While investors seem overall to be feeling positive about the coronavirus pandemic, their optimism begins and ends with the developed world, mostly North America and Europe, and some part of East Asia. However, Covid-19 is far from gone and at present the pandemic is the most intense in India, which has had some unforeseen consequences for the financial markets.
Since the official start of the global coronavirus pandemic, India has had a total of 21.5 million cases of the novel virus. The country experienced a lull as infections went down in January and February (coincidentally, some of the worst periods for the United States and Europe), but in March they began rising again.
In April they surpassed all global daily records; India has now seen several days with over 400,000 Covid-19 infections, including yesterday and the day before. These numbers are extremely worrisome and might indicate that the peak of the outbreak in India has not been reached yet.
The country is experiencing a heavy healthcare crisis at the moment. There are devastating shortages in the number of hospital meds, the amount of medication available, and even necessities like oxygen for patients with low O2 levels. The government has resorted to opening makeshift facilities to contain patients with Covid-19, but the lack of enough medical personnel and medication is costing the country thousands of lives that perhaps could have been saved with better access to proper healthcare.
India, who is the world’s largest vaccine manufacturer, has also been attempting to ramp up its inoculation campaign in order to protect whoever has not been infected with Covid-19 yet. However, as other countries (most notably the EU) have proven, vaccinations are a slow, arduous process, and even when administered, vaccines take weeks to build the required immunity.
The Covid-19 crisis in India obviously has a negative effect on the domestic markets. The Indian rupee has weakened, especially as the Reserve Bank of India has sought to loosen its monetary policy to allow better access to loans for hospitals and businesses. Moreover, the country’s GDP forecast for 2021 was revised downward.
But the situation in India has an international impact as well. For example, the country’s decision to halt exports of vaccines manufactured there in order to cater to its own population first will likely translate into a slowdown in the distribution of vaccines to third-world and low-income countries under the Covax program.
In addition, the outbreak in India has also hurt the global demand for oil and gold. Oil has strengthened slightly this week due to lower supply in the United States, but a continued drop in demand will likely prevent oil prices from appreciating beyond $70.
