Omicron Restrictions May Shave Off Up To 150 Bps From FY22 GDP Growth

Omicron-induced lockdowns, among other factors such as an increase in raw material prices, may pull down growth in gross domestic product (GDP) by up to 150 basis points (bps) for this fiscal year, according to economists.

- Indivjal Dhasmana

Meanwhile, the government will release the first advance estimates of GDP for FY22 on Friday. It is to be seen whether it takes the Omicron effect into consideration.

Advance estimates are released to provide the numbers to the finance ministry to work on the Budget for the next year.

The curbs will affect economic activities mainly during the fourth quarter of the year.

Govinda Rao, former director at the National Institute of Public Finance and Policy (NIPFP) and now chief economic advisor at Brickwork Ratings, said an apparent third wave, rising international crude oil prices, steadily increasing costs of raw materials and freight rates, disruption in semiconductor supplies, and coal and power supply issues were likely to slow the growth momentum.

We revise our GDP estimates for the current fiscal year to 8.5-9 percent as against our earlier estimate of 10 percent, Rao said.

Others have revised down GDP growth by lesser percentage points.

India Ratings said concerns relating to Covid-19 and its impact on the ongoing economic recovery had resurfaced in view of the spread of Omicron.

It added curbs in various forms such as reducing the capacity of market/market complexes and night/weekend curfews to check human mobility/contact had started in several states, affecting economic activities.

This will have an adverse impact on Q4 of FY22 GDP, India Ratings Chief Economist Devendra Pant said.