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 9.0%.
With the recent surge in Covid-19 cases and widening of restrictions leading to heightened uncertainty, it is increasingly unlikely that the MPC and RBI will commence with policy normalisation in February 2022 itself, unless inflation provides an acutely negative surprise. However, the likelihood of the latter is muted at this point.”
The author of this article is Ms. Aditi Nayar, Chief Economist, ICRA Limited.
The views and opinions expressed are not of IIFL Securities, indiainfoline.com
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