Omicron Scare: Impact Of New Variant To Be Less Severe On India’s Economy, Says FinMin Report

Preliminary evidence suggests that the Omicron variant is expected to be less severe and more so with increasing pace of vaccination in India, according to the finance ministry

New Delhi: As the Omicron variant of the deadly Covid-19 virus has raised concerns globally, the latest study pointed out that India will be among only a few economies in the world to rebound strongly from Covid-induced economic contraction of 2020-21.

The finance ministry report assuaged concerns saying that the Omicron variant's impact on the Indian economy will be less severe due to rapid vaccination, according to the news agency PTI.

What are key findings of the report?

Real GDP in Q2 of FY2021-22 has grown by 8.4 per cent year-on-year, recovering more than 100 per cent of the pre-pandemic output in the corresponding quarter of FY2019-20, said the monthly Economic Review prepared by the finance ministry.

"India is among the few countries that have recorded four consecutive quarters of growth amid Covid-19 (Q3, Q4 of FY21 and Q1, Q2 of FY22) reflecting the resilience of the Indian economy. The recovery was driven by a revival in services, full-recovery in manufacturing and sustained growth in agriculture sectors," it said.

The recovery also hinted at restart of the investment cycles supported by rising vaccination coverage and efficient economic management activating the macro and micro drivers of growth, according to the report.

Economic recovery is expected to gain further strength in the remaining quarters of the financial year, as evident from 19 among 22 High Frequency Indicators (HFIs) in September, October and November of 2021 crossing their pre-pandemic levels in the corresponding months of 2019, it said.

"Yet, Omicron, a new variant of Covid-19 may pose a fresh risk to the ongoing global recovery. However, preliminary evidence suggests that the Omicron variant is expected to be less severe and more so with increasing pace of vaccination in India," the finance ministry said.

Observing that the Covid-19 pandemic has led to considerable human and economic costs setting countries back on their developmental goals, the latest review said, 2021 is thus a "catch-up" year for the global economy, including India, trying to recover the pre-pandemic output level of 2019.