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Thinkpad: On The Brink

Thinkpad: The economy is on the brink of a recession; the telecom sector pulled back from the brink after legal relief.

A cliff edge in East Sussex, U.K. (Photographer: Graham Barclay/Bloomberg News)
A cliff edge in East Sussex, U.K. (Photographer: Graham Barclay/Bloomberg News)

Happy Sunday.

Not a particularly cheery thought to start a weekend note on, but India is on the brink of a recession.

The country’s gross domestic product contracted 24% in the first quarter. Most economists are predicting that positive growth will only return by the fourth quarter. For the full financial year, estimates range from a contraction of 8-11%.

If seen in absolute terms, the loss of GDP is estimated at about Rs 20-22 lakh crore. Who bears that loss? Credit Suisse Neelkanth Mishra and team tried to estimate that in a study summarised here.

Lately, every economic statistic stumbles into controversy and this one was no different. A fairly pointless debate erupted on whether the decline seen by India was the worst across the world. Quarterly, annual, annualised statistics were all thrown about liberally. Soon the seriousness of the loss of economic output was lost in the frivolity of comparisons.

Eventually, the debate was put to rest when IMF Chief Economist Gita Gopinath put out comparable statistics. India did see the worst decline after we imposed the strictest lockdown. Did we get our strategy wrong?

Despite that stark GDP decline, there was no clear hint that the government will step up fiscal support. And the support that the great Indian consumer has provided to the economy over the past few years is now shaky. How quickly and how far will it rebound? Till then, it’s up to the Reserve Bank of India and the Monetary Policy Committee, which could maybe take a pointer or two from overseas, writes Raghav Bahl.

If the economy is on the brink, the telecom sector pulled back from the brink after the Supreme Court allowed adjusted gross revenue dues to be paid over a 10-year period. The verdict was seen as more favourable for Bharti Airtel Ltd. than Vodafone Idea Ltd. You can read that analysis here.

Vodafone Idea, which has flirted with the idea of bankruptcy as the uncertainty raged, said that option was no longer on the table. By the end of the week, it had announced its plan to raise Rs 25,000 crore in an attempt at a turnaround.

Will this be the end of the troubles of the telecom sector? Maybe, just for now.

It’s not all glum out there.

There are businesses and sectors that are doing well. And there are some amazing tales of resilience. We want to flag off two such stories.

Digital transactions have surged since the start of the Covid-19 crisis. But how much of India’s private consumption spending is happening digitally? BQ analysed the data and found that nearly a quarter of private consumption spending took place digitally in the April-June quarter. That’s good news. You can read that analysis here.

From across borders, emerged a poignant story of resilience. A strange phenomenon was noticed near Amazon.com Inc. delivery stations: smartphones dangling from trees. Why? Read here: Amazon Drivers Are Hanging Smartphones in Trees to Get More Work.

Finally, if you are a movie lover you have one more reason to crib about Covid. A staggered release of Christopher Nolan’s Tenet is underway in theaters across some cities in the United States and globally. Probably no chance of a theatre release here in India.

Ah well, you can cheer yourself up with this thread about a truck of rice that broke Twitter this week. It’s a riot!

Till next week.