The Modi government’s decision to vaccinate the entire Indian adult population for free and provide free foodgrains to 800 million vulnerable people can help restore people’s confidence in the future and stoke a recovery in growth rates. If the initiative succeeds, it could provide a template to deal with similar crises in the future.
The good news is beginning to flow once again for the Indian economy. Close on the heels of the onset of the four-month long monsoon season came the news that the Indian government would vaccinate the country’s entire adult population for free.
Addressing the nation on June 7, Prime Minister Narendra Modi said his government will vaccinate all citizens above the age of 18 years free of cost. Once it starts rolling, the scheme is expected to restore the confidence of the people in their own and their country’s future.
The sectors in which the move is expected to show immediate results are the touch-sensitive ones like hospitality, travel and tourism, aviation, restaurants, malls and retail. Other industries that could gain from a return of confidence in the economy are housing and construction, cement and steel, financial services, automobiles.
A revival in these industries, coupled with the stimulus announced by Modi in the form of free foodgrains to 800 million people till November, could help the Indian economy, which was just sputtering back to life in the last two quarters of the previous fiscal, return to the growth path once again.
The latest Consumer Confidence Survey by the Reserve Bank of India (RBI) shows the Current Situation Index falling to a record low of 48.5 in May from 53.1 in March. A score of 100 is what divides pessimism from optimism. The survey also had grim tidings for the year ahead outlook. This index fell from 108.8 to 96.4 over the period under review.
"Household spending also weakened in the latest survey round," the RBI survey said, pointing to consumer concerns about the economic situation and job prospects. “Even essential spending was showing signs of moderation while non-essential spending continues to contract.”
Therefore, the universal vaccination drive announced by Modi, which will be launched on June 21, will be key to restoring consumer confidence and bring back consumption demand to the economy.
India has an adult population of 940 million, which is almost three times the entire population of the US and more than double that of the European Union. Since every individual will receive two jabs, that comes to 1.88 billion doses of vaccination that will be needed for this humungous exercise.
The government, which began the world’s biggest Covid vaccination programme on January 16 this year, has already delivered 236 million jabs, leaving 1.64 billion doses still to be administered to about 870 million people. About 60 million Indians have already received their full quota of two jabs, while another 170 million have received only one dose so far.
If the programme has to be completed by December 1, the government will have to vaccinate as many as 9 million people a day for the next six months. That’s a very ambitious ask. The world record for vaccinations is 4.5 million jabs a day achieved by India in the first week of April.
The achieve the target of vaccinating its entire adult population by the end of the year, the government will have to administer doses at a rate that is double the current world record and maintain it for every single day till December 31. To get there, the Modi government has launched an accelerated drive to train 117,000 additional health workers, who will be pressed into service when their training ends.
On June 1, the government decided to amend its Liberalized and Accelerated Phase-3 Strategy of Covid-19 Vaccination that was launched on May 1 this year. Under the amended strategy, the central government will buy 75 per cent of all the required vaccines and provide the same to the states free of cost.
“No state government would be spending anything for vaccines. Till now, crores of people got free vaccine, now 18 years segment will be added to this. Government of India will provide free vaccines to all the citizens…
“As many states came forward with a demand for reconsideration of the vaccination strategy and for bringing back the system that was there before 1st May, it has been decided that the 25 per cent vaccination that was with states will now be undertaken by the Government of India. This will be rolled out in two weeks. In two weeks, Centre and states will make necessary preparations as per new guidelines," Modi told the nation in a televised address.
The total cost of vaccinating India’s entire adult population is estimated at $6 billion. The government will also be bearing the cost of providing free foodgrains to India’s most vulnerable sections. That will cost almost $9 billion.
Policy makers and analysts are hoping these measures will help restore confidence and persuade Indian consumers to open their purse strings once again for both essential and discretionary purchases.
If they do, then economists may well consider the free vaccination and free food schemes as a template for stimuli programmes to deal with future economic shocks.