Why a free vaccine is good for economics

Vaccination of Kovid-19 for 18-45 year olds will begin on May 1. Individuals of this age are required to pay for the vaccine, even at government-run vaccination centers. People over the age of 45 receive their vaccines free of charge at government vaccination centers and continue to receive them free of charge.

Serum Institute of India (SIII), which manufactures Kovishield vaccine, sets prices 600 per dose for private hospitals and 400 per dose to the State Governments. Covshield accounts for 90% of the vaccines provided so far in India.

The final cost of the vaccine may be higher than that 600 per dose at private vaccination centers, taking into account their own costs for giving the vaccine.

This leads to the question of what Finance Minister Nirmala Sitharaman means when she makes the following statement in her budget speech on February 1: “I provided 35,000 crore for Kovid-19 vaccine in BE 2021-22. I am committed to providing more funding if needed. “BE means budget estimate.

If they have to pay between the ages of 18-45 to get vaccinated Should Rs 35,000 crore be spent on budget allocation? It needs to be mentioned here that the Central Government has moved forward 3,000 crore to the Serum Institute and 1,567 crore for supply of vaccine till July to Bharat Biotech, which manufactures covaccine vaccine.

The central government still needs to collect vaccines because those over the age of 45 will continue to be vaccinated for free at government vaccination centers. The government is spending 4,567 crore out of the total allocation 35,000 crores. It costs more to continue vaccinating people over the age of 45 for free at government management centers. However, there is still a lot of money left in the allotted kitty. What is this money used for? Also, and most importantly, why treat a part of the population differently?

Furthermore, the problem is not just about treating different areas of the population differently. Currently, there are two companies supplying the vaccine. The demand for the vaccine by May 1 and in the weeks following is much higher than what these companies can supply. In fact, more foreign companies are waiting in the wings. But foreign vaccines take time to come to market.

Clearly, this is the supplier market. The serum has the price of a vaccine at the Institute 600 per dose for the private sector, the final price being higher at the private vaccination center. Also, with limited supply, there is a risk of black market emergence in these vaccines, oxygen cylinders and drugs being used in the treatment of Kovid.

Let’s try and understand this problem in a little more detail through the example of hand sanitizers. When Kovid first started spreading early last year, hand sanitizers were disappearing from the market and selling black. The reason for this is that demand exceeds supply. However, seeing the high price of sanitizers, many entrepreneurs entered the business, soon the supply problem was solved and the prices became reasonable. So, the free market worked and it worked well.

In the case of vaccines, new entrepreneurs will not be able to enter the market, and start vaccine production and thereby, ensure that the price of the vaccine does not rise in the next few months. This does not mean that the private sector should not be involved in vaccination. The population should be, because it is necessary to vaccinate as soon as possible.

Depending on this, there is a need for a loyal competitor who sees to it that vaccine prices in the private market do not go through the roof. Who is this loyal competitor? Central Government. This can be done by ensuring that the vaccine against Kovid-19 is given free of charge at government vaccination centers. This ensures that private players set their vaccines at an affordable price and do not make supernatural gains. Subsequent events have now increased significantly.

Apart from ensuring that the right incentives are on offer, there are other benefits to following good economics. Vaccines are what economists call a positive externality, meaning that the benefit of basically getting the vaccine goes beyond the person taking the vaccine.

As written by Ryan A. Bourne Economics in One Virus: An Introduction to Economic Reasoning Through Kovid-19: “Once someone is vaccinated, they are more likely to be immune to the virus, or at least less likely to have bad symptoms, and more likely to be infected, which means that fewer people in the population can spread the disease to unknown people, so many governments subsidize them.” ”

Vaccine Helps the community to move towards herd immunity. As Bourne writes: “One potential endgame of this pandemic is called herd immunity, a condition in which enough people have immunity (recovery from infection or vaccination) that does not accelerate any spread of the virus. The risk of infection is very low. “

It helps the economy as a whole. The faster society moves towards herd immunity, the faster economic activity will recover, and governments will not have to resort to lockdowns and curfews. These come at a huge cost.

Gross Domestic Product (GDP) or the Indian economy at 2019-20 203.5 trillion (nominally, not adjusted for inflation). It is likely to shrink 195.9 trillion in 2020-21, which is a contraction 7.6 trillion. This was predicted before the start of Kovid’s second wave. Therefore, it may be less than GDP for the year 2020-21 7.6 trillion and therefore, the contraction may be higher.

This shrinkage in economic activity forced governments to impose lockdowns and curfews, at the expense of Kovid outbreaks and the fact that society had not achieved herd immunity. The fact that government tax collections are declining or petrol prices are almost touching 100 per liter, part of which.

Therefore, it makes sense for the government to at least give free vaccines at vaccination centers. Not only does it ensure that private sector prices are reasonable, but it also ensures that as more people are vaccinated, the herd will move faster towards immunity. At 800-1,000 per vaccine, at a time when the incomes of a large segment of the population are severely affected, we are seeing two doses costing Rs. 1,600-2,000 per person. If a third dose is needed, costs may increase further. In this scenario, free vaccines will help the majority of the population.

In 2021-22, the Indian economy is unlikely to shrink, which is expected to shrink in 2020-21. If India is currently growing at a rate lower than the expected 10-12%, we are again looking towards a few trillion rupees of economic devastation.

In this scenario, if the central government spends 35,000 crore allocated for vaccines (or even more if needed), which will greatly benefit the overall economy.

Free vaccines against Kovid-19 have enormous economic significance.

Vivek Kaul is the author of Bad Money.

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