Why has the Sensex been growing since March, even though most of the manufacturing industries have been placed on lockdown over three months, migrant labourers have returned to their home and unemployed, the country's economy has been down for the past four-five quarters and consumption, as well as purchasing power, is at its lowest? Is there any explanation?
- Ravi Kumar
Yes, one explanation is that markets are currently crazy. The other explanation is that markets discount the future and people in the market may think that this is going to be temporary, most businesses will get out of it after two-three bad quarters and only a small part of businesses will be impaired or hurt in a fairly permanent way.
With migrant labourers having gone back to their villages, their cost of living is lower there as they simply don't have to pay the rent, they do not have to worry about day-to-day expenses and have the support system they need. They don't even have to pay for the shelter, they have a community there and the cost of food, which could be the only requirement, is substantially lower. Everything that you have mentioned has impacted the purchasing power and consumption on which, our economy heavily depends.
So, in that sense, the market going up is basically a bet that we will be back to normal and a good part of the economy will take time, but we'll get back to normalcy. That is the explanation and that explanation may be wrong, which means there is a possibility that this can linger for a long period of time. There could be reasonably a permanent shift in migrant labour. Some people may just think - was going to a city worth the reason, was it justifiable, should they come back?
Answers to these are all in the realms of the future, which is always uncertain. But I agree with you and the reason why markets are upbeat is that they are optimistic and that they think that things will be back to normal.
