Just when the markets were skyrocketing, economy was gaining momentum, and money trickling in, reports of Omxicron –the newest strain of the coronavirus appeared.
Does this feel like the beginning of the third-wave of COVID-19?
This time around, the government is alert and has taken pre-emptive steps like barring international travel to 14 countries including the UK, South Africa, some parts of Europe, etc.
Pfizer, BioNTech, Moderna, Johnson & Johnson, and AstraZeneca have begun studying the virus to protect against the strain. Proactive steps now will help us fight the virus better.
In the meantime, rapid growth in several sectors since the easing of lockdown has left the markets buoyant and businesses optimistic about recovery in the final quarter of this calendar year.
Data shows this quarter will be the highest since the second quarter of CY2014. The construction sector is optimistic about its selling price, inventory, and hiring.
Adding a boost to this positive outlook is the Dun & Bradstreet Composite Business Optimism Index (BOI). The BOI for the final quarter stands at 94.6%, 27.4% higher than Q3CY2021. Per the survey, five out of six indices –the volume of sales, net profits, selling prices, new orders, inventories, and employees have grown compared to Q3 levels.
The Dun & Bradstreet’s Global Chief Economist says, “GDP growth during October-December quarter of 2021 will be strong as the BOI surged to an eight-year high.”
Per the survey, 79% of the respondents expect the sales volume to increase in Q4 2021 compared to the 67% in Q3 2021. 62% of the respondents expect net profits to grow in Q4 2021, compared to 48% of respondents in the previous quarter.
The director of National Institute of Public Finance and Policy, Pinaki Chakraborty, believes the current macro-economic situation in India is better than a year earlier. He anticipates growth despite elevated inflation owing to significant economic and financial expansion in the last 18 months and the looming COVID-19 third wave.
The IMF forecasts a growth rate of 9.5% in 2021 and 8.5% in 2022.
What is fuelling this positive outlook?
There can be several reasons why businesses believe the Q4 will be better for business, but the top few reasons are-
- Boost in consumption in all sectors,
- Easing of lockdown limitations
- Bottled-up and festive demand
- Payment of dearness allowance arrears
- Improving consumer confidence in the economic growth
What could hamper recovery?
Several reasons like inflationary pressure, supply chain issues, high deficits of the Centre and the States, and the resource allocations may hamper recovery despite the optimistic outlook businesses have.
However, better management of inflationary pressures and supply will help businesses maintain their positive outlook. The Director, NIPFP Pinaki Chakraborty says, “If we manage deficits in a way that it doesn’t become an issue later, then recovery will be durable and sustainable.”