May 18, 2021


INDIA: Covid-19 – neither prevention nor cure as the economy struggles

BY Aditi Phadnis

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  • India’s Covid-19 infections have reached rural areas where the health infrastructure is extremely weak.
  • Full universal vaccination is the only answer but given shortfalls in vaccine supplies, this seems a far cry.
  • State governments are responding in the only way they can to break the chain of transmissibility – by imposing lockdowns. Inevitably, this will show up in economic performance.
  • However, the federal government is clear that its reform roadmap, especially privatization plans will continue apace even if there is no market appetite.

Prime Minister Narendra Modi’s meetings with District Magistrates (DMs), the most junior but arguably most powerful bureaucrats at the district (county) level, indicates how serious the pandemic challenge has become for the country. India has 718 districts, only 150 of which are assessed to be Covid-19-free. Modi will meet the DMs of the most seriously hit districts first, going over the heads of the chief ministers to whom DMs report, giving a political edge to the meetings.

The government’s biggest concern is that the pandemic has spread to the rural areas, which have neither the health infrastructure nor the manpower capacity to handle a public health crisis. A grisly testimony to this is the reported (and continued) sighting of hundreds of dead bodies floating in rivers, especially in north India, suggesting that the bodies of those who may have died at home have been dumped in passing rivers rather than being cremated.

This gives rise to many questions, the central one being how much of India’s population is actually infected. With rapid transmissibility being a highlight of the so-called “Indian” variant, there is no record of people who have been re-infected and only an approximate assessment of those who have died from the infection (rather than other reasons like cardiac arrest and kidney failure, for instance).

Other problems associated with the infection are also showing up now. One is the fungal infection that can afflict recovering patients. Another is blood clots in the wake of vaccination, especially the AstraZeneca (AZ) vaccine. The government has for the first time since India’s vaccination program began, warned patients of thromboembolic events, asking them to report back to vaccination centers if they spot symptoms of a blood clot after receiving the vaccine. Meanwhile, oxygen supplies have stabilized, though the gas is still in short supply in a few states, leading to unanticipated deaths.

The size of the problem is unknown

The only solution to stop the spread is universal vaccination: but the country is far away from this goal. Earlier this month, vaccine eligibility was opened up to 18-44-year-olds. But data from the Ministry of Health suggest that daily vaccine distribution from the government’s centralized stocks to state governments dropped from 6mn doses at the start of the month to 1mn doses this week, pointing to a severe supply constraint. The central government has announced that it will ramp up supply, while some state governments might decide to import vaccines from abroad. But all of this seems mostly like headline management, including unnamed officials telling various publications that all Indians will receive the vaccination by December.

Worried about its slipping credibility, the government has, in the space of one week, booked police cases and arrested 24 people in the capital, Delhi, who have criticized its management of the public health emergency by putting up posters. Their associates and relatives have petitioned the Supreme Court to direct the police to scrap the cases and release the detainees, in the interest of upholding the right to freedom of speech. If this clampdown continues, the government could face an acute credibility crisis.

Inevitably, the resilience of the economy has been undermined. Power demand has continued to fall by around 4% week on week for the fourth consecutive week. The labor participation rate has moderated to 40.5% from 41.3% last week, with the unemployment rates rising as rolling state-wide lockdowns impede mobility even if they marginally reduce caseloads. At least six states in India are currently under lockdown, which are less stringent than before but with obvious economic implications. In short, more economic pain is in the pipeline.

Privatization plans in place, but does it matter?

The government’s economic plans, especially privatization of several state-owned entities, remain on course, though whether the market has the appetite for it is unclear. The full privatization of India’s biggest airline, the state-owned Air India, is scheduled to be completed in 2021-22. It is crucial to meet the federal government’s INR1.7tn disinvestment target for the next financial year as announced in the budget on 1 February. The list of SOEs that the government wants to sell includes two banks.

However, demands on state funds are growing. The opposition Congress party wants the government to transfer cash to the accounts of low-income families to stimulate demand, even as the government remains adamant that it will not offer any doles. The government believes it is doing all it can to ensure food on the table. But there is no denying that vehicle sales have contracted by 30% in April, month on month. Tractor sales, a proxy for rural demand, which had so far shown resilience, saw a double-digit decline in April. Other activity variables such as steel consumption and fuel demand also showed a decline in April.

While health forecasters suggest Indian infection levels may have peaked, the government has learnt the hard way that it is better to be prepared. Modi’s meetings with district-level officials may offer clues into how he proposes to meet the coming challenges

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