Omicron's economic impact on 2022-23 Union Budget

Lata Moni Das

(latadas2020@gmail.com)

The new variant is causing havoc all over the world, which is affecting people's sentiments towards the country's emerging economy. According to a recent OECD (organisation of economic corporation and development) statement, the chief economist Lawrence Boone is fearful of disrupting the overall supply system and he also said that if this variant occurs, significant inflation is expected. In India too the new variant has raised a lot of uncertainties among us. Every Indian wonders, will this outbreak impact the double-digit growth for the Indian economy this year? This uncertainty seems to put stock market participants in an uncomfortable position. One of the most pandemic affected sectors by Covid has been 'tourism', December being the peak season; the cancellation is noticed not from outbound even from inbound travellers. Companies are expecting their employees to travel outside the city or country when it is only necessary.

Though there is not much prediction, the statement, in the monthly economic report announced from the Finance Ministry in November assured the economy to be less impacted with the excessive speed of vaccinations in addition to strong external demand and policy support by RBI that give the nation lot of hope for the upcoming Union budget which is going to be tabled on 1st February 2022. 50% of eligible Indians are fully vaccinated while 86% population have taken the first dose. By announcing vaccination for 15-18 years old and the precautionary vaccinations for citizens over 60 with co-morbidities and health care workers is strengthening public confidence amidst uncertainties caused by Omicron. The next plan should be for kids over 5 years and old. Now question is that are we be able to assure that the Indian economy could be less impacted? India's eyes are on the upcoming budget, the biggest economic event, especially when elections are happening in 5 states amidst everyday Omicron outbreaks. The top world credit rating agencies have been doing various forecasts about the Indian economy. For example, Moody's forecasted a growth of 9.3% in the current fiscal year and another 7.9% in the following financial year. Also, Fitch has projected a growth of 8.7%in the current fiscal, which ends March 2022, and 10% growth in the next fiscal. Similarly, S & P global ratings also forecasted a growth of 9.5% for the current fiscal and 7.8% for the next fiscal year. The Indian economy is gradually rebounding due to the return of consumers' confidence in the market, which was boosted by successful vaccination. The collection of revenue in November under GST was 25% higher than the same month in the last year and 27% higher than the year 2019-20. As we look at all the above projections and the growth of the economy, it makes us more optimistic about the upcoming Union budget however can't deny the recent reports of Omicron cases in many states that have caused panic among masses that threatens India's recovering economy.

The government's continuous effort to boost consumption by keeping the interest rate low is paying off. With further reduction in excise duty on petrol and double reduction in excise duty on diesel is a relief to the farmers for their winter crops and thus the inflation rate seems to be at a low rate. Despite the omicron threat, we can see a rise in demand in the manufacturing industry, improving market condition which leads to a rise in employment. IHS Markit said in one of their recent reports that manufacturers' confidence was boosted by the projection that the market would improve. The working from the home culture in corporate India has enabled smooth business operation and infect a recent study has shown that workers are highly productive when they work from home. Various companies like Apple, Google, Facebook have experienced a rise in the share price when their workers are working from home. The Infrastructure is going to be a key area in the upcoming union budget, resulting in greater job creation and business growth that is needed to relieve people from the feelings of job insecurity caused by Omicron. 'PM Gati Shakti Yojna' is also a major booster to our national infrastructure to compete internationally and will provide thousands of work among youths in coming days which will ease young people's concern amid the turmoil of the third wave, thus supporting the economy. Amidst this pandemic, the Government is reaching its budgeted disinvestment target and the decision of Air India will add energy to the aviation sector. The biggest disinvestment from LIC is also expected in the January-March quarter of 2022. During a recent pre-budget interaction with top industrialists, PM assured to focus more to invest on industry and hopeful to see India's industry among the top five of the world in every sector. The Government is taking all proactive measures to shield the economy from any global crisis.

In the wake of Omicron, the nation is thrown into uncertainty, amidst this can we expect the Union budget that brings relief, recovery and reforms? In contrast to the second wave, the third wave is expected to be milder and government officials are aware of the need to take measures to prepare for it. Though Mini lockdown in the capital and night curfew imposed by many other states has created a fear to face unemployment and economic disruption. With the steady rate of vaccination and better monetary and fiscal policies, the economy would remain resilient. India's economic advisory council predicts growth of 7% to 7.5% in 2022-23. As Finance Minister promised that her upcoming budget will be unique, it will put fiscal concerns aside and allow record spending to boost demand and create jobs. Let's hope 'Pradhan Mantri Gareeb Kalyan Yojana, which has empowered underprivileged people and 'Atmanirbhar Bharat Rozgar Yojana, which has generated new jobs and resorted lost jobs, will continue after March 2022. As the economy is strained, due to the rise of omicron, there are some expectations from the budget, such as a focus on health care making it more accessible and affordable, an increase in states spending, which will surely lift the economy, creating jobs for both skilled and unskilled workers, strengthening the ability of banks to lend. FM is advised by economists ahead of announcing the budget to avoid sharp fiscal correction and work towards consistency and stability in tax and further advised to aim in public investments in infrastructure.

Each segment of the population and the economy has its expectations from Budget 2022-23. For the first-time central bank is also forced to tighten the monetary policy. Due to its international backdrop, it is expected to be different from any other in decades. Despite many challenges, only on 1st February 2022 country will have a lasting answer whether India will full fill the expectation of the IMF and World Bank to become the fastest economy in the world or not?