5 Things You Might Not Know About COVID-19 In India

Some have spoken of the “mystery behind India’s low death rates” from the COVID-19 disease, and an apparent slow spreading of this disease. India's government praises a successful containment cluster strategy as the main reason. With the little we know about the new coronavirus, however, it is too early to cry victory, and caution must be exercised making any predictions. Albert Schram takes us deeper into India's COVID-19 story.

This article was written by Albert Schram, PhD for Emerging Market Experts (EMEx). For more information about Southeast Asia or other business solutions, please feel free take a look at our services or contact us.

For the last 8 weeks, the world’s largest democracy has put serious mobility restrictions on more than 1,300 million people and closed all schools. The whole of India has been under lockdown measures since 24 March, when more than 35,000 cases were confirmed nationally, a measure which recently has been extended to 18 May.

As result, wide spread disruption of economic activity occurred, which threatens economic progress made since the 1990s. In the last 30 years, for example, India has managed to reduce its poverty rate from over 40% to less than 20% by achieving a GDP growth rate of over 7%.

The sudden lockdown meant, for example, that millions of migrant workers, often paid on a daily basis, to be stranded across the country. Last week, some migrant laborers began to travel back to their home states on specially organized train transport.

As to exiting the lockdown the government of India has chosen a localized approach: areas will be classified as green zones if they have had no confirmed new cases for 21 days. All of India's major metropolitan areas remain, however, are categorized classified as red zones and will stay under strict lockdown conditions.

Not all human activity has been disrupted numerous schools and universities have continued to teach online. Since the country went into lockdown in March, there's been a 26% increase on conversations of the online dating platform OkCupid.

So what are the likely impacts on the economy and public health of COVID-19 in India? Here are 5 stylized facts, you may not know about COVID-19 in India, and point towards future developments:

1) India’s economy will suffer mildly in 2020, but will bounce in 2021

After registering GDP growth of 5% in 2019 already down from 6.1% in 2018, the IMF has lowered its growth forecast for 2020 from 5.8% to 1.9%. The World Bank at this moment is less pessimistic slashing its forecast for 2020 from 6% to 4.8-5%, similarly the ADB reduced it growth prediction from 6% to a still respectable 4%. Predictions from the bounce back in 2021 as respectively IMF 7.4%, WB 1-5-2.8% and ADB 6.2%. The World Bank sees a rebound only in 2022 predicting 5% growth.

You get the picture: moderate reduction in growth compared to other emerging markets depending more on tourism and trade, with a moderate bounce back in 2021. These forecasts however are currently subject to continual change, as India’s economic future looks more and more uncertain.

It is likely that because of the necessary economic stimulus package India’s already high debt to GDP ratio of 71% will grow to 78% of GDP. The rating agencies for now have not lowered their ratings, with Fitch rating India’s sovereign bonds BBB with a stable outlook.

McKinsey has done its own assessment, and interviewed over 600 business leaders producing a less rosy picture. Its most positive scenario with a restart of supply chains and a generous stimulus package and only 1-2% growth in 2021. If lockdown continues and restart is slower, damage could be much higher from -2% to -10% in 2021, but the impact will vary greatly by economic sector.

McKinsey also point out that there could be solvency risk within the Indian financial system, as almost 25 percent of MSME and small- and medium-size-enterprise (SME) loans could slip into default.

2) Different Indian states have applied widely different approach with unequal results

Just like Africa is not a country and the Global South not a region, the differences between Indian states often are more striking than the similarities, as is confirmed by the response to the COVID-19 pandemic. Even regarding inter-state trade, there are still customs and levies to be paid on many products: when milk for example is transported from Gujarat – the home of Amul on of the largest milk producers in the world - to Bombay in Maharashtra.

As to COVID-19 response, while Kerala, for example, started very early with a contagion route map, other states dithered and are dealing with community transmission and exponential growth. Unfortunately, except for Kerala testing regimes are still not in place, and the true number of cases is probably a multiple of the official numbers.

3) India’s demographic structure and high percentage of rural population, have reduced number of COVID-19 cases

The relatively low percentage of one high-risk groups, the over 65-year-olds is still yet only 6% of the population, because 60 years or so life expectancy in India was much shorter than it is now. This compares to over 20% of 65-year-olds in most European countries. Moreover, according to the 2010 census 70% of the population was still living in rural areas, and relatively isolated.

4) The COVID-19 pandemic has unleashed a wave of innovation India.

Though vaccine development is all health researchers’ holy grail, this requires a large, world-class infrastructure and a lot of coordination. India will certainly play a role in clinical trials and in the production phase, for example, through Serum based in Pune one of the largest serum producers in the world now in partnership with US based Codagenix, as well as Oxford University in the UK. Hyderabad-based Bharat Biotech announced a partnership with the University of Wisconsin Madison and US-based firm FluGen to make almost 300 million doses of a vaccine for global distribution.

As to COVID-19 treatment, it is unlikely that anywhere a miracle cure will be found, so many separate treatments for different aspects of the disease or patient care are being developed. For example, in order to scale up hospital capacity, 100% recyclable beds made from water-proof corrugated cardboard were developed.

Conversely, the challenge to test 100 millions of people for COVID-19 is a uniquely Indian challenge, and Indian researchers are well placed to make good progress. An then of course, there are the apps. India is in an excellent position to develop smart computer programs which support detection and treatment of COVID-19 patients.

5) Future development will depend on how debt and currency risk, political risk and the risks of disruptions due to social unrest are managed by state and national governments.

COVID-19’s health and economic impacts are not the only challenges that India faces. How things develop from now on, will depend on whether a global debt crisis can be avoided, and within India whether the health care is able to step up, but also how economic stimulus and other policies pan out. Policy matters.

India has a large and growing internal market and a record of solid economic growth over the last 30 years. In our view, for any investor the upside of the Indian economy still far outweigh the negatives. Nevertheless, risks need to be carefully managed, including currency risk, political risk and the risks of disruption to social unrest or policy response to the COVID-19 pandemic.

This article was written by Albert Schram, PhD for Emerging Market Experts (EMEx). For more information about Southeast Asia or other business solutions, please feel free take a look at our services or contact us.