How bad can the COVID BF.7 variant be for the Indian economy

India reported around 225 COVID cases on Christmas day, 25th December 2022. That is not a very encouraging sign and the latest BF.7 variant has already been detected in India. Now, for information sale, the BF.7 variant has been causing havoc in China in the last few days, with a spill over impact on Japan, South Korea, Thailand and Hong Kong too. India has already put restrictions on passengers coming from these places. However, the scale of damage in China is still not fully known. Reports suggest that there have been scores of death at a time when China was just planning to exit its zero-COVID obsession. However, the real story about China may take a much longer time to really come out.

What about India and what is the risk right now? Even as the fears have escalated in India due to the emergence of the BF.7 variant, there have been calming voices. The director of the Centre for Cellular and Molecular Biology (CCMB) in Hyderabad has stated quite categorically that the risk in India would not be anywhere close to the risk in China and other Asian countries. That is because, most Indians would have already developed "herd immunity" having taken two vaccine shots and a booster shot. Also the impact of the BF.7 is unlikely to be anywhere close to the Delta variant or the Omicron variant. That may give a rather placatory feeling, but it still does not rule out the risk totally.

That is the reason, the prime minister of India and even the CCMB director have taken pains to explain the need to follow proper safety measures and other distancing protocols to avoid an escalation. The problem with the BF.7 variant is that it is highly transmissible and can even infect people who are already fully vaccinated and even sometimes those who have already been infected with the previous variants of Omicron or Delta. However, the underlying message appears to be that the severity of the infection is unlikely to be as much as it used to be with Delta. That is the good news, although the message also appears to be that India cannot afford to let its guard down.

While fatalities had virtually come down to zero in the last few months, there were two COVID fatalities on Sunday. However, a quick look at the stock markets and it shows that the markets are almost looking nonchalant. Either the markets are confident that this is just a false scare or the markets believe that it can be easily handled considering the accumulated experience over the last 3 years. However, for the Indian economy, the bigger challenge will be to keep the cases in check and do voluntary adherence. India cannot afford another bout of lockdowns at a time when the Indian economy is promising to be the fastest growing large economy in FY23. There is room for optimism, but no room for smugness.