Stanford University's study: Verdict on Modi government's Covid policy is out

Do you remember Covid Times? Of course, you do. Then you must also remember how the Indian government dealt with it. And while we are here did you see how the media covered it? It was like a witch hunt. In the name of helping the poor, emotions were being stoked. Journalists sitting like vultures outside shamshan ghats and prime time anchors using the opportunity to bash their ideological rivals were common sights.

Rarely would anyone ever do a comparative analysis of India’s response with that of its developed counterparts. The fact is that yes, the situation was not good in India. But it was far better than countries having twice or thrice per capita GDP than India. It was far better than countries that spend more on healthcare and have better health infrastructure. Even Stanford University can confirm it now.

Paper on Covid reforms

Recently, a working paper was published by a joint collaboration of Stanford University and the Institute for Competitiveness. The paper is titled Healing the Economy: Estimating the Economic Impact of India’s Vaccination and Related Measures. Amit Kapoor and Richard Dasher are the brains behind it. The paper reflects on India’s journey during Covid times. Here is a brief and point by point explanation of it.

The first parameter authors look upon is to see whether lockdowns in India were effective or not. There are controversies around the effectiveness of lockdowns all across the world. The first controversy is related to the origin of the concept. Lockdown strategy emanated from China, an authoritarian state. Naturally, one would doubt its effectiveness in democratic societies. Secondly, there have been concerns over real life implications as places like Sweden and Florida fared better than their counterparts that relied on absolute lockdowns.

The paper marks India’s lockdown strategy as a good mix of flexibility and rigidity. It highlights the Modi government’s efforts to mitigate the risks related to lockdowns. 1900 hospitals were declared as specially dedicated to Covid related concerns. India had overall 1.7 lakh beds and 21,000 ICU beds, especially for Covid-19. Side by side, Covid testing facility was also ramped up. The country that didn’t have capacity to conduct 100 tests per day in initial days was doing 1 lakh tests per day by the end of May 2020. Apart from these, the four T’s – tracing, tracking, testing, and treating was another big factor in India’s lockdown strategy.

Their effectiveness can be gauged from the fact that 1 lakh lives were saved due to effective lockdowns in March and April 2020. India took 175 days to clock its Covid peak from the first 100 cases. The number is more than thrice the number of days taken by developed countries like France, Italy, Germany, Canada and Russia. In India, 1 per cent increase in stringency resulted in 4.6 per cent less spread of virus. This helped in causing 5.9 per cent less deaths per capita. Overall, India saved 20 lakh lives due to its lockdown strategy.

Authors took note of the fact that a large share of credit also goes to cooperative federalism. Citing the success in places like Bhilwara, Dharavi and Kerala, it was appreciative of the fact that the Modi government took a bottom-up approach, unlike China. Most Covid related powers were delegated to local authorities.

Relief package

To mitigate the economic impacts of lockdown, a relieved package was essential. India’s relief package was broadly announced for 4 domains namely MSMEs, social, employment generation and agriculture. For MSMEs, Subordinate Debt for Stressed MSMEs and Guaranteed Emergency Credit Line (GECL) were two main schemes. The authors calculated the impact by relying on MSMEs contribution to the Indian economy, which is 30 per cent. It is scattered over 6.3 crore such companies.

Through relief packages, the government aimed to protect the Indian economy from the loss of $110.18 billion of GDP, which is 5.38 per cent of GDP. However, 9 per cent of MSMEs did shut down, bringing the overall impact down to $100.26 billion, which is about 4.9 per cent of GDP.

Employment generation and social sector

Protecting MSMEs is not enough and ensuring that they have an employable population is also a big challenge. For this purpose, people were given food and income security by the government. Authors of the paper have treated Pradhan Mantri Garib Kalyan Yojana (PMGKY) and Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY), Aaatmanirbhar Bharat Rozgar Yojana (ABRY) and PM Garib Kalyan Rojgar Abhiyan (PMGKRY) as fiscal stimuli, which they are, but for some unknown reasons people don’t call it so.

Under ABRY, nearly 6 million Indians availed the benefits. Under PMGKRY, 50.78 crore man days of work were created. Taking minimum daily wage in accounting, the overall impact of these schemes on the Indian economy has been estimated at $11.81 billion. On the other hand, cumulative assignments under the PM Garib Kalyan Package were marked at $ 33.81 billion. Their overall impact was $26.24 billion.

It is pertinent to note that the return was not fabulous in the social sector domain in absolute terms. It was not even the target since the final aim of social sector schemes was to not let demand go down due to people’s spending on food.

Agriculture

With food and employment security, most of the urban and unorganised working class had migrated to villages. Apart from MGNREGA, farming emerged as a key avenue for keeping people engaged. The government also pitched in with its own packages for the sector. The following chart depicts how much each-sub sector of farming got in its covid relief package. In authors’ words, “these schemes varied from DBTs to loan extensions to subsidies to financing projects.”

In total, the government allocated $49.4 billion for the sector. Such is the impact of other schemes that, despite an increase in the employment rate of agriculture, less than 50 per cent of the amount was availed by beneficiaries.

Vaccination

The aforementioned schemes could keep going on and on, until the emptying of coffers. Thankfully, vaccines arrived on time. But India had a peculiar problem of its own with regard to vaccines. With a population of 1.4 billion, even autocracies that operate on a single order face challenges in executing vaccinations, let alone democracies.

To sort the issue, India relied on a phase wise approach to vaccination. In the first phase, frontline workers were provided the vaccines, so that economic activity could kick start. Then vulnerability became the main factor. That is why people belonging to middle age were inoculated in the last phase as they are the least vulnerable of the bunch.

Given the size of the population, there were concerns that overcrowding would cause chaos. To address this, vaccination sites were divided into four sections namely registration, waiting, vaccination, and observation, as well as entry and exit points. Furthermore, in order to track each individual’s vaccination status, the vaccination process was routed through the CoWIN app, an interface that mapped the entire vaccination process.

Finally, to supplement the country’s native cold storage capacity, the Covid-19 vaccine was stored in 29,000 cold chain points, 240 walk-in coolers, 