32mn livelihoods at risk in India, economy to shrink 20% if lockdown on till mid-May
If the India lockdown continues till mid-May along with moderate relaxation after the end of 21-day lockdown on April 14, it could put 32 million livelihoods at risk and swell non-performing loans (NPLs) by seven percentage points, resulting in the economy contracting sharply by around 20% in the first quarter of fiscal year 2021, with –2 to –3% growth for fiscal year 2021, a new report warned on Friday. 
 
According to the report by leading management consulting firm McKinsey and Company, the cost of stabilising and protecting households, companies and lenders could exceed Rs 10 lakh crore, or more than 5 per cent of GDP in such a scenario.
 
The report, titled ‘Getting ahead of coronavirus: Saving lives and livelihoods in India,' said that restarting supply chains and normalising production and consumption can take three–four months if the lockdown goes till mid-May as the virus ligers on.
 
If the lockdown continues for additional two–three weeks in Q2 and Q4 FY2021 because of virus resurgence, it could mean an even deeper economic contraction of around 8 to 10 per cent for fiscal year 2021. 
 
"This could occur if the virus flares up a few times over the rest of the year, necessitating more lockdowns, causing even greater reluctance among migrants to resume work, and ensuring a much slower rate of recovery," the report suggested.
 
To understand probable economic outcomes and possible interventions related to COVID-19, McKinsey spoke with some 600 business leaders, economists, financial-market analysts and policy makers.
 
According to the findings, in case the lockdown period is extended till mid-May, the potential economic loss in India would vary by sector, with current-quarter output drops that are large in sectors such as aviation and lower in sectors such as IT-enabled services and pharmaceuticals.
 
"Current-quarter consumption could drop by more than 30 per cent in discretionary categories, such as clothing and furnishings, and by up to 10 per cent in areas such as food and utilities," said the report.
 
Strained debt- service-coverage ratios would be anticipated in the travel, transport, and logistics, textiles, power and hotel and entertainment sectors.
 
There could be solvency risk within the Indian financial system, as almost 25 per cent of MSME and small- and medium-size-enterprise (SME) loans could slip into default, compared with 6 per cent in the corporate sector (although the rate could be much higher in aviation, textiles, power and construction) and 3 per cent in the retail segment (mainly in personal loans for self-employed workers and small businesses). 
 
"Liquidity risk would also need urgent attention as payments begin freezing in the corporate and SME supply chains. Attention will need to be given to the liquidity needs of banks and nonbanks with stretched liquidity-coverage ratios to ensure depositor confidence,' the report mentioned.
 
Given the magnitude of potential unemployment, business failure and financial-system risk, a comprehensive package of fiscal and monetary interventions may need to be planned. 
 
"Consideration could be given to an income-support programme in which the government both pays for a share of the payroll for the 60 million informal contractual and permanent workers linked to companies and provides direct income support for the 135 million informal workers who are not on any form of company payroll,' the report further suggested. 
 
Since last week, the Health Ministry has observed a staggering rise daily in the number of confirmed coronavirus cases across the country -- nearly 500-plus cases daily with a few exceptions where the number has gone below 400 cases -- a pattern which indicates a worrying trend after solid implementation of the nationwide lockdown and sealing of hotspots.
 
On Friday, the number of confirmed cases has risen to 6,412, an addition of 669 cases in a day.
 
Punjab and Odisha have already extended lockdown till May 1 and April 30, respectively.
 
According to the report, countries that are experiencing COVID-19 have adopted different approaches to slow the spread of the virus. 
 
Some have tested extensively, carried out contact tracing, limited travel and large gatherings, encouraged physical distancing, and quarantined citizens. 
 
Others have implemented full lockdowns in cities with high infection rates and partial lockdowns in other regions, with strict protocols in place to prevent infections.
 
"The pace and scale of opening up from lockdown for India may depend on the availability of the crucial testing capabilities that will be required to get a better handle on the spread of the virus, granular data and technology to track and trace infections, and the build-up of healthcare facilities to treat patients (such as hospital beds by district)," said the report.
 
Since there is a very real possibility of the virus lingering on through the year, a micro-targeting approach could help decelerate its spread while keeping livelihoods going.
 
