India’s poor response to the pandemic makes it less attractive, BlackRock says
  • China was hurt by pandemic but India is unlikely to benefit.
  • India’s poor response to the pandemic provides little incentive for investors
  • India’s economy is expected to outpace China’s larger one this year but slip behind again in 2021.

China paid a large economic price because of the lockdown forced by the deadly coronavirus, but don’t expect neighboring India to take advantage by drawing business and investors away quickly.

China’s economy probably contracted about 8% in the first three months of 2020, the International Monetary Fund said this month. It was the first year-over-year quarterly decline in gross domestic product since official record-keeping began in 1992 and likely the first since Mao Zedong’s death in 1976, the Wall Street Journal reported.

India, which overtook the U.K. and France last year to become the world’s fifth-largest economy, is expected to grow 1.9% in 2020, topping China’s estimated 1.2%, the IMF estimates. Facebook stunned the tech world this week with its $5.7 billion investment into Jio Platforms, India’s largest telecom operator, saying “India is in the midst of one of the most dynamic social and economic transformations the world has ever seen, driven by the rapid adoption of digital technologies.”

“This is especially important right now, because small businesses are the core of every economy and they need our support,” Facebook CEO Mark Zuckerberg wrote in a Facebook post. “India has more than 60 million small businesses and millions of people rely on them for jobs.”

However, Jayati Ghosh, an economist and professor at the Jawaharlal Nehru University in New Delhi, said India’s poor response to COVID-19 will hamper its overall growth.

“I think China is the country best placed to benefit,” she said. “You need testing to reopen, and we are at the very bottom.”

Indeed, the IMF expects China to once again outpace India in 2021, gaining 9.2% to India’s 7.4%.

India, which has reported 640 deaths among almost 20,000 confirmed COVID-19 cases, is behind many countries in conducting tests to determine the presence of the novel coronavirus. The country’s main medical research organization ordered a pause in testing because of concerns the equipment being used was faulty.

“India’s #COVID response has been disastrous,” Steve Hanke, professor of Applied Economics at Johns Hopkins University, tweeted on Wednesday. “It’s a #LockdownWithoutPlan that’s killing #India’s poorest. #MigrantsOnTheRoad are jobless, hungry, & dying on their way home.”

BlackRock, the world’s largest asset manager, also doesn’t see India gaining on China because of the larger economy’s stumble. The pandemic hit India as the country’s economy was slowing, giving investors fewer reasons to put their cash there, Neeraj Seth, head of Asian credit at BlackRock, told CNBC.

In fact, a March survey of 25 companies with operations in China showed little interest in shifting away from the country, according to business groups AmCham China and AmCham Shanghai. More than 70% had no plans to relocate production and supply chain operations or sourcing outside of China due to COVID-19, according to the organizations, which worked on the survey with PwC China.

Relocating operations is a “costly, time consuming, and largely irreversible process,” Alan Beebe, president of AmCham China, said in a statement. “It is worth emphasizing that China appears ahead of the global curve when it comes to restarting the economy following months of lockdown.”

Earlier this month, China ended its lockdown of Wuhan, the city of 11 million people where the coronavirus first emerged. And while the country’s reports of few to zero new cases of the virus have been questioned — President Trump earlier this month called them “a little on the light side” — the country’s business moves contrast sharply with India’s.

Ghosh told Karma, “We have a very powerful, failed state.”

Photo by Wang Zhou/Getty Images