Thinkpad: The More Things Change...

Happy Sunday.

We can all be forgiven for thinking that we are in a time warp of sorts. Just as we rang in 2022, we find ourselves facing an iteration of 2020 or 2021.

The year has started with a surge in Covid cases. The anticipated third wave is here. Conventional wisdom, backed by data from countries like the U.K. and the U.S., suggests that while cases will soar, hospitalisation will be lower. We're no experts but those managing the surge seem to be working with that assumption.

Mumbai, where daily new cases are above 20,000, is not planning on a stricter lockdown, Iqbal Chahal, the commission of the Brihanmumbai Municipal Corporation, told Bloomberg. So far, restrictions have been placed on large gatherings, events and high-contact services.

If that is the extent to which activity is curbed, the economic impact may be more limited than in the previous two waves. The advance estimates for GDP for the current fiscal, released this week, peg real GDP growth at 9.2% and nominal growth at 17.6%.

The third wave could shave off up to 25 basis points from estimated growth, said HSBC's Pranjul Bhandari in this conversation. Nomura's Sonal Varma also sees a risk to inflation emerge from any additional supply disruptions. Behind the aggregate though, just recovering sectors like hospitality and travel, will have to brace for another slow quarter. Talk about a false start.

The more things change, the more they stay the same.

Some of that sentiment was visible in other ways this week.

A long stretched out insolvency of Videocon Industries had finally been closed last year, with a sale to an entity linked to Anil Agarwal's Vedanta Group. The recovery for lenders was abysmally low at just 4%. A few dissenting creditors had decided to challenge the proceedings of the Committee of Creditors. The Davids out-maneuvered the Goliaths and a rebid has been permitted by the National Company Law Appellate Tribunal. Four years and counting.

Incidentally, a recent report from the Reserve Bank of India had pointed out that banks recovered just Rs 27,311 crore from proceedings under the Insolvency and Bankruptcy Act in FY21. This was on par with the good old SARFAESI Act.

We repeat, the more things change...

Another story which refuses to end is the battle between Amazon and the Future Group. This week saw the Future Group move court to end arbitration proceedings with Amazon after the Competition Commission of India withdrew approval to the deal. By the end of the week, the Future Group won some relief after the Delhi High Court issued an interim stay on the ongoing arbitration proceedings.

Future Retail, meanwhile, has failed to make good on repayments due to lenders at the end of December. The clock is ticking before the account is marked down into the non-performing category.

Elsewhere, the annual business news event of the year—the Union Budget—which is much more than the statement of accounts that it should be, is around the corner.

This year, the conversation is all around the capex cycle and what could lead it.

The ingredients are in place, writes AM Naik in this piece. But with capacity utilisation still modest and private investment coming only in dribs and drabs, government spending will be important to nudge the cycle along, wrote Pallavi Nahata. Vinayak Chatterjee, in a conversation which you will find on BloombergQuint in the coming weeks, said the issue of funding is now been nearly resolved. The next question—what is the project pipeline this money will be spent on? Some big thinking is needed on the next generation of projects India wants to fund.

Keep track of BloombergQuint's budget coverage. We'll keep it sane.

Till next week.