Covid has accentuated the private cost of India’s public failure

People carry a body of a man, who died from the coronavirus disease (COVID-19), during his cremation at a crematorium in New Delhi (REUTERS)Premium
People carry a body of a man, who died from the coronavirus disease (COVID-19), during his cremation at a crematorium in New Delhi (REUTERS)
 4 min read . Updated: 03 May 2021, 09:25 PM IST Vivek Kaul

The health crisis will boost the trend of India’s well-off opting out to create parallel infrastructure

On 2 May, the total number of active covid cases in the country crossed 3.4 million. The number was at 5,80,387 on 31 March, implying a jump of around 488% in a little over a month’s time. Unlike the first wave, this time around the well-to-do middle class has also been heavily impacted by the pandemic. Even the upper middle class and the rich are getting a feel of the real Indian system, or rather the lack of it.

As the 15th Finance Commission (FFC) pointed out in its report: “In 2018, there were 11.54 lakh registered allopathic medical doctors [and] 29.66 lakh nurses." The ratio of doctors to our population is very low, at one doctor for every 1,511 people, against one for every 1,000 people recommended by the World Health Organization. Further, India has one nurse for every 670 people against the recommended 300.

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As of June 2020, India had just over 1.25 million allopathic doctors. The number of nurses stood at about 3.26 million, as of December 2019.

These are aggregate numbers, and the situation varies across different parts of the country. Kerala has 65,685 doctors for a population of 35.6 million. Jharkhand’s population is 38.6 million, but the state has only 6,837 doctors. Karnataka has 130,698 doctors for a population of 67.6 million. In comparison, Gujarat has 69,746 doctors for a population of 63.9 million. Uttar Pradesh has 84,560 doctors for a population of 237.9 million. Clearly, there is a great inequity when it comes to the availability of doctors. The same is true of nurse availability as well.

There is much more to health infrastructure than just doctors and nurses, but a look at this data suggests that India’s medical infrastructure is weak and distributed unequally. Even in 2020-21, the central and state governments spent just 1.8% of India’s gross domestic product (GDP) on health, against the 1.4-1.5% of GDP earlier.

What’s true of health is also true for other sectors like education, and the general ease of living. This leads to what economist Albert Hirschman calls the exit from the state; those who can, opt out. As Akhilesh Tilotia writes in Through the Looking Glass: “They create a parallel infrastructure, at significant private cost."

This exit is visible in how people cocoon themselves in urban gated communities, making sure that there are diesel generators to ensure the availability of electricity even if there is a power cut, sending their kids to private schools, buying vehicles to move around because the public transport is not up to the mark, and so on. Opting out also involves tax avoidance. The taxes collected by our central government have fallen from a peak of 12.1% of GDP in 2007-08 to 10.6% in 2020-21.

Tilotia calls this the private cost of public failure, “as citizens seek out market-based avenues to fulfil their needs" and pay lower taxes in the process.

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The exit also involves using private health services because what the government has to offer in most states isn’t deemed reliable. The trouble is that even the private health services do not have enough scale to make up for what the government isn’t able to offer. And that has come to the fore with the second wave of this pandemic.

How will this play out once we are out of the pandemic? One thing that will happen is that more of India’s super-rich will want to leave the country and move to places with better health systems and lower tax rates. In fact, as per the Global Wealth Migration Review, published by New World Wealth, a wealth intelligence firm, nearly 7,000 wealthy Indians or 2% of our high net-worth individuals left the country in 2019. Of course, this was more on account of high taxes here than our rickety health system.

This migration will intensify in the years to come, putting pressure on the total amount of taxes collected by the government, given that a bulk of the country’s income tax is paid by very few people. As the 15th Finance Commission report points out: “The number of taxpayers who filed returns in AY 2018-19 was about 5.87 crore... 40.4% were in the nil tax bracket and another 52.8% in the tax-bracket below ₹1.5 lakh." Hence, those in the top tax brackets pay most of the tax. And if some of them choose to leave the country, it means lower tax collections for the government.

Of course, a bulk of our well-to-do will continue to live in the country. One way for them to push for easier lives is to be politically more active. But given their numbers, they remain politically irrelevant.

So, the only option left for them is even higher self-preservation, and that would mean more people trying to exit from the state. In the short-run, it would mean setting aside more money for a health emergency. An immediate impact of this will be that the release of pent-up consumption we saw after the first wave of covid last year won’t happen this time.

In the long-term, one can foresee gated communities with their own hospitals coming up. This could soak up medical resources and put further pressure on our already-weak health infrastructure. No doubt, all this will be very difficult to measure. But it will be the private cost of India’s public failure.

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