Protecting the economy
Both home minister Amit Shah and finance minister (FM) Nirmala Sitharaman, separately, detailed the nature of the economy’s recovery from the Covid-19 pandemic at the Hindustan Times Leadership Summit on Saturday. GDP for the September-quarter was higher than that in the corresponding quarter of 2019, and many high frequency indicators, and also mobility and business resumption indices are at pre-pandemic levels. Tax revenues too have recovered smartly. On Saturday, India crossed another important milestone — a little over 50% of the country’s adult population has now been fully vaccinated, and another 35% has received one shot of the vaccine.
If there is a touch of grey to all these silver linings, it is the emergence of Omicron, already identified in a handful of cases in India. The little we know about this variant points to higher transmissibility but milder symptoms. We have no information yet on the effectiveness of existing vaccines against this heavily mutated virus, although, even in a worst-case scenario, we are only likely to see a blunting of their efficacy, not complete ineffectiveness. The threat posed by the variant (acknowledged by the FM) could well stay the Reserve Bank of India (RBI)‘s hand in this week’s deliberations of its Monetary Policy Committee. In the absence of Omicron, the central bank is likely to have carried forward its liquidity-tightening efforts, perhaps even reducing the reverse repo rate, the interest rate that banks get when they park their surplus cash with RBI. That, and the reduction of fuel prices (both the Union government and many states have reduced levies), which is sure to reflect in headline inflation readings, may mean the easy money policy could continue, at least for another quarter.
But sustaining the current economic momentum isn’t just RBI’s responsibility. The Union government and state governments need to ensure that their response to Omicron — it is a given that more cases will emerge, maybe even outbreaks in some parts of the country — is measured, and protects both lives and livelihoods. To put it bluntly, they should not consider lockdowns, even partial ones. It is becoming clear that the response of many countries to Omicron is not sending all spare vaccines to Africa (which may prevent newer variants), but booster shots for their own population. That means there is a high likelihood of more variants — all the more reason why countries have to learn to live with the virus.