The breakout of Covid-19 in South Korea, Iran and Italy raised more than eyebrows. They raised anxiety levels. I think the source of the outbreaks in Korea and Italy have been traced. They are still China connections. Don’t know about Iran. It is clear that the supply chain disruptions that the virus outbreak has caused could turn out to be permanent.
[An article in Global Times claims that China would maintain reasonable growth despite the virus. It will be interesting to watch the first quarter print.]
Vietnam and Bangladesh could be beneficiaries. Basically, countries that lost market share to China could gain or ones that have been winning market share from China because they are the lower cost substitutes now would win more.
Indian stock markets have seen inflows. But, can India win businesses? Lower tax rates are one thing. But, ease of doing business at the ground level – State and local governments – matters. A ‘World Economic Forum’ briefing note on India (from 2015) is still instructive. It has 19 charts. The chart on labour productivity and on India’s ‘inclusive growth performance’ are worth paying attention to. These issues define the limits of India’s attractiveness. A situation like this reminds us of the extent of our under or unpreparedness to cash in.
A story that appeared in ‘Business Standard’ today noting that the government might fast-track manufacture of technology goods is welcome. Some supply-chain disruptions and hence consequent realignments are inevitable. India will be a beneficiary. The question is how big and how durable will India’s gains be.
Sanctity of contracts is a key determinant of success in weaning businesses away from China and to India. In this regard, recent unilateral abrogation or renegotiation of contracts would not have sent reassuring signals. In November, there was a story in Mint that the Union govrnment was proposing a law to protect international investors. In December, the Economic Times reported that the Union government was coming up with an Ordinance to ensure that electricity purchase (power purchase agreements or PPA) agreements were honoured. As per the news-story, the scope of the Ordinance appeared wider and welcome:
The Centre plans to take a major initiative in the power sector with an ordinance to ensure sanctity of contracts, restrict cross-subsidisation of consumers and force utilities to pay their bills on time, a move that can go a long way in making electricity generation and distribution attractive for investors. [Link]
But, it has not happened yet, to the best of my knowledge.
Just ten days ago, the storyline changed. Now, it appears that the Union government is planning a tribunal that would adjudicate on such cancellation of contracts.
The Finance Minister, in her budget speech (Paragraph 85), mentioned the following:
A stable and predictable business environment is a key objective of this government. There is also a strong argument for ensuring that contracts are honoured. India has a sound framework related to Contracts Act. We shall deliberate upon strengthening it.
Perhaps, the tribunal is the practical manifestation of this promise. But, the Ordinance sounded more promising. I hope that happens independent of the proposal on the Tribunal.
Lastly, on the corona virus itself, there is plenty of anxiety to go around. Understandable. But, the Centre for Disease Control has a page on annual incidence of flu. Since 2010, the annual deaths from flu related illnesses have ranged from 12,000 to 61,000 in 2017-18. 2011-12 recorded the lowest number of deaths around 12,000 – according to this page. This is only for the United States.
Globally, the World Health Organisation provides the following information:
Worldwide, these annual epidemics are estimated to result in about 3 to 5 million cases of severe illness, and about 290 000 to 650 000 respiratory deaths. [Link]
So, we need to get a perspective. If anything, anxiety lowers immunity. Good hygiene (hand sanitisers, salt water gargling, nasal hygiene), alertness, awareness, minimising or eliminating travel to colder zones and to affected areas and some luck should suffice.
As we grow hyperanxious based on circulating rumours and even news on stories that have little relevance for us, we would do well to check out some of the biases that humans are prone to (ht: Rohit Rajendran). They may relieve anxiety, induce laughter and, I hope, some reflection.