Omicron spread, stricter curbs may hit growth by 0.3% in Q4

Tribune News Service

New Delhi, January 4

The growth in the last quarter of the current fiscal (January to March 2022) might be impacted by up to 0.30 per cent because normal economic activities will be hindered by state-level restrictions in the wake of rising Omicron cases, said economists at HDFC Bank, the country’s largest private sector lender.

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The guarded outlook by HDFC economists tallies with the Reserve Bank of India’s latest Financial Stability Report (FSR) which had noted that global economic recovery had started losing momentum in the second half of 2021-22 itself (October 2021 to March 2022) in the face of resurfacing Covid infections, the new variant Omicron, supply disruptions and bottlenecks, elevated inflationary levels, and shifts in monetary policy stances in advanced and emerging market economies.

“With states imposing Covid-related restrictions (night curfew on movement of people, restaurants allowed at 50% capacity, offices to operate at 50 per cent capacity in various states), economic activity is likely to get impacted in Q4 of fiscal 2022,” they said.

The downside risks are both from states imposing restrictions which might go into January 2022 as well as the slowdown in global recovery, pointed out by the RBI, which will weigh on the exports.

The RBI might also desist from hiking interest rates as growth gets impacted. The RBI may continue with its focus on liquidity normalisation and capping yields, said the HDFC report while pointing out that Omicron cases are spreading at a faster pace in India and about 60 per cent of the overall infections are reported to be that of the new variant.