Businesses prepared to take on Covid wave 3.0

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Rohit Vaid | 11 Jan, 2022
India Inc is ready to take on the third Covid wave with operational experience gained during the last two-years of pandemic.

Accordingly, the rising cases of Covid-19 as well as subsequent mobility curbs will have a ‘relatively mild' impact on India's economy in comparison to earlier waves.

On the other hand, the bounce back powered by the pent-up demand will be strong.

Lately, the covid resurgence have led to various curbs instituted by state governments such as reduced capacity of markets, night and weekend curfews to check the infection transmission rate.

However, the curbs seen till now are less disruptive than Covid 1.0 and 2.0 due to the mildness of the disease.

Besides, businesses have shown "a mature" response to deal with the current wave.

A smooth transition has been seen with offices shifting back to work-from-home mode, alongside uninterrupted supply chains.

Even market associations have imposed a "no mask no sale" policy.

Consequently, economy watchers believe the impact on the country's economic growth due to the current wave will be "mild".

"Even as the Indian economy has rebounded faster than expected post the second wave, the emergence of Omicron has added a fresh dose of uncertainty on Q4 as well as to the next year's outlook," said Dipti Deshpande, Principal Economist, Crisil.

"While the world is still learning about this variant's ability to dodge vaccines and cause severe disease, experience has shown that every successive Covid wave has had a weaker impact on the economy... Healthy vaccination coverage and learning to live with the virus have led to progressively less-stringent lockdowns."

Deshpande further cited that in the base case scenario, the impact of Omicron is unlikely to be very damaging on economic growth.

Suman Chowdhury, Chief Analytical Officer, Acuite Ratings and Research, said: "We believe that the economic impact of the third wave will be relatively lower as compared to the previous surges going by the current data on hospitalisation and mortalities which will hopefully translate into lesser risk of large scale and prolonged lockdowns.

"For the whole of FY22, we hold on to our growth estimate of 10 per cent with moderate downside risks."

As per average industry estimates, GDP growth in Q4FY22 is expected to come in at 5.5-5.8 per cent year-on-year (YoY).

Earlier, estimates had pegged the growth at over 6 per cent.

"The current wave will induce a slowdown in economic activity. This will inturn impact the Q4FY22 growth. However, less disruptive restrictions as well as past experience to deal with these type of surges will provide a faster turnaround opportunity for the economy," said Sunil Kumar Sinha, Principal Economist, India Ratings.

"Nevertheless, both fiscal and monetary policy support will be required at least for the foreseeable future."

Furthermore, the healthy rate of vaccinations coupled with administering of a ‘precautionary dose' for frontline workers and senior citizens should blunt any further impact.

"While the Omicron-led uncertainty adds risk to Q4FY22 growth, we note the impact would likely be mild giving limited restrictions and high vaccination rates," said Madhavi Arora, Lead Economist, Emkay Global.

"However, the situation is still evolving and needs a watch."

In addition, Aditi Nayar, Chief Economist, ICRA said: "Our early analysis suggests that the impact of an Omicron wave may be limited to one quarter in terms of the duration of the surge in fresh cases, as well as the economic impact given the better preparedness of governments, the health care system and households. However, there continues to be a lot of uncertainty around this.

"The impact on GDP growth will depend on the extent to which restrictions need to be extended across states in the coming weeks. As of now, we see a modest downside to our forecast of FY2022 GDP expansion of 9 per cent."