India’s economy desperately needs that shot in the arm from the vaccine

ANALYSIS
India’s economy desperately needs that shot in the arm from the vaccine
Beneficiaries above 18 years old stand in a queue to get the COVID19 vaccine. Several international organisations have been forced to revise India’s GDP growth in the wake of the deadline second wave of the pandemic.Courtesy: ANI

While localised lockdowns in various states seem to have succeeded in slightly arresting the rise in Covid cases, the real remedy to this crisis, lies in inoculating the entire adult population in India. Even as that is being done, the country may be paying a price in terms of lost economic growth.

Amid the gloom of the devastation wrought by the second wave of the Covid-19 pandemic, there is slight optimism that the wave may have peaked as the seven-day rolling average of cases has fallen for seven days in a row.

This, however, comes with a caveat. India may have to pay a heavy economic price as it engages in its fight against Covid-19. Several international and Indian banks, brokerages and agencies have revised downward their rosy projections of high double-digit growth to GDP expansion just around the 10 per cent mark, with a rider. This figure could do further south if state and local level lockdowns continue to hamper the mobility of goods and personnel beyond August.

The seven-day rolling average, which is considered the most reliable pointer to the direction of the Covid graph, has declined by almost 40,000 to 354,000 on May 15 from 391,000 a week before.

The seven-day rolling average, considered the most reliable pointer to the direction of the Covid graph, has declined by almost 40,000 to 354,000 on May 15 from 391,000 a week before.

Government officials warn against complacency

Central government officials, however, warned against complacency as treating the plateauing of Covid-19 numbers as the beginning of the end of the pandemic could be self-defeating. They urged state governments to remain vigilant and step up efforts to contain the virus and continue the drive to build both infrastructure and human capacity to tackle the virus.

In further good news on the medical front, India’s positivity rate has gone below 20 per cent over the last week. The national Test Positivity Rate (TPR), moving in tandem with the seven-day rolling average, has also come down over the last seven days. It was at 19.5 per cent in the May 8-14 week compared to 22.4 per cent in the previous week. This indicates a lowering of the infection rate.

Active cases have also declined by more than 150,000. The death toll, however, remains high at more than 4,000 a day.

Central government officials warned against complacency as treating the plateauing of Covid-19 numbers as the beginning of the end of the pandemic could be self-defeating.

12 states report drop in infection rates

In more positive news on the battle against the virus, 12 of the worst affected states reported more than 10 per cent fall in cases. Of these, Delhi had the most encouraging fall of 39 per cent in fresh cases over the last week. Other states on this list are Chhattisgarh (-31 per cent), Uttar Pradesh (-29 per cent), Bihar (-27 per cent), Maharashtra (-21 per cent), Madhya Pradesh (-21 per cent) and Jharkhand (-20 per cent).

This was, however, partially offset by a sharp rise in cases such as Tamil Nadu, where fresh cases zoomed 32 per cent, Himachal Pradesh (30 per cent), Assam (20 per cent), West Bengal (12 per cent), Odisha (12 per cent) and Punjab (11 per cent).

Some other states, especially in the North East also saw sharp spikes in fresh Covid-19 cases.

The death rate, however, remains a cause of concern. The only way forward is increased and faster vaccination for the entire eligible population, experts said.

The country crossed a landmark on May 14, when the cumulative number of vaccination doses administered in the country crossed the 180 million mark. The GoI has assured that enough vaccines will be available by the end of August.
The country crossed a landmark on May 14, when the cumulative number of vaccination doses administered in the country crossed the 180 million mark. The GoI has assured that enough vaccines will be available by the end of August.Courtesy: ANI

India has been trying to make progress on the vaccination front, considering its population. A landmark was crossed on May 14, when the cumulative number of vaccination doses administered in the country crossed the 180 million mark. Four days before that, on May 10, India became the fastest country to vaccinated 170 million, which it did in just 114 days. China had done it in 119 days and the US in 115 days.

However, there are other metrics on which it still has a long way to go. Till May 14, India has administered two doses of vaccines to only about 40.4 million people, or 2.9 per cent of its population of 1.35 billion, according to data from the Ministry of Health.

Courtesy: ANI

All adults to be vaccinated by the end of the year

India announced that all adults, i.e., people over the age of 18 will be eligible for vaccines from May 1, doubling the number of people to be vaccinated to about 940 million. India, which is the world’s largest producer of vaccines, has a capacity to produce 80 million doses a month till July. So, the current backlog of vaccine candidates will continue to swell for two more months before it begins to fall. The government also wants to complete the vaccination programme – i.e., administer two doses to every adult – by the end of the year.

According to a senior government official, the capacity expansions currently underway at Indian vaccine manufacturers such as Serum Institute of India (SII), Bharat Biotech and Dr Reddy’s Laboratories, as well as imports from abroad will swell vaccine availability in the country from 85 million doses in May to 100 million in June, 150 million in July, 360 million in August, 500 million in September, 560 million in October, 590 million in November and 650 million in December.

That’s just considering the supply side of the equation. India began its vaccination programme on January 15, Till May 14, it has administered 180 million doses. That’s 1.5 million doses a day on average.

Research from the State Bank of India has also revised GDP growth estimates for 2021-22 to 10.4 per cent, down from 11 per cent earlier. The reason: Covid curbs across states.

Meeting the vaccination target will be a tough task

India will have administer about 1.7 billion vaccines in the 231 days remaining in the year at the rate of almost 7.4 million doses a day to reach its target of vaccinating its entire adult population this year itself.

The world record for Covid-19 vaccinations is 4.5 million doses a day and the average is about 1.5 million a day. That means the government will have to step up its game by at least five times come August to meet the very stiff target it has set for itself.

A deserted view of Connaught Place as the Delhi government extended a one-week lockdown till 24 May. While infections rates are being curtailed the lockdown is taking a toll on the economy.
A deserted view of Connaught Place as the Delhi government extended a one-week lockdown till 24 May. While infections rates are being curtailed the lockdown is taking a toll on the economy.Courtesy: ANI

Lives versus livelihoods battle

Even as the government is waging a relentless war against the Covid-19 pandemic, the lives versus livelihoods debate is extracting its pound of flesh from the economy.

The local and state-level lockdown, so necessary to curb the spread of the virus, is taking a toll on the economy. Several Indian and global agencies are revising downward their rosy 13-14 per cent GDP growth projections for India.

India’s GDP growth forecasts revised downward

Barclays Securities, an international broking firm, had projected a GDP growth of 11 per cent for the Indian economy before the onset of the second wave of the Covid-19 pandemic. It has now revised its forecast by a full percentage point to 10 per cent.

According to a research report titled “India: Tracking COVID-19 and Vaccines”, Barclays analysts Rahul Bajoria and Shreya Sodhani said: “In a more pessimistic scenario, whereby the pandemic is not brought under control soon, the economic losses could be much higher. If mobility restrictions remain in place until the end of August, this could point to another 120 bp of downside to annual real GDP growth, dragging FY 2021-22 growth to 8.8 per cent y/y."

Research from the State Bank of India (SBI), India’s leading commercial bank, has also revised GDP growth estimates for 2021-22 to 10.4 per cent, down from 11 per cent earlier. The reason: Covid curbs across states.

“India must vaccinate its population with single-minded focus to achieve herd immunity and avoid any further waves as other countries are facing,” said Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI, in the report.

That, then, is India’s Covid report card. There’s some good new coming from the medical front. But it’s coming at the cost of the economy.

The Modi government will have to figure out a way very quickly to strike a balance between the two goals – of controlling Covid without sacrificing economic growth.

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