Middle-class consumers are shifting towards buying need-based goods and services
Omicron rapidly rising in India has triggered fears of a third wave. It will highly impact on the agricultural, industrial, services sectors, the tourism industry and the balance of payments position. The policy makers are trying to maintain the forecast of 9 per cent of GDP growth in FY2022, with a clear K-shaped divergence amongst the formal and informal parts of the economy. Rising consumption will push capacity utilisation above the crucial threshold of 75 per cent by the end of 2022, which should then trigger a broad-based pick-up in private sector investment activity in 2023. The government of India will very soon circulate the revised e-commerce policy for raising the online trading pattern while maintaining the swoosh economy shape of recovery through its flagship PPP economic model. The Q3 FY 2022 data does not provide convincing evidence of sustainable growth for current the monetary policy in India and I expect the Indian monetary policy to change in the upcoming budget in February 2022 in order to control the direction of economic recovery amid the Omicron situation. The Government is also planning to make a roadmap for energy transition in India. The policy makers are intent on maintaining net-zero emissions by 2070. The oil and gas sectors are vital players for achieving the set target. Today, if we look at the global energy systems, it is still largely dominated by fossil fuels, with well-established conventional technologies. Coal, crude oil, and natural gas account for about 84 per cent of primary energy, with about 12 per cent from renewable energy and four per cent from nuclear power. The energy transition is essentially matching end-use applications with renewable resources using appropriate energy technologies in a cost-effective system, to bring the share of renewable energy to more than 90 per cent. Reports say that Indian oil, GAIL and BPCL have also started the process to set up green hydrogen production facilities. The run-up to the renewable energy policy is marred by the rapid surge in Omicron cases and it has already led to economic disruptions across many countries in the world. Cases are also rising in India and will badly impact the Indian economic recovery. The Government must focus on its development policy for working towards an economic revival despite Omicron. The new variant of Covid-19 has set a new barometer of uncertainty for the Indian economy aimed at disrupting the speed of economic revival. Recently, the economic revival through foreign portfolio investors increased the pace of selling in the secondary equity market of India. As per NSDL, net sellers of equities were worth $4.5 billion. This is the highest figure since March 2020. The economy endured to forge ahead in India, emerging out of the shackles of pandemic,but the rise of Omicron has emerged as the biggest risk factor especially in the automobile sector as an oligopolistic market player. The middle-class consumers are shifting towards buying needs-based goods and services (NBGS) for their defensiblelifestyle during the times of viral uncertainty. However, it is too early to quantify the risk Omicron poses for Q3 FY2022. The recovery rate needs to wait for the data of Q4 FY2022 for understanding the economic shape of the country. The policy makers need to create awareness about the risks and Covid-appropriate behaviour. There is a need for extreme caution till more is known about the virus and the impact on the economy.
(The writer is Dean of Economics, Chitkara University, Punjab. The views expressed are personal.)