"It is imperative that society preserve both lives and livelihoods. To do so, India can consider a concerted set of fiscal, monetary, and structural measures and explore ways to return from the lockdown that reflect its situation and respect that most important of tenets: the sanctity of human life," the report noted.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    vram2311

    3 months ago

    We must focus on getting out of our current situation rather than crystal ball gazing exercises especially from McKinsey
    If we get our initiatives in place it's going to lay the platform for sustainable growth

    Mumbai police cracks whip on social media, group admins for fake content
    The Mumbai Police on Friday cracked the whip on Social Media against fake content and Group Admins of WhatsApp groups as personally liable if such misleading stuff is found circulating.
     
    The city police commissioner has issued orders - valid from April 10 to April 24 - prohibiting any kind of fake or distorted information on all social media platforms like WhatsApp, Twitter, Facebook, TikTok, Instragam, etc.
     
    It has also banned derogatory or discriminatory messages towards any community, or causing panic and confusion among the people, said the order signed by Deputy Commissioner of Police (Operations) Pranaya Ashok.
     
    The order also prohibits any attempts to incite mistrust against the government officials or their acts to prevent the spread of Coronavirus and such messages causing danger to public health or safety or public peace.
     
    For all such acts by any person or groups, the person designated as "Group Admin" shall be held personally liable for such content in his/her group and attract action under the relevant laws, warned DCP Ashok, who is also the Mumbai Police official Spokesperson.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
     
     
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    Beware of COVID Scams, Fraud, Profiteering and Corruption
    The coronavirus has unleashed the biggest pandemic any of us have seen in our lifetime. While the world of medicine and science is working overtime to contain the virus and to find a cure, are we prepared for the pandemic of fraud and corruption that thrives during disasters by preying on people’s misfortune and anxieties?
     
    The developed world is already used to criminals capitalising on calamities; but although these are extensively documented and acted upon, each new disaster throws up thousands of new victims. 
     
    It is no different in India, where corruption is already very high. But a majority of Indians will struggle to keep up with the ingenuity and sophistication of online fraud and its spread through friendly social media forwards. Heightened anxiety levels due to the unprecedented lock-down, has created a fertile environment for fraudsters to play on people’s fears. 
     
    Fake news and sensational videos claiming to provide COVID-related information, emails pretending to offer official warnings and notifications, messages seeking donations to fake entities or selling cheap COVID insurance are used to steal money or plant malware to allow criminals to access to your passwords and financial information. One of these offered a free Netflix subscription for the entire lock-down period to those who filled out a survey that was attached and forwarded it to 10 WhatsApp users. Offline cons include sale of dubious cleaners, tests and remedies for COVID-19 and, in the US, even an advance booking on a ‘soon-to-be launched’ COVID vaccine! 
     
     
    Unthinking social media forwards allow these scams to go viral in record time before being exposed. But bigger than any of these is the massive financial fraud, government corruption and misuse of State machinery that is unleashed during major calamities. 
     
    In almost every country, senior citizens and those unfamiliar with online transactions are most vulnerable, especially at a time when their income from savings is sharply reduced due to the drop in interest rates and they are worried about whether they have adequate insurance to cover eventualities. 
     
    Poor and less literate Indians are equally susceptible, because they aggressively adopted digital technology but remain fuzzy about financial risks. Those with bank accounts linked to mobiles and Aadhaar numbers are easier targets and, hence, need to be extra mindful. 
     
    Fraudsters invariably play on fear, greed, gullibility or carelessness. Here's a quick look at some tricks being used by COVID scammers. 
     
    The Postman Brings Cash from Banks 
    Only yesterday, a well-known consumer group helpfully forwarded a message claiming that the postal department had ‘introduced a new service called AEPS transaction’ allowing a withdrawal of up to Rs10,000 from your savings account via the postman without going to the bank. This ‘service’ was offered to people with an Aadhaar number linked to their mobile phone and bank account and could be availed by sending a message with details to a particular mobile number. 
     
    An activist lawyer checked and found that it belonged to someone from Gujarat. Those forwarding the message failed to note that post-offices are not even delivering letters during the lock-down. 
     
    The good news is that Indian banks and companies have worked hard to catch new tricks and warn customers through emails, text messages and press releases. Hopefully, it will contain some of the damage. 
     
