What exactly is this B.1.1.529 virus and is it likely to hit India’s economic growth?

The B.1.1.529 virus or the Omnicron virus has its origins in the Southern part of Africa. One of the concerns about this virus is that it is a mutated version; which adapts quickly to the conditions. This does not stimulate the immune system fast enough to build solid defences. Of course, we need to await the final word from WHO on this subject.

The point to note is how the various responses pour in. For example, the UK has already banned flights and travel from 6 African nations. Other European countries as well as developed markets like Singapore, Hong Kong and Israel have laid down stringent norms for inbound travel from affected regions. No country will take any chances and restrictions resulted in a sharp fall in equity markets and also led to a 13% crash in crude oil prices.

The lag effect of COVID 1 and 2 have been bad enough. left the world economy with huge supply side constraints on metals, alloys and semiconductors. The restrictions will hit the flow of trade and worsen supply constraints. Also, it is likely to have an impact on demand. The impact on growth would largely depend on how the virus threat is handled.

The overall may be less this around as the experience stack is there. One immediate outcome would be to tighten the transport and travel flows before it becomes a full-fledged pandemic. Most of the adult population is dual vaccinated and would have built anti-bodies. Even for India, the sooner they take up isolation and restrictions and map contact trail, the better it is. At 6.9% fiscal deficit, India really does not have much of fiscal room left.