DARK CLOUDS LOOM AGAIN

The Covid Omicron variant once again threatens to cripple most services sector businesses. How deeply the economy will be scarred depends on the level of the health crisis at hand

- M.G. ARUN

As the third wave of the pandemic sweeps across India, distress lines are already visible. Night and weekend curfews and other regulations to avoid crowding, along with travel restrictions, have already hit hotels, bars, restaurants, cinema halls and retail outlets hard. Automakers worry about another demand drought, retail businesses about restrictions on shop timings wiping out whatever uptick they saw in the festive season. Policymakers worry that supply disruptions could stoke inflation and further dampen consumer spending, hurting the economy and the job market. Harried investors resort to heavy selling in the stock markets, leading to frequent market crashes. On January 6, the benchmark Sensex of the BSE fell over 700 points on concerns over Omicron and the impending hardening of US interest rates. Many worry whether Covid-related uncertainties will create a situation like last year's when the Sensex fell over 1,000 points on 14 different occasions, wiping out lakhs of crores in investor wealth.

The first wave of the pandemic in early 2020 resulted in the Indian economy going into a recession for the first time in four decades, with growth contracting 23.9 per cent in the first quarter of 2020-21 and by 7.5 per cent in the second. The impact of the second wave in early 2021 wasn't as harsh, since restrictions happened mostly at the local level. How badly the economy is impacted this time depends to a large extent on the spread of the Omicron variant and how early it peaks. The initial signs are not too encouraging. Although cases of hospitalisation have been low so far, the rapid spread itself could make authorities resort to more stringent measures, hurting businesses further.