     
    Cancellation Con: First off the ground in India were phishing emails targeting those wanting to cancel travel bookings after the lock-down. MakeMyTrip, Cleartrip and Goibibo quickly alerted people about attempts to entice them into sharing bank details and personal information with criminals to obtain a refund against cancelled bookings. One is lulled into forgetting the standard practice is for refunds to be made to the original source of payment, whether it is credit/debit card, e-wallet or bank account whose details are already available with the seller. 
     
    PM Cares Donations: Yogesh Sapkale has already written about refund frauds and attempts to skim donations through fake UPI (unified payments interface) handle which were very similar to [email protected], the official handle for donations to PM-CARES (prime minister's citizen assistance and relief in emergency situations) Fund. 
     
    Another scam is in the form of calls and messages offering to deposit funds into your bank account as a part of the government’s COVID relief schemes, which ask for personal and bank details. These are bound to ensnare people who have lost jobs or their livelihoods.
     
     
    Postponing EMI: Banks have warned customers to be extremely mindful about email, SMS and IVR calls offering help to defer EMI (equated monthly instalments) payments by activating the temporary moratorium announced by the Reserve Bank of India (RBI). The goal is to access banking details, email logins and passwords, or lure victims into sharing an OTP (one time password) received on their phones and skim money from their accounts. 
     
    Online Classifieds Scam: Even before the COVID lock-down, there was a sharp spike in attempts to scam people who sought to sell products through online on sites such as OLX and Quickr. The ease of UPI (unified payments interface) transactions makes it attractive for cheats. After lulling victims with a tiny test transaction, they are able to steal money through UPI instead of making the promised payments. Banks are sending repeated warnings about how a “UPI/Debit Card PIN is generated ONLY to make payments & NOT to receive payments.” Do people pay attention to such messages?
     
    Corruption Pandemic
    Writing in The Hill, Jeff Cortese, formerly with the Federal Bureau of Investigation’s Public Corruption Unit, warns of the ‘corruption pandemic’ that will be triggered by COVID-19. The need for fast action during emergencies creates massive opportunities for corruption by government officials, contractors and suppliers. In the aftermath of Hurricane Katrina in 2006, over $1 billion were improperly distributed or fraudulently obtained in one city alone. The difference is that the US charged over 1,100 people with fraud by 2011. This is unlikely to happen in India.
     
    We have already seen this in how medical safety equipment, ventilators, testing kits and even sanitisers, that are essential to medical workers and doctors, have turned scarce and expensive. Gross mismanagement of procurement and attempts to centralise purchase and supplies are only increasing the scarcity. 
     
    There is growing evidence of gross abuse of power by bureaucrats, politicians and the police during the lock-down. A few days ago, an engineer was badly beaten up at the bungalow of Maharashtra minister Jitendra Awhad in Mumbai. Those responsible were arrested; but the fact that the beating happened at the minister’s bungalow seems to be ignored. 
     
    On Thursday night, it was revealed on social media that Amitabh Gupta, a principal secretary of the home department issued travel pass to ‘family friends’ the Wadhwan family to travel from Khandala to Mahabaleshwar in the middle of the lock-down. These discredited promoters of the failed Dewan Housing Finance Ltd (DHFL) are out on bail and being investigated for underworld links and gigantic fraud that shook up the financial system. 
     
    Mr Gupta, the IPS officer, has been sent on compulsory leave after being caught; but this seems an eyewash, since he ought to have been suspended under government rules, says IAS officer Ashok Khemka. 
     
    These are just small glimpses of the gumption and brazenness of those in power, who thrive in an unprecedented situation when people’s freedom is curtailed for their own protection. Such abuse of power is probably multiplied a million times in a country of 134 crore people which still operates in a feudal manner. We may know the extent of it only after the war against the coronavirus is finally over. 
     
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    COMMENTS

    dbdesai4

    3 months ago

    A local newspaper in Sindhudurg district of Maharashtra has published a news today that the District Head Post Office has announced such scheme in the district.

    m.prabhu.shankar

    3 months ago

    Thanks for the article Sir.

    ganeshjohnson

    3 months ago

    Maybe smart readers of your column can take the letter, photoshop the names and vehicle numbers of their own, and proceed to Mahabaleshwar for some cool relaxation!

    drbheda

    3 months ago

    nice & timely write up hope people remain vigilant.

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