Second waves and new beginnings

Last week, in less than 100 days of India’s vaccination drive, the government made significant changes to the process. In a single stroke, it removed restrictions on eligibility, price and distribution, opened up more widely to the states and the private sector, and liberated the attempt to vaccinate. Some have reservations on move time, especially since short-term supply limits seem to be somewhat adhered to, which is still a very welcome step.

India’s previous success in having Kovid infections in 2020 is not ration based. A major reason for India to have the previous Kovid wave and reopen the economy is its liberal testing approach. This helped reduce the fear of contraction of the Kovid, improved treatment protocols and promoted extensive testing, thereby promoting early detection.

Similarly, the government should do all it can to address the ambiguous vaccine contraction amid the noise surrounding vaccine protocols. While the number of doses given is high in India, the percentage of vaccinated population is low. Only more than 8% of the population received a single dose of the vaccine, and only 1.3% were fully vaccinated. Even in priority groups, so far only 50% of all frontline and healthcare workers have been vaccinated, and only half of those aged 60 and over have received at least one dose.

Although such a large number of vulnerable populations have not yet been vaccinated, the decision to simplify eligibility is the right one. Throughout 2020 the government has performed well, managing the economy by simply responding to emerging conditions. Given the strangers around the virus (its spread and effects), it makes sense to wait and respond appropriately to the economic downturn, with economic measures. Recently, the government reintroduced free food rations that would be available to 800 million people, for two months, to alleviate their suffering.

However, with vaccines, the opposite response is required. High levels of vaccination are a way to keep the economy afloat. The government provides resources for vaccines in its annual budget 35,000 crore per drive. According to some estimates, it would be a total burden on states to vaccinate people between the ages of 18 and 44 46,300 crore, or 0.2% of GDP (GDP). All this together 81,300 crore, just 0.36% of India’s estimated nominal GDP. In contrast, at least one of the authors’ estimates of the cost of local lockdowns in the current wave 80,000 crore and growing, which makes repetitive lockdowns and movement restrictions more expensive than vaccine drives.

A major obstacle in this regard is the supply of vaccines. Shortages of raw materials, low prices and export commitments are limiting India’s ability to increase domestic coverage. Infrastructure has been prepared to make 7 million diseases a day, but in recent days, many states have had to stop distributing the vaccine or supply rations, especially for the first dose. Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council, recently noted that India could vaccinate only 5 million people a day by September.

The new vaccine collection rules will introduce an issue on a one-on-one basis between states and centers on providing free doses. Finally, central and state governments lose revenue when high-introductory services are restricted. This is especially true as cities are increasingly affected by the Kovid. As such, the most logical strategy here is to save as much of the resource as possible, without worrying too much about burden sharing, because weight loss from the control, testing and treatment of Kovid-19 is many times more expensive than vaccines.

Government estimates on economic growth, tax and non-tax revenues, and 2021-22 spending are likely to be the second epidemic in our view. The current three-tier pricing of vaccines — one for the center, another for the states, and another for the private sector — causes confusion, mediation, diversion, and leakage. The country has only two prices: one for the government and the other for the private sector. It allows the center to collect and distribute vaccines to states, actively supporting their efforts. During this period it became a good sign of federalism. Nationwide vaccinations, facilitated by the central government and financially assisted, equate to its stimulus economic response to the first wave. States have a responsibility to ensure that vaccines are not diverted to the black market.

More importantly, with the US leaning towards higher taxes and the design of supply chains away from Asia, India has the opportunity to attract global capital with its political stability, reasonable tax rates and structural reforms. For it to materialize, India needs to control its second wave of Kovid and this requires joint and co-operative efforts by the central and state governments.

V. Anantha Nageshwaran & Rahul Bajoria are respectively members of the Economic Advisory Council to the Prime Minister and Chief Indian Economist at Barclays.

These are the personal opinions of the authors

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