Vijay Kumar Gaba: Corona

Thursday, March 31, 2022

Himachal Pradesh: Positive but not ebullient

Last week we travelled through seven districts spread across all three divisions of Himachal Pradesh. In five days we drove through Sirmaur, Solan Shimla Districts (Shimla Division); Bilaspur, Hamirpur and Mandi Districts (Mandi Division) and Una district (Kangra Division). The journey was mostly through lower Himachal, except few areas of Shimla district that lie in upper Himachal. The objective was to assess the current socio-economic and political conditions of the state and sentiments of the people ahead of elections scheduled in November 2022.

The following are some of the key observations made during the trip.

There are no signs of Covid-19 pandemic in the state. Masks are mostly absent from the faces of the people as well as shops. Only room service staff at expensive hotels are seen wearing masks while attending guest calls. The customary hand sanitizer bottles put up in hotel lobbies, shops and offices are mostly empty. Most of the people we spoke to remember Corona as a bad dream, but none appeared concerned about it any longer.
The pandemic affected the services (mostly tourism and hospitality) sector of the state significantly. But most of it is recovering well now. The tourist arrival as well as spending has been strong since last holiday season (October-November 2021). Hotel occupancy presently is above the average.
The horticulture (fruits and vegetable) sector of the state suffered in 2020 due to logistic issues. The sector has recovered well in 2021. Both the crop and realizations have been better than 2019.
The roads in the state are mostly in good shape. The construction of highways and village (PMGSY) roads that suffered during the pandemic is back on track. Chandigarh-Solan route is now completely four lane. Solan-Shimla four laning is progressing well. The local people are generally happy with the widening of roads. The voices of dissent (on environmental issues) are few and feeble.
The sentiment of people is generally positive, but not particularly ebullient. The efforts of the government to create local employment opportunities have not yielded the desired results so far. Even though the implementation of numerous government schemes is progressing well and corruption is not seen as a major issue in the state. Inflation is a key concern in towns, not so much in villages.
Politically, there is no significant anti-incumbency in the state. No one seems to be vocal with complaints. Though people are not excited about the present state leadership. Most of the people we spoke to are expecting a change in the state leadership post election.
The ruling BJP has already started the election campaign, while no other party seems bothered about it as yet.
The traditional monsoon forecasting mechanism of the tribal farmers has been significantly more accurate than the professional forecasters. I have been personally observing this for the past 25years. This time they are anticipating a good monsoon. This is good news for the farmers of Himachal Pradesh, Uttarakhand, Haryana, Punjab and Western UP at least.

Friday, March 13, 2020

Some random thoughts of coronavirus

An old market proverb is that "markets stop panicking when the government begins to panic". However, the current market conditions appear defying this conventional wisdom. Instead, the panic shown by the government authorities in dealing with the threat posed by the novel coronavirus (COVID-19) has caused deeper panic in the financial markets.

From the statements made and actions taken by various state authorities across the world (including India) to check the spread of the coronavirus, I decipher the following:

(a) The coronavirus has spread to a large number of countries. Even though the mortality rate of patients suffering from the virus may not be high, the transmission is much faster, and it threatens large scale immobility or people and disruption of business. In that sense it is perhaps one of the most disruptive pandemic for the modern generation. The spread of bubonic plague in 19th century (though that had massively higher mortality rate) could be the only appropriate parallel to this.

To this extent, the panic reactions of the government may not be unwarranted or inappropriate. Though many may like to argue that complete ban on travel could have been avoided by comprehensive screening mechanism at the ports of departure as well as the port of entry.

(b) The indications from China is that the Chinese authorities are in full control and new cases of infection are negligible now. The businesses have started the process of normalization and in 4-6 weeks shipments could return to normal level.

Similar, indications have been received from South Korea, Hong Kong, Singapore, Vietnam, Taiwan, Thailand and Malaysia etc.

The number of cases in heavily populated South Asia (India, Bangladesh, and Indonesia) is also well within control.

Regardless of the alarm bells sounded by German Chancellor, WHO, and European Commissioner, the coronavirus may be declared under control latest by the end of April.

(c) The disruption is likely to have significant impact on shipping, travel and hospitality industries. The loss of business for them in this quarter may be permanent in the nature.

(d) So far there is little indication that the spread of coronavirus may have impacted the household income significantly. The impact on household consumption may not be material, or at least not permanent. At worst, we may see some deferment of the demand till the conditions normalize.

(e) As of this point in time, there is little indication that the disruption may cause any significant change in the business practices and procedures. Redefining necessary travel, work from home, virtual meetings, etc are some trends that may not be materially stimulated by the coronavirus. I expect these trends to follow their normal trajectory.

(f) The business disruptions caused by the coronavirus related developments, could prove to be fatal for many micro businesses as well as many large businesses. For example, a small eating joint may default on its debt repayment obligation and face closure. Similarly, many large businesses which are already stressed may breach the fault line and become defaulters. Financial sector will have to deal with this. The role of regulator would be critical in managing this situation. They must proactively allow the banks to assess which accounts to allow relaxation and to which not.

At this point in time, I see no reason to change my investment strategy as discussed couple of weeks of ago (see here). I shall continue to shift my debt and gold overweight to equities over next 3 weeks.