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
