India, the supplier of vaccines to the world, is now at the bottom of the pecking order.
Till April 30 this year, at least every fourth American had been fully vaccinated, as had been every fifth Briton and one in 10 Turks. In India, not even 2% of the population had been fully vaccinated and the vaccination rate remains lower than even that seen in other emerging markets: 6% in Brazil and almost 5% in Russia.
A successful vaccine strategy is the cheapest policy path to economic normalisation. In fact, analysts are now saying that it would be cheaper to spend the required amount on ensuring universal vaccination than to allow disruption in economic activity, of the scale being seen currently.
The deadly second wave of the COVID pandemic has wreaked havoc on the nation, with the highest ever active cases as well as mortality rates, forcing most of the state governments to place strict restrictions.
As per data from the Ministry of Health and Family Welfare, till 8 am on Wednesday morning, there were 37,04,099 active infection cases and 2,54,197 deaths in India due to COVID. Nearly 24.26 lakh vaccine doses were administered in the last 24 hours and 17.02 crore Indians have been fully vaccinated.
Vaccination cost vs output loss
Now, Madhavi Arora and Hitesh Suvarna of brokerage Emkay Global have said that the cost of universal vaccination would be equal to 0.6-0.7% of the GDP — much lower than the 0.9-1% loss of monthly economic output due to ongoing lockdowns.
The analysts have also pointed out that if India were to target universal vaccination by the end of the current calendar year and ramp up vaccine supplies, there would still be an average monthly supply gap of a whopping 170 million doses.
“Given the strong positive externalities, stepping up the vaccination drive remains the most viable and cheapest policy path to economic normalisation,” the Emkay analysts said. “Our calculations suggest that the cost of vaccinating all the population would be 0.6-0.7% of GDP, assuming no wastage and optimal distribution. This compares with the 0.9-1% loss of monthly output amid soft lockdowns…The vaccination drive is skewed state-wise and has overall slowed substantially, with the current 7-day moving average rate of about 1.9 million shots, less than 50% below the peak of about 3.7 million in March.”
“The supply gap is significant and can only be resolved by production ramp-up. Even after assuming enhanced supply from July and November, averaging 5.7 million and 6.6 million jabs per day respectively, there will still be a supply gap of about 170 million jabs per month on an average, if India intends to cover universal population by December 2021. Our base case suggests that by March 2022 and July 2022, 70% and 100% of the universal population will likely be vaccinated,” they added.
Ups and downs of vaccine saga
India’s vaccine saga has seen many ups and downs since the beginning of the 2021 calendar year. The first shots were administered to health workers/doctors on January 16 and the drive was subsequently expanded to other frontline workers, citizens aged 60 and above, and then to all over 45 years, and now to all adults.
The drive has been expanded exponentially without the country having the required vaccine supplies in place. According to some estimates, while many other countries placed orders with vaccine manufacturers that were twice or more the size of their respective populations, India only ordered around 15 million dozes.
Additionally, the vaccine manufacturers snagged large export orders, with some pegging vaccine exports at around 6.6 crore dozes to over 90 countries till now.
The only way to tame the second Covid wave is for India to scale up vaccination rapidly.
“The endgame of this all…is going to be to get people vaccinated…India is the largest vaccine-producing country in the world. They’ve got to get their resources, not only from within, but also from without,” said Anthony Fauci, the Chief Medical Adviser to US President Joe Biden, last week.
As is usual in public policy in India, there have already been multiple changes to the vaccine policy. As the deadly, second wave of COVID infections started building up late March, and the importance of getting more and more Indians fully vaccinated began to get further highlighted, the Centre put some of the onus of procuring and paying for vaccines on the state governments.
No wonder then that the Centre and state governments are now sparring over how much to pay for the vaccine, who should pay, how to tackle the critical shortage of doses and also over the administration of shots.
Currently, two vaccine producers – Serum Institute of India and Bharat Biotech – supply all the jabs between them to the domestic market. And 50% of the supply has to be bought by state governments together with the private sector, unlike earlier, when 100% was being procured by the Centre and was being given to states free of cost.
In a belated attempt to quell vaccine shortage, the Centre has given emergency use approval to some other vaccine candidates as well but the supply situation is expected to remain severe for several months. So, as daily vaccinations flag, analysts’ concerns over concurrent economic decline are worth noting.
Ratings agency Crisil has pointed out that the adverse impact of local lockdowns on demand has been most severe in this second wave on service sector industries – aviation, hospitality, media and organised retail. Though it has projected growth in each of these industries in the current fiscal, that would still leave these sectors with sizes smaller than pre-COVID times. Overall, its corporate revenue growth forecast is a robust 10-15% in 2021-22, partly due to the low base effect of a tepid 2020-21.
Crisil has also pointed out that the total sum needed for vaccine procurement is anywhere between ₹55,000 crore and ₹60,000 crore and that for key infected states, the respective amounts needed are “manageable”.
Whether state governments can afford to buy the vaccines within their present budgets or not, now is not the time to hesitate. Because vaccination seems to be the only route to prevent further deaths and economic misery.