India has been suffering from a spate of negative developments which the French journalist Guillaume Faye would have termed convergence of catastrophes. Each day brings an increasing number of corona cases in spite of a prolonged severe lockdown. There is scorching heat wave with temperatures touching 47 degrees Celsius in Delhi. The virus which was supposed to wilt away in this heat has instead created more hot spots. Tryst with cyclone Amphan, which means sky, has proved to be devastating for West Bengal & Orissa, another one Nisarga is about to reach Mumbai, first cyclone there in 129 years. Continuing heart rending images of immense suffering of migrant labour seems to be never ending. If these were not enough, India is now battling the worst locust attack in 3 decades and so far 5 states have been affected – it has the potential to affect food security. India’s strong and belligerent neighbour China is flexing its muscles on the border. Only an earthquake was missing and sure enough one made an appearance with 4.6 Richter in close proximity to Delhi.
In this all pervasive gloom and despondency, I thought it is important to look and find a few bright aspects of recent developments. Some positive news will help in giving rise to a more balanced and realistic assessment of the future.
Dr. Ian Lipkin, prominent virologist, professor at Columbia University and consultant for pandemic 2011 movie Contagion is concerned that he might lose his contract for the next disaster movie, because of 100 % record of his movie scripts becoming reality. However, he is optimistic that there is very high probability that we will have a vaccine available by April 2021. There is tremendous effort underway with some early positive signs; one example is of Moderna’s successful vaccine trial. However, it is at a very early stage, the trial involved a very small number of people and important data was missing from the details provided by them.
On therapeutics front, there is a massive pipeline of 298 unique drugs in various stages of development. This is demonstrative of the tremendous response of the pharmaceutical industry compiling resources and talent, to find quickly an effective drug to combat this pandemic. Effort is literally on a war footing with medicines names ending with Vir which means brave warrior in Hindi language. Gilead, the leading company has even gone a step further by invoking Ramayana where the good ultimately triumphs over evil. They have named their drug Rem Desi Vir, just slightly changing the name to circumvent copyright infringement. Two other prominent medicines are Favipiravir by Fujifilm Toyama Chemical Co Ltd, and Sarilumab, a monoclonal antibody by Regeneron Pharmaceutical, all are currently in Phase III.
There has been lots of work and progress in antibody testing. It has lot of appeal – by identifying people who have been infected with the virus, it can provide important epidemiological information about how widely the disease has spread in a community and the extent of asymptomatic cases. Additionally, these tests can be beneficial in restarting local economies by identifying people who might be immune to the virus and could therefore safely return to the public sphere- sort of an immunity passport .However, so far it has not been very reliable since it produces quite a few false positives. According to WHO, additional data is needed before modifying public health recommendations.
While we wait for progress in all these areas, it is increasingly important to balance lives and livelihoods. Unlocking has been a cause of worry for most people. Dr Atul Gawande provides hope by writing that it is possible to open in a safe manner where employees can work safely with one another and with their customers. He gives the surprisingly successful example of his hospital with 75000 people; 2/3rds of them were working in April 2020 and still keeping the transmission rate very low. He writes that the shutdown of virus was made possible by implementing all four measures of hygiene, mask, distancing and screening in a rigorous and thorough manner. He talks about an important fifth principle and that is the culture of not only keeping yourself safe but embracing a desire to keep others safe , for example, ‘I am wearing a mask to protect you.’
Unlocking in India is causing even more concern since it is happening amidst rising cases. However, R0 has come down from 2 to 1.27. R0 is an important epidemiological number which represents new infections estimated to stem from a single case. A R0 below 1 suggests that the number of cases is shrinking while above 1 indicates that the number of new cases is growing. Michael Levitt, Noble prize winner in 2013 for chemistry and a Stanford University professor believes that the virus likely has its own dynamics and will run its own course which is unrelated to lockdown. He gives the example of Denmark which has seen R0 continue to fall after schools and shopping malls reopened. A top Italian doctor, head of a major hospital in Italy’s most affected area says that virus is losing its potency by comparing viral loads of recent swabs and those taken 2 months back. However, there will be lots of uncertainty because of unlocking and it will be important to be vigilant.
There is some positivity in the area of finance and economics too. The world economy is emerging from its corona virus enforced hibernation and showing some green shoots of economic recovery, as governments ease lockdowns of businesses and allow consumers to travel and shop again. Measures of high-frequency data and confidence increasingly suggest a bottom has been reached in the worst global recession since the Great Depression. In India, where the world’s biggest lockdown threatens to push 12 million into extreme poverty, there may be glimmers of hope in high-frequency figures. A basket of such indicators, including traffic congestion, electricity demand, and employment, point to a “modest lift off lows”.
USA stock markets has been another source of optimism with levels remarkably close to pre Covid levels – S& P index was at 3386 , fell to 2237 and has recovered to 3081. NASDAQ which was at 9817 fell to 6860 and is now at 9608. Federal Reserve stimulus has a big part to play in such a rise and the feeling is that the stimulus will remain for quite some time. However one has to be careful about this divergence between Wall Street and Main Street as the NYU professor Nouriel Roubini described it. Indian markets have not been as exuberant. Sensex which was at 42000 pre Covid fell to 26000 and is now around 33000.Fiscal stimulus is perceived as weak and demand side has not been addressed though praised for its longer term measures. On the positive side there are some optimistic forecasts. For example, Duvvuri Subbarao, former RBI governor believes that Indian economy may expand by 5 percent in the FY 2022 after contracting by 5 per cent in FY 2021. He feels that this growth is possible since Covid 19 is not a natural disaster. Our factories are still standing; our infrastructure and transport systems are still there. However, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers.
Reliance Jio- Facebook deal is a transformational partnership for Indian digital economy and provides lots of optimism for future growth and creation of jobs. It can have a massive impact on Indian consumer’s internet landscape with intended targeting of 60 million MSME, 120 million farmers and 30 million small merchants. Nandan Nilekani says that it is a synergistic move unique to Indian set up –for example it will be supporting Kirana stores which are important job creators rather than upending them. He further says that this collaboration will bring hundreds of millions closer to online ordering and their first digital financial transactions. Moreover, it is proving to be a catalyst for attracting lots of foreign investment with marquee global technology investors including Silver Lake, Vista, General Atlantic, and KKR stepping in one after the other in quick succession. It is expected to be listed on a USA stock exchange and perhaps can create the same excitement as the Chinese giant Alibaba.
Overall, to overcome the bleakness of deluge of current negative news, it will be good to visualize the world a few months later where there is likely to be progress in vaccine development, higher effectiveness of therapeutics and better accuracy of antibody testing. Economies of multiple countries would have opened more with quite a few sectors working at a good capacity. However, risks remain and there is no room for complacency. Taking a cricket analogy, the opponent bowling team might feel that the new ball may have lost its sheen but there is still plenty of juice in the wicket. Therefore with a balanced approach, we try for runs but with lots of caution. For health, it is important to continue to take precautions as described by Dr Gawande. While for our finances, as emphasized in my previous articles, it is important to maintain ample liquidity, keeping core equity portfolio intact with a few defensive and hedging precautions and long term money being invested only in tranches.