Is Omicron a threat to the reviving economy?

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India has already faced two ruinous waves of Covid-19. As per data, 4.68 lakh people in India lost their lives due to Covid-19.  

The livelihoods of a lot of people were affected, the work culture of the people changed. We were just seeing an improvement and now Omicron has emerged.   

Indian equities, as well as global equities, bounced back from record lows to post robust returns.   

The Swiss brokerage UBS Securities suggested that India will remain among the fastest-growing emerging markets till FY23.  

The economic activities slowed down due to the Covid-19 pandemic. Now it is normalizing as the transportation restrictions are gradually removed.   

There is a downside to this perspective. The fact that currently, available vaccines can provide a little protection or no protection at all against the new variant is a peril.    

When new variants arrive, the governments are forced to bring back mobility restrictions. It will adversely affect the demand for goods and services and affect the recovery.  

They will model what might happen if a mutant virus creates the hospitalization and death scenarios that happened earlier. When more people are infected, the number of people in hospitals will increase as the majority of the population are not fully vaccinated.  

Then we could expect vaccines for the new variant by late FY23. Bur that would slow down recovery.  

Swollen valuations and increasing inflationary pressures have already forced many brokerages to downgrade emerging markets like India.  

Also, if the new variant creates a wave, Federal Reserve will be going with very low-interest rates and the hike which was foreseen will not happen.  

The travel and tourism sector has begun to face the blow after the discovery of the new variant. The aviation, restaurant and related sectors are also facing a blow due to this.   

If Omicron goes out of control, other sectors including industry, services, etc. Will be adversely affected.  

The upcoming elections will be a concern for the governments. They will have to prevent the increase in the price of essential commodities, avoid further covid deaths and prevent joblessness.  

On the other side, pharma companies are in their pursuit to find protection against new variants. 

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