Stock markets on a high despite growing poverty and hunger: Here it’s Jo ‘Jeeta Wohi Sikandar’

Even in US and UK, people in cars are lining up for free food. 40 million Indians have slipped into extreme poverty. Four million small businesses have shut down in US during 2020

Cars lined up waiting for their turn at a food bank in the US (Photo courtesy: Twitter)
Cars lined up waiting for their turn at a food bank in the US (Photo courtesy: Twitter)

V Venkateswara Rao

More than 820 million people around the world do not have enough to eat. In India, 14.8% of the population is undernourished. While millions and millions of people across the world are relying on food banks or free rations distributed by the governments/NGOs to feed their families, amazingly the stock markets are at all-time highs.

Food banks across the ‘Land of plenty’, the US are experiencing an enormous surge in demand from people looking to feed their families, many of whom are experiencing such economic hardship for the first time. Some videos have shown scenes of thousands of cars “stretching as far as the eye can see” in line to receive free food from a local food bank in Dallas, Texas state. Similarly, Miami had a “massive food bank line stretched for two miles.” You can see the same thing in big cities like New York and Los Angles, to quieter towns like Erie, Pennsylvania, and across the world. In the small town of Dorset in southwestern England, food banks have handed out an astonishing 1.2 million meals over the past few months.

Multiple studies have been warning that the pandemic-induced economic crisis would have a cataclysmic impact on the poor globally and be particularly severe in India - home to the maximum number of poor. 40 million Indians are estimated to have slippped into extreme poverty due to the pandemic. A few months back, the Global Hunger Index 2020 report ranked India at 94 (out of 107 it mapped for the 2020 report). The report says: "In India, like in many other countries, the pandemic is aggravating an already serious hunger situation."

“Post the pandemic and the lockdown, the biggest impact has been due to a lack of food reaching families, communities,” said Sumitra Mishra, executive director, Mobile Creches. “In addition, the meals that children and pregnant women were getting at the anganwadis are no longer available.”

As per press reports, the ‘Hunger watch’ survey carried out by Anna Suraksha Adhikar Abhiyan (ASAA), Gujarat to track the hunger situation amongst vulnerable and marginalised communities amid the of Covid-19 pandemic revealed that 20.6 per cent households sometimes skipped meals due to lack of food, while 21.8 per cent said they sometimes slept without a single meal.

The survey was conducted in September and October to unravel the impact of the lockdown and pandemic on people’s food security and nutrition across households in nine districts including Ahmedabad, Anand, Bharuch, Bhavnagar, Dahod, Morbi, Narmada, Panchmahals and Vadodara. It revealed that households have reduced consumption of essential food items too.

The consequence of pandemic on the economy was not limited to drop in GDP, employment and household incomes. It reshaped the economy where big is beautiful and small is vulnerable. Small businesses are being devastated by the pandemic, with the mom-and-pops, restaurants, travel agencies and similar establishments going out of business at a rapid rate. Big Tech and conglomerate are raking in big money, while many other companies, including small businesses, suffer.

The big and strongest companies in every sector are reinventing themselves through new-normal operating models and are also capitalizing on the malleable moment to usher in agile processes, nimbler ways of working, manpower rationalization, cost cutting, increased speed and productivity. While big businesses are boosting their profits, small businesses with no such wherewithal are decaying.

Many small businesses the United States have lost out this year. About 4 million U.S. small businesses closed in 2020, according to Oxford Information Technology, driven mainly by restaurants, gyms, hair salons and other small companies. The situation is no different in India. But the disappearance of small businesses in India is not garnering notice simply because data isn’t there. Amazon and Flipkart are gaining major market share at the expense of mom-and-pops. Many restaurants and gyms are closing down because people are scared to dine out or exercise in gyms.

Even after the lifting of lockdowns, small businesses in India have not recovered enough. According to officials of the Gujarat Chamber of Commerce and Industry (GCCI), despite the green shoots in the Indian economy, a number of small enterprises in Gujarat were still facing liquidity issues and are finding it difficult to repay loans.

With small businesses unable to reopen or find traction after Covid-19 lockdown in Gujarat, the Non-Performing Assets (NPAs) under the Pradhan Mantri MUDRA Yojana (PMMY) have risen to over Rs 587 crore at the end of September 2020, a 33 percent increase over the same month of last year, as per the latest report of State Level Bankers’ Committee (SLBC).

Stock markets are euphoric of the pandemic induced changes in the economies and businesses. In USA, the S&P 500-stock index, the most widely watched gauge, is finishing the year up more than 16 percent. The Dow Jones industrial average and the tech-heavy Nasdaq gained 7.25 percent and 43.6 percent, respectively. The Dow and S&P 500 finished at record levels despite the public health and economic crises. In India, Sensex and Nifty are up 15% in 2020.

Gary Cohn, a former Goldman Sachs executive and top economic adviser to Trump, warned that part of the stock market’s gains were prompted by large corporations benefiting from the demise of small businesses. The market’s gains have been driven largely by a handful of superstar stocks; a scenario eerily reminiscent of the dot-com era. Three of the biggest tech giants - Apple, Amazon and Microsoft -accounted for more than half of the S&P 500′s return this year. In India, conglomerate Reliance Industries was a major contributor towards the gains of benchmark indices.

Stock markets don't have any time to care about the growing hunger, unemployment, pain of small businesses or GDP contraction. They are piggybacking on the growing influence and growing profits of Big Tech and Big Conglomerates, to push the benchmark indices to record highs, of course with the help of generous liquidity created by the stimulus packages.

The success mantra of stock markets is "Jo Jeeta Wohi Sikandar".

(V Venkateswara Rao is an alumnus of IIM, Ahmedabad and a retired corporate professional.)

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