Omicron to hit Q4 GDP by 0.40 pc, dent FY22 growth by 0.1 pc: Report

Indications so far suggest that the infections are milder and mostly not life-threatening, the rating agency said, adding that the curbs imposed by local governments will be less disruptive than those during the first two waves of COVID.

Both government and businesses are more equipped to deal with the situation and be more resilient, it said, expecting the impact of COVID 3.0 to be lower than COVID 1.0 and 2.0.
Both government and businesses are more equipped to deal with the situation and be more resilient, it said, expecting the impact of COVID 3.0 to be lower than COVID 1.0 and 2.0.

The Omicron variant spread will impact the January-March quarter GDP by 0.40 per cent and shave off 0.10 per cent from the FY22 growth, as many states resort to restrictions to limit infections, a domestic rating agency said on Thursday.

“Curbs in various forms such as reducing the capacity of market/market complexes and night/weekend curfews to check human mobility/contact have already started in several states, which are impacting economic activities,” India Ratings and Research said in a note.

The surge in cases seen over the last fortnight will have an adverse impact on the fourth-quarter GDP and the growth will come at 5.7 per cent during the quarter, which is 0.40 per cent lower than the earlier estimate of 6.1 per cent. For the entire FY22, the GDP is expected to clock a growth rate of 9.3 per cent, 0.10 per cent lower than what was estimated earlier.

The revision in estimates comes amid a massive surge in COVID infections across the country, especially in the metro. A majority of the new cases are suspected to be that of the Omicron variant of the coronavirus, which is suspected to be spreading fast and also evades prior vaccinations.

Indications so far suggest that the infections are milder and mostly not life-threatening, the rating agency said, adding that the curbs imposed by local governments will be less disruptive than those during the first two waves of COVID.

Both government and businesses are more equipped to deal with the situation and be more resilient, it said, expecting the impact of COVID 3.0 to be lower than COVID 1.0 and 2.0.

The economy will bounce back pretty quickly once the third wave subsides, as per the report.
Policy support – both monetary and fiscal – would be “critical” till the threat of pandemic continues and the economy reaches the stage of a sustained growth trajectory, it added.

Despite the ongoing recovery, select high-frequency indicators, such as the Index of Industrial Production, are showing that the industrial output levels are still lower than pre-COVID-19 levels, it stressed.

The rating agency said it expects the Reserve Bank of India to continue with its accommodative policy stance with no change in the policy rate in the “foreseeable future” and the Centre will not be in a hurry to get back to the fiscal consolidation path.

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