As Covid cases decline, what should the government’s next steps be?

There was a flurry of economic news last week. It began with the release of the GDP data for the fourth quarter of last year, was followed by the RBI monetary policy announcement, and ended on an optimistic note of GST collections maintaining the Rs 1 lakh crore run rate in April. In the interregnum, cumulative Covid cases declined by 72 per cent from the peak in May.

The second Covid wave has left a tale of devastation across rural India. The number of rural districts that had a case fatality rate (CFR) above the India average stood at 221 at last count (35 per cent of India’s districts). Tier-3 and Tier-4 cities that are rural and semi-rural in nature witnessed a significant increase in deaths during the second wave as compared to the first wave. The 14-day moving average of the top 20 districts even now reveals a clearly contrarian trend, with rural cases still climbing, while in urban areas it is declining. The percentage of daily new cases from rural areas is still at 52.8 per cent.

The silver lining, if there is any, is that these rural districts account for a lower share of economic activity, thus the GDP loss due to the current wave will be much lower than that in the first wave. However, on the downside, as most of these states have a higher per capita income (Punjab, Maharashtra, Haryana, etc), a pick-up in demand is unlikely to be meaningful. It may be noted that RBI has already cut its GDP estimates to 9.5 per cent, citing the rural impact of the second wave. However, it has enhanced its projections for the third and fourth quarters, expecting a vaccination-driven recovery. This brings us to the issue of vaccination.

There has been a subtle change in India’s vaccination policy, with a massive emphasis on people receiving the first dose. As on May 13, 55 per cent of the daily vaccinated people had received a second dose. That has now declined to 10 per cent on June 4. When we look at the metric of total vaccinations per hundred population, for India, it stands at 16.2 for the first dose, and 3.2 for the fully vaccinated. For the US, these numbers are 89.4 and 44.1 respectively.

The idea behind this shift in vaccination strategy is well appreciated, as talks of a possible third wave have now gained traction. International experience suggests that the intensity of the third wave is likely to be as severe as the second wave. However, it has also been observed that in the third wave, if we are better prepared and if more people have been vaccinated at least once, a decline in the rate of serious cases will lead to a lower number of deaths. If serious cases decline from 20 per cent to 5 per cent (due to better health infrastructure and a more aggressive vaccination drive), then the number of deaths could reduce to one-fourth of those seen in the second wave.

But we need to step up the vaccination drive. With around 15-17 crore children in the 12-18 age bracket, India must opt for an advanced procurement strategy like that adopted by developed nations to inoculate this age group. Further, it is pertinent to vaccinate all school, college and university teachers, along with the support staff — around 1.13 crore people fall in this category.

Can the policy response be supportive at this juncture? Yes. One indicator of household stress is bank deposit data. Bank deposits have shown alternate periods of expansion and contraction in 2021-22 in the first two months. It is possible that such expansion followed by contraction indicates household stress, as people getting their salaries in the first fortnight of the month are drawing them down in the second fortnight for health expenses and stocking up currency for precautionary motives in an uncertain scenario.

A “compassionate fiscal policy” at both the central and state levels should be the ideal option to deal with such household stress. It could imply, as an alternative to cash transfers, fuel prices being rationalised, or tax holidays, electricity rebates for MSMEs for a specific period. Both these supply-side measures could make a lot of difference to businesses and the common man in these extremely difficult times.

Finally, it is perhaps the best time to undertake administrative reforms. Just when the first wave had reached its peak, the government had acknowledged that governing is likely to get more complex. This led to the launch of Mission Karma Yogi — the National Programme for Civil Services Capacity Building (NPCSCB).

We, however, want to go beyond such initiatives. The pandemic has helped identify several best practices related to public health that fall in the realm of administrative reforms. The “Mumbai model” of oxygen distribution under the able administrator, Iqbal Chahal, has saved many lives. Apart from BMC, Ernakulam in Kerala has a war-room that oversees the entire city and allows for resources to be shifted swiftly between hotspots. The states of Tamil Nadu and Karnataka both have telephone-based triaging systems. And, of course, a centralised vaccine procurement is a must, which has now been implemented by the Prime Minister, along with a centralised pricing strategy.

This apart, digitising operations of local bodies can help in better resource allocation by fixing accountability. Covid-19 has shown that publicly available dashboards for tracking beds can be of immense help to people.

The Centre should now collect and collate such systems and make them available to state governments to strengthen the health infrastructure. This is akin to the NITI Aayog’s concept of policy “garages” in which good ideas from states could be driven by others. Its aspirational district programme focuses on collaboration among bureaucrats in 112 districts. Creating a dashboard of such policies for the future can be a good starting point.

The writer is group chief economic advisor, State Bank of India. Views are personal