New Covid variant JN.1: As cases spike, can it impact India's economy? Here's what experts say

Amidst a spike in Covid cases with the new variant JN.1, health authorities are ramping up monitoring but for now the economy and financial sector may remain insulated. Experts note that while Covid cases are on the rise, the intensity and spread is still limited. If and when the case count increases significantly, the new Covid variant could begin to impact the real economy. 

“If this is a mild outbreak, it is unlikely to have a significant impact on economic activities. The first Covid wave led to a national lockdown while in the second wave, individual states took a call on lockdowns. The third wave or Omicron did not have any lockdown per se,” noted Devendra Kumar Pant, Chief Economist and Head (Public Finance), India Ratings & Research, adding that it is still early days and the impact on the economy would also depend on policy response. 

India reported 412 Covid-19 cases, according to the health ministry on Tuesday with active cases crossing the 4,000-mark to 4,174. Till now, 69 JN.1 infections have been reported in India. The government has however, underlined that there is no need to panic but has advised people with co-morbidities to wear masks as a precautionary measure. 

Limited impact on markets

While the S&P BSE Sensex and NSE Nifty 50 plummeted on December 20 due to various factors, including the resurgence of Covid-19 cases in India, markets have since recovered. 

Manish Chowdhury, Head of Research, StoxBox said, “Our sense is that the rising Covid cases in India warrants caution, but the severity is likely to be limited as evidenced by lower hospitalisations. With India doing well in managing the contagion last time, we believe that sanity would prevail, and we may not see deep correction from these levels in the market.” 

Kaushik Dani, Fund Manager - PMS, Abans Investment Managers agreed and said that the situation needs to be monitored on a continuous basis whether it spreads to other states and how fatal the variant is. “However, initial reports suggest that it is not so fatal and more so over-preparedness to tackle virus now has been much better compared to the past. So, speed, quantum and fatality rate will determine the nervousness of the market. Till that time, does not seem to be a major risk for markets,” he said. 

Amit Goel, Chief Global Strategist at Pace360 said the government's steps should not be over-interpreted by citizens, and there is no reason to be worried. “In the short run, we expect the market to consolidate as investors resort to profit booking and become wary of the possibility of an increase in Covid cases, particularly in Kerala and Karnataka, making them cautious in the market,” he said. 

India Inc, which already has a hybrid structure in place and work from home facilities for employees, seems also prepared for any further resurgence in cases. A Nestlé India spokesperson said, “ We already have in place a hybrid structure of working, which gives people the option to work from home. In addition, we have safety precautions in place, such as hand sanitizers that are installed on every floor at multiple points. After 2020, we designed our office in such a way that colleagues can maintain enough social distance at the workplace. We also have our internal safety committee in place that continues to monitor the situation.” 

Travel, tourism, insurance could be affected

But experts cautions that if the spread intensifies, contact intensive services such as travel, hospitality and entertainment could be adversely impacted. However, most companies in the travel and tourism business feel that despite the rising number of cases, they aren’t seeing any subdued demand during the upcoming festive season. In fact, the number of bookings is already on the rise.  

Companies say that for Indians this season remains a favourite time to travel for not only family and multigenerational family segment, but also millennials and young professionals. “Indians across segments are utilising their year-end leave, also extended weekends and public holidays to plan multiple mini-cations especially to no-visa and easy visa short haul destinations,” said Rajeev Kale - President & Country Head, Holidays, MICE, Visa - Thomas Cook (India) Limited.  

According to SOTC Travel, despite increased airfares and hotel rates, Indians are willing to increase spends on their holiday by 20-30 per cent. “We are witnessing interest in short getaways/drivable destinations, preference for eclectic stays and unique accommodations, outdoor and adventure experiences,” Daniel D’Souza, President & Country Head - Holidays, SOTC Travel said. 

As per Radisson Hotel Group, amidst recent challenges, the industry has learned the importance of resilience, adaptability, and prioritising the well-being of both guests and staff. “Looking forward to 2024, the emphasis is expected to shift towards technology-driven conveniences, sustainability, and experiential travel,” K.B. Kachru, Chairman Emeritus & Principal Advisor, Radisson Hotel Group, South Asia, said.  

Insurance is another sector that could see higher claims as well as demand, as was seen in the previous Covid waves. 

Rahul M Mishra, Director and Co-Founder, Policy Ensure notes that the return of Covid-19 is concerning, especially for the insurance sector in India. “With the health crisis growing, more people will likely want health insurance. Besides, life insurance policy buying will increase. Overall, Covid-19 will have a moderate impact on the insurance sector,” he said. 

However, to navigate these changes, focus on clear communication so clients understand their policies better, he further said, adding that working closely with healthcare providers can also make processing claims smoother. 

Real estate, fintechs ready for higher demand

However, sectors like real estate and online lending remain well prepared for higher demand. Rohit Arora, CEO and Co-founder Biz2Credit and Biz2X said that fintech companies are poised to play a pivotal role as the demand for secure and efficient digital financial services rises. “However, concerns about economic recovery may impact lending practices and investment strategies,” he said. 

Gaurav Mavi, Co-founder of BOP Group said that amidst the challenges posed by the Covid-19 pandemic, there was a notable shift in consumer behaviour towards larger homes, with individuals prioritising safety measures. In response, real estate developers adjusted their focus to expensive projects, resulting in substantial growth within the sector. “The real estate sector continues on its upward trajectory, demonstrating resilience in adapting to the challenges posed by the pandemic. Despite concerns about new Covid variants, the industry is expected to be minimally affected, maintaining its positive momentum,” he said. 

With inputs from Navneet Dubey, Ashish Rukhaiyar, Prerna Lidhoo, Arnab Dutta and Surabhi 

Also read: COVID-19 in India: 69 JN.1 variant cases reported till Monday, highest from Karnataka