At the time of writing, there are heated debates taking place over the total cost of immunization; who will pay; and how much they have to pay. The unity government has made it clear that it will not bear the full cost of immunizing all adults in the country. At best, it can cover 50% of the adult population. The rest of the cost would have to be borne by state governments or individuals.
Perhaps another question is more relevant here: What is the cost – economic and human – to the country if not everyone is immunized quickly? The assumption here is that only a mass vaccination program covering almost all adults could return life to a semblance of normalcy as it was before the pandemic. Until this happens, full economic activity will not be possible.
Once you have answered the second question, it becomes clear that the cost of do not quickly vaccinating the entire population will be much higher than paying the full cost of vaccination.
The answer to the first question is simple. We know that the union government negotiated hard with the vaccine companies to get a price of Rs 150 per dose. We know our total population is around 135 crore and our adult population over 18 is around 90 crore. We know that each person needs two doses and therefore the total cost of the vaccine for one person is 300 rupees at the price paid by the union government. We also know that he had allocated Rs 35,000 crore in his budget this year for the vaccination exercise. These details tell us that at this price, the unity government would only spend Rs 27,000 crore – or Rs 8,000 crore less than what it allocated. Add a few thousand crores for logistics, administration and waste and it would still be less than budgeted amount.
If the union government only vaccinates half of the adult 90 crore population, its costs will also be halved. For the other half, states will pay much more than what the union government pays because they are buying at a higher price.
With that out of the way, let’s try to get the answer to the second question. It’s less easy to quantify precisely, but we have a good idea of the slowdown projections as we go into wave two. Several activity indices are already showing the effects. The unemployment rate increases while the participation rate decreases. Other indicators of industrial activity such as electricity demand and capacity utilization do not look good either.
And while the unity government has emphasized that a nationwide lockdown is the last option, various states have put in place restrictions at the local level. Three major business centers – Mumbai, Delhi NCR and Bengaluru – have applied restrictions for different periods. Many critical industries employing hundreds of thousands of people – such as multiplexes, movies, restaurants, gyms, and airlines have shut down or simply limped. Meanwhile, worried about local lockdowns, migrant workers are returning home.
In the first wave, the sudden lockdown saw the economy contract massively as everything came to a halt. As economic activity picked up slowly towards the end of the year, pent-up demand and other factors intervened but were not enough to offset the two-quarter contraction. For the 2020-2021 fiscal year, the Central Statistical Organization forecast a contraction of GDP of 8% compared to the previous year.
In the new fiscal year, analysts and forecasters were hopeful that economic activity would pick up. They predicted that the Indian economy would grow 10.5% to 12% over the full year. This would bring India back to where it was at the end of the 2019-2020 fiscal year. Now, all are revising their growth forecasts downwards. The reductions are in the order of 1 to 1.5% compared to their previous projections. And these assume that the second wave of Covid will soon be under control and there will be no more disruption.
Projecting economic growth is not an exact science. There are many factors you need to take into account. One of the things that, for example, will not appear until much later is the decline in household savings and the increase in personal debt of the poor and middle class as families grapple with it. with the health costs of Covid. This, in turn, will influence consumption trends, labor availability and other indicators in the medium to long term.
The human costs of Covid are enormous. According to official figures, we have lost over 200,000 people to the virus, and many more are left with long-term health problems. But given the mismatch between the number of official Covid deaths in Wave 2 and the daily burden in crematoria, observers say the actual number of deaths from the disease is between 5X and 10X per day compared to the numbers. official.
Even though the government has chosen to ignore the human cost, it should not ignore the economic cost. It had allocated for immunization just over 1% of the total expenditure budget and about 0.16% of the current year’s GDP budget estimates.
The cost of non-vaccination would be much higher if GDP growth fell by 1% or 1.5% or even more due to successive waves. It doesn’t seem like a difficult choice to make.
Prosenjit Datta is a former editor of Businessworld and Business Today magazines. This has been reproduced from his website prosaicview.com with his permission. Opinions are personal.