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When India Is Set For Economic Growth, Will Omicron Threaten Recovery?

Nirmala Sitaraman, Union Finance Minister has made infrastructure spending a priority. During the session, Sitharaman will present the central government's plan on expenditure and revenue goals.

Photo Credit : PTI

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The new COVID-19 variant named omicron that was first detected in South Africa is presenting a hurdle in making the road to global economic recovery difficult. 

Recently, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva told Reuters that global economic growth projections from the International Monetary Fund will likely be downgraded due to the emergence of the Omicron. 

Amid the ongoing Coronavirus pandemic, the South Asian nations are on a path of recovery to post the fastest growth among major economies as most sectors, including services and exports witnessing momentum. 

According to GlobalData, a leading data and analytics company, with receding COVID-19 cases along with strong external demand and conducive market conditions, India’s real gross domestic product (GDP) is expected to grow by 9.24 per cent in 2021 and by 8.4 per cent in 2022. The figures are highest among all other major economies across Asia. 

"The impact of Omicron on the Indian economy will depend on the degree of the number of cases and any consequent pressure is on the medical infrastructure, and localized restrictions," said Senior Economist at Kotak Institutional Equities, Suvodeep Rakshit, while talking about the negative effect of Omicron variant on the Indian economy. 

Rakshit also said that it is too early to understand the impact on the economy. In fact, the details on the nature of the virus are also not well understood.

India slackened its financial and monetary policy to influence through the pandemic-incited droop and has pledged to keep it like that to support growth and development.

Ahead of the budget session in February 2022, Nirmala Sitaraman, Union Finance Minister has made infrastructure spending a priority. During the session, Sitharaman will present the central government's plan on expenditure and revenue goals.

Apart from that, the steady pace of vaccinations and a decrease in COVID-19 cases, has fed a pick up in economic activity. From the country's prevailing services sector to manufacturing and from robust exports to rising tax collections, most high-recurrence indicators are giving indications of growth.

"Given the degree of vaccination, it is not apparent if restrictions need to be as severe as in the first couple of waves. The government has a good idea in terms of handling further waves and the measures that need to be put in place," said Rakshit. 

The Reserve Bank of India (RBI) is likely to leave its record low-interest rates unchanged, amid the monetary policy meeting next week. The low loan rate system is relied upon to drive development in any event, when policymakers downsize the support extended out during the COVID-19 pandemic.

"In case there is any economic impact and depending on its extent further well-targeted measures will remain an option," Rakshit added. 

Meanwhile, amid the scare of the ongoing Omicron variant, the third wave of COVID-19 could hit the peak by February with cases likely to be reaching up to 1-1.5 lakh a day in India. However, the wave is expected to be milder than the second, Manindra Agarwal, IIT scientist involved in the mathematical projection of the trajectory of COVID-19 told PTI. 


Tags assigned to this article:
economy economic recovery india COVID-19 Omicron