- 16 January will see the first phase of inoculation of 300 mn frontline Covid-19 fighters. Vaccines will likely be available to those who want to jump the queue – but at a cost – in a few weeks.
- As emergency economic measures run their course, fiscal and monetary problems will return.
- A slew of upcoming elections and an ongoing farmer protest could force the government to reorder priorities.
When Prime Minister Narendra Modi launches the inoculation drive against Covid-19 at 1030 AM IST tomorrow (16 January), the mood across the nation will be celebratory for the first time in months. After numerous dry runs at every level of the administration, the chances of glitches are few. This phase of the campaign covers only frontline staff – health workers, security forces and auxiliary logistics staff such in sectors such as sanitation and ambulance services – but the number is huge: 300 mn. Every recipient of the vaccine has been carefully selected using a variety of tools including electoral rolls. Once the vaccination drive expands to cover more sections of the population (those above 50 and below with co-morbidities), it will unite the nation as only a war has done in the past.
The vaccine will be available over the counter in a few weeks but at a cost. The first phase will be free for the recipients and the cost will be borne by the federal government. Several state governments have announced that for residents of the state, in the expanded drive, the state government will pay. Those who want to jump the queue can buy the vaccine (INR 2000 or USD 28 for two doses for the Astra Zeneca-Serum Institute vaccine, excluding taxes and the cost of administering it). Modi has said that as the campaign advances, other vaccines (four are in the pipeline and are currently going through clinical trials) will become available. Doubts about the efficacy of the India-developed Covaxin have been quickly set at rest by an array of experts, both government and independent, and fears that Indians might be being used as guinea pigs for a vaccine that has been tested insufficiently, have been scotched by Modi himself, exhorting people not to become victims of propaganda prompted by ‘corporate rivalry’.
But the hard part comes now – not just in the management of the infection as the populace lets down its guard, but the economic and political toll it has extracted.
Industrial production data released this week showed a renewed y/y contraction in output in November. But the fine print is encouraging, especially the capital goods output component, which suggests there was a further recovery in investment in the fourth quarter of 2020. Investments by firms delayed during the most acute phase of the lockdown are expected to renew gradually. The budget 2021-22, to be presented on 1 February, is expected to reveal government strategies to stimulate growth.
However, caution is warranted. The fundamentals of India’s banking system were already showing warning signs before the pandemic hit. Two rounds of stimulus announced by the government and India’s central bank, the Reserve Bank of India (RBI), that involved mitigation of bad debt liabilities of private companies by way of a moratorium, helped avert stress. But now that the moratorium is coming to an end, RBI data indicates that non-performing loans could jump from 7.5% of total loans in 2020 to a 20-year high of 13.5% in 2021. Obviously, this will put pressure on the lending capacity of banks. The construction sector, which is responsible for low-end labor employment, is expected to be the worst hit.
While the vaccination drive is seen as a positive for the upcoming elections due in four states (Tamil Nadu, Puducherry, Assam and West Bengal to be held sometime in April-May), the ruling Bharatiya Janata Party (BJP) is currently in power only in one (Assam). The BJP faces a multitude of other political challenges – an ongoing protest by farmers, pressure by alliance partners and managing their expectations.
The government’s strategies will be evident when the budget session of parliament begins on 29 January. More is expected on the economy: privatization, infrastructure development and banking. But the next two quarters are expected to be dedicated to consolidation rather than major policy reform.