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1.Vaccination for 18 to 44 year olds: High CoWin registrations, too few vaccine doses to dispense underscore supply-demand mismatch
Despite the commencement of vaccination for 18 to 44 year olds on May 1, disappointment is the order of the day as few people in this age group have succeeded in getting their shots. Till date, just 34 lakh persons in this age group have got jabbed despite over 7 crore persons registering on the Cowin platform since enrollment was opened on April 28. Against this humongous demand, just 2 crore doses will be available for state governments in May for this age group.
Only 110 people could get vaccinated at a centre in Vishakhapatnam due to a shortage of vaccines earlier this week.
With the promised doses yet to materialise, many states haven’t yet commenced vaccination for the under-45 cohort or have stopped it midway. There is also much heartburn over the criteria followed for vaccine allocation. Some states like Maharashtra, Gujarat, Rajasthan and Delhi have vaccinated in lakhs while others with high active caseloads like Karnataka and Kerala are lagging far behind or have not even commenced inoculations.
An option before the Centre is to implement a longer gap between Covishield doses, which will allow some diversion of doses to the 18-44 age group. Centre has booked nearly 16 crore doses from Serum Institute and Bharat Biotech for delivery in May, June and July to vaccinate the priority group. Right now, too many people are logging into CoWin and facing disappointment. There are also several crore citizens who have no digital access.
Meanwhile, state governments are attacking vaccine companies for slow delivery of booked doses. The fault does not lie with the companies but the sudden decision last month to open up vaccinations for all adults which gave companies little time to ramp up supply. Given the supply-demand mismatch, it is incumbent upon the central and state governments to communicate to the younger population that their turns could take several weeks.
2.Shackled momentum: Localised lockdowns will have economic effects that will need a fiscal realignment
India is in the midst of a patchwork of lockdowns initiated by state governments. They are nowhere as sweeping as last year’s nationwide shutdown, so their economic impact will be relatively limited. As the situation remains fluid, it’s difficult to gauge the extent of the current slowdown in economic momentum. Notwithstanding this, downgrades of existing forecasts of GDP growth for 2021-22 have begun. Moody’s has slashed over four percentage points to fix the growth rate at 9.3%. Standard & Poor’s has indicated a range of 8.2%-9.8%, depending on the way the infection surge evolves.
There are now two aspects that are clear. Economic consequences of the second wave will not be as severe as the initial Covid outbreak both because the lockdowns are not as stringent and because firms have learnt to adapt. On the other hand, a quick recovery once the second wave subsides is unlikely. Two shocks in a space of a year are likely to cause long-term damage to smaller enterprises and informal sector employment. Some clues on what may lie ahead are available in Azim Premji University’s report, State of Working India 2021.
The report concludes that a 10% decline in mobility is associated with a 7.5% fall in income, which provides a handy benchmark. It confirms that there is a disproportionate impact on women because there are inadequate fallback options. For men, popular fallback options are agriculture and petty trade, two sectors where productivity is relatively low. There’s early evidence that this pattern is repeating itself. CMIE’s urban unemployment measure increased over a percentage point since the start of the month to touch 10.60% on May 11. Some job losses are likely to be on account of pre-existing frailties among MSMEs, which normally provide over 110 million jobs.
RBI has already stepped in with an unscheduled set of measures to keep credit flowing. It’s unlikely to be impactful. Financial sector showed signs of risk aversion even before the second wave. For example, year-on-year growth of bank credit to micro and small enterprises till February 26 was 1.5%, far lower than the 6.5% growth in overall non-food credit. The way out is to creatively use fiscal measures. A supplementary budget in the monsoon session of Parliament can rework the last budget to account for subsequent events. Realigning spendin.g will be more effective now than a monetary push.
3.State action: On Centre’s role in COVID-19 fight
Instead of dictating how States deal with the pandemic, the Centre must be a facilitator
India’s national positivity rate, or the proportion of tested cases returning positive, is around 21%. Moreover, 533 of the 734 districts have reported positivity greater than 10%. There are 26 States that had more than 15% positivity, nine with over 25% and 10 with 20%-25% positivity. Couple that with the faltering vaccination drive, and the picture is far from pretty. On April 12, India administered 3.7 million doses of vaccine and after April 26, it has failed to administer over 3 million doses a day. Ever since the vaccine drive was expanded to all adults over 18, on May 1, the maximum number of daily doses administered has been 2.4 million. This, even as daily new cases added continue to be above 380,000 and deaths close to 4,000 a day. The oxygen crisis continues and the pandemic has now established itself in rural India in lethal proportions, with macabre reports of bodies surfacing in the Ganga in the stretch from Uttar Pradesh to Bihar. All of these point to the fact that there is a very large pool of those infected and prone to infecting those around, bringing up the question of whether a national lockdown should be reimposed.
No fewer than 18 States have imposed various grades of lockdown or curfews. Some only lay stress on shutting down marketplaces whereas others are more reminiscent of the curbs of March and April last year. These restrictions are expected to be in force at least till the third week of this month. Many of the States with the highest positivity rates and growth in infections have already imposed restrictions on the main sources of continued spread. These include religious gatherings, social functions and leisure visits to public entertainment spaces. A ‘national lockdown’ at this stage has only cosmetic value. India’s economy was already in a nosedive before March 2020 and the sudden imposition wreaked havoc on the migrant workforce. The brutality of the second wave has burnished the importance of masking up and opting for a vaccine as early as possible. In the absence of newer effective treatments, these continue to be the mainstay in staying safe. A lesson that has emerged from the pandemic is that States are best equipped to take care of themselves with the Centre doing its job best while acting as a facilitator. Central Ministers, armed with the best medical experts, had declared early this year that India was in the ‘end game’ of the pandemic and that India had “shown the world” how to beat it. Instead, the Centre must focus on distributing equitably across States vaccines, oxygen tankers, testing kits and other critical medical equipment whil`e also accounting for a potential third wave.
4.A lesson for the State and markets
The National Statistical Office released the Index of Industrial Production (IIP) numbers for March 2021 on May 12. While the 22.4% headline growth number has a strong base effect — IIP contracted by 18.7% in March 2020 — it suggests a strong revival in economic activity in March. The fact that other high frequency indicators such as Goods and Services Tax (GST) collections for April crossed ₹1.4 lakh crore also supports such a view.
To be sure, tailwinds from the festive season might have had a role in this pick-up. But it will not be far-fetched to assume that both the State and the markets were beginning to believe that the economy had left the pandemic behind it. Nomura India Business Resumption Index (NIBRI) touched 99.3 in the last week of February. The weekly average of daily new cases reached its lowest levels since June 2020 in the first half of February. Everybody pressed on the throttle in March. And indeed, if all had been well, India’s economic recovery may have sustained.
But as India battles the second wave, it is clear that the optimism wasn’t warranted — and indeed, the spike in economic activity may well have exacerbated the health crisis. Had preventive and vigilance measures been put in place earlier, even if it had slowed down the transient economic recovery in March, the second wave may well have been muted. There is a lesson from this self-inflicted irrational exuberance — now that the government itself recognises the possibility of future waves. Markets are driven by self-interest and cannot be expected to mitigate risks from lowered vigilance against the pandemic. It is the State’s responsibility to cover for this rather than becoming a cheerleader.