India

Economic concerns become a challenge

Many companies are upset because of Omicron.

Alok Puranik

Many companies are upset because of Omicron. The supply chain is likely to be disrupted. Inflation is a big concern now. According to the Reserve Bank, in October 2021, fuel inflation had reached the highest level of 14.3 percent. The cost of fuel has an effect on the inflation of everything sooner or later.

If we look at the index of Bombay Stock Market (BSE), it does not seem that the country is battling Corona and the cases of Omicron are on a new boom. The BSE index saw a jump of about twenty four percent in one year and about three percent in a month. The index of companies related to Information Technology (IT) listed on the BSE has gone up about forty seven percent in a year. The index of the share price of companies related to the automobile sector has increased by more than eighteen percent in a year. That is, broadly at least the stock market has become corona free.

But not everything is green in the market which has been freed from the worries of Corona. The stock of a company associated with a well-known brand like Paytm has come down about twenty nine percent in a month. In fact, this is where the worries begin. Many investors are investing heavily in the shares of new companies. It is as if they are assuming that there is only one movement in the stock market and that is to move upwards. During the Corona period, the stock market remained in a numb state for some time, then a different kind of carelessness came in them and in the circumstances now, it can be clearly assumed that the movement of the stock market has been freed from Corona. It has serious meaning and implications.

According to the data released by the central government in November, during July-September 2021, the economy grew by 8.4 percent. There was an increase of 20.1% in the earlier quarter i.e. April-June 2021. These figures clearly show that the Indian economy has returned to the path of growth strongly. According to the Finance Ministry’s monthly economic report for the month of November, 2021, India will be among the few countries to emerge rapidly in the current financial year 2021-22 due to the decline in the economy due to Kovid-19. Also, due to the rapid vaccination in the country, the new form of the corona virus, Omicron, will not have a more serious impact on the economy. The report said that India is among the few economies in the world that will recover more quickly from this contraction. That is, there is no need to worry much about the Indian economy regarding the Omicron form of Corona, believes the Ministry of Finance.

The GST collection also shows strength in the economy. The Goods and Services Tax (GST) collection crossed Rs 1.29 lakh crore in December 2021, an increase of 13 per cent over the same month last year. The GST collection in December has been lower than the figure of Rs 1.31 lakh crore in November. For the sixth consecutive month in December, 2021, the government’s GST revenue has exceeded one lakh crore rupees, that is, the economy is looking strong on the GST front.

But concerns have their place. Many companies are upset because of Omicron. The supply chain is likely to be disrupted. Inflation is a big concern now. According to the Reserve Bank, in October 2021, fuel inflation had reached the highest level of 14.3 percent. It is worth noting that the cost of fuel has an effect on the inflation of everything sooner or later. The Reserve Bank estimates that the retail inflation rate will be 5.3 percent in 2021-22. This rate is of great concern. The retail inflation data for December 2021 has also come. Retail inflation stood at 5.59 per cent in December 2021, that is, very close to the risk limit set by the Reserve Bank, ie 6 per cent.

The level of retail inflation which was recorded in December 2021 is the highest level in five months. That is, inflation is raising its head again. And the crisis is also that the prices of crude oil are roaring again in the global market. Crude oil prices are at two-month high. Inflation hurts in many ways. On the one hand, it nibbles the purchasing power and on the other it dwarfs the interest income. Inflation continues to lower the standard of living of the elderly, which is no less a serious issue. But curbing inflation is possible only to an extent in the hands of the government. The government has no interference in the prices of crude oil. Inflation comes from there, the rise in crude oil prices is more or less visible in the price of every commodity, sooner or later.

According to the Reserve Bank’s own standards, if this inflation rate goes above 6 percent, then it should be considered that there are signs of danger. The hurt of inflation can be felt by every person who takes petrol etc. from the petrol pump. With the rise in the price of petrol, the inflation of almost everything increases, it appears. The government should seriously consider this issue as to how to reduce inflation so that people suffering from Corona’s recession can get some relief.

The cost of credit in the domestic market has come down. It is absolutely true that the cost of taking loans i.e. interest rates have come down and entrepreneurs are getting loans easily at cheaper rates. Not only this, shares of new companies are being bought fiercely in the capital market. That is, there is no shortage of capital anywhere. But the question is another. There is capital, there is business, but there is no demand. Demand is not looking strong in every sector. The most affected is the service sector. Hotels, tourist places are all still deserted. Cinema halls are still waiting for when the audience will come. Due to Omicron, all the state governments have started imposing new restrictions on goods, cinema halls etc.

The economics of inflation is squeezing the pockets of the common man. The economy has been saved to a large extent from Corona, but it is not easy to avoid the effect of inflation. Therefore, there is a danger that inflation may spoil many types of economic prospects. According to the latest statements from the World Health Organization, Omicron should not be taken lightly. With the continuous increase in the cases of Omicron, the question has become important in front of all the state governments whether to impose a complete ban again or not.

But here the second question arises that what will happen to the daily earners? Then, when the factories of all the companies are closed, the sources of income are blocked, all economic factors including tax collection will be affected by the overall lockdown. That is why FICCI, the representative body of the industry, in a letter to the Minister of Commerce and Industry, has written that Omicron is very contagious, but despite this, hospitalization is less likely than before. That is, an overall balance is needed. The country can no longer bear the total lockdown caused by Corona, there is a need to balance the equation of livelihood versus life.

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Shivam Bangwal

Shivam Bangwal is an Indian based entrepreneur who is a tech, travel and coding enthusiast with a post graduation degree on Master's of Computer Applications. He is a founder of Youthistaan, People News Chronicle, Hitchhike TV, Branding Panther and many more.

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