May 21, 20214 min read

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

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 percent 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, 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 percent 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 percent in the May 8-14 week compared to 22.4 percent 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.

12 States Report a Drop in Infection Rates

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

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

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

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 percent of its population of 1.35 billion, according to data from the Ministry of Health.

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 the 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 program – 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.

India’s GDP Growth Forecasts Revised Downward

Barclays Securities, an international broking firm, had projected a GDP growth of 11 percent 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 percent.

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 percent 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 percent, down from 11 percent earlier. The reason: Covid curbs across states.

“India must vaccinate its population with a 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.