India came in for considerable criticism over its reaction to the spread of the coronavirus pandemic in the first wave.
Locking down the economy almost overnight and trapping millions of migrant workers from returning home, only to then release them a week or two later to flood out into rural areas and spread the virus, was roundly condemned (both inside the country and out).
The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.
Coronavirus pandemic in India
Since then, infections have been on a relentless rise. Infections reached a peak in mid-September of some 93,000 per day. That brought the total to some 9 million cases and deaths to nearly 130,000 (one of the highest totals in the world).
Rolling local containments and much more effective work at the city and community levels have gradually reduced infections. Infections are about half of what they were in late September, as this graph illustrates:
Lacking the financial firepower of mature economies, the government has been unable to support the economy in the way many Western governments have done.
As a result, India’s GDP contraction has been brutal.
According to the Financial Times, gross domestic product contracted almost 24% year over year in the second quarter of 2020. In the third quarter, GDP fell by an additional 9%.
The decline puts the country into a technical recession for the first time in its history.
Manufacturing plays catch-up
Manufacturing activity accounts for nearly 14% of India’s GDP, the Financial Times reported. Furthermore, manufacturing activity hit a 10-year high in October.
However, that activity had to play catch-up from months prior.
Goods and services tax collection also rose to an eight-month high of about $14.4 billion last month. The collections marked a 10% increase from October 2019. However, collections are down 20% in the year to date compared to last year.
But not all businesses are rebounding.
The article goes on to say service industries, which account for nearly half of the country’s GDP, are languishing at a fraction of pre-pandemic levels. Shoppers are avoiding crowded public places unless they have to go to their workplaces.
Over the last two months, sales of apparel, furniture, home textiles, and organic foods are said to be about 65% of last year’s levels. As a proxy for the retail market, gold sales at the critical Diwali run-up are said in the Deccan Herald to be running at just 70% of last year’s level, in volume terms.
Anecdotally speaking with Delhi businessmen, MetalMiner understands manual laborers and workers are having to just ignore the virus. In other words, they essentially are getting on with life in order to make a living. Office staff are working extensively from home, prompting a mini-boom in laptop sales and internet upgrades.
The population remains wary and cautious. However, optimism is growing with the falling infection rates and news of potential vaccines. On the other hand, India will face the huge challenge of securing and delivering vaccinations to nearly 1.4 billion people.
How India’s economy fares over the rest of this year and into Q1 2021 will depend largely on whether the government can avoid a resurgence of coronavirus cases in the cities.
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