Revival of Indian Economy

After hitting rock bottom this year, the Indian economy will definitely start its recovery in the next financial year (2021-22). However, how the recovery would take place is the biggest question. Many Speculators presume that it will be a U-shaped, W-shaped, V-shaped recovery. However, recently Samir Arora, a well-known hedge fund manager in Singapore who runs an India-dedicated fund, has invented a K-shaped recovery for India. Essentially this means that post-COVID-19, some segments of the economy may do very well (like technology, pharma and non-discretionary consumer goods) while many others (real estate, tourism hotels, airlines) will continue to languish for a longer period.

Now this is where it gets interesting, we are seeing that the stock market is constantly going up. So your question will be “Why is the stock market going up even though the latest economic statistics show the economy in shambles ?”. We might be seeing the letter ‘V’ forming on the stock markets in the NIFTY50’s Price chart, financial analysts believe this rise is unsustainable and an eventual correction is imminent.

As India moves closer to being the country with the largest number of Coronavirus Cases, industries that require minimum physical contact would recover quickly. On the other hand those which require personal contact could take years to resurge. For example The IT industry and online retail would grow, while malls, construction and most of the informal sector would struggle to get back to their original levels.

A K-shaped recovery will lead to a greater inequality of wealth and is something that we should collectively try to prevent. The government could, of course, change the alphabet of the recovery by a well-directed substantial stimulus that would generate the demand to get the sectors on the decline to recover.

The K-shaped recovery is therefore not the ideal option but we are heading towards it. Even in the stock markets of india we can see that the pharmaceuticals and technology sectors are booming ahead while the tourism, real estate, banking sectors are not doing so well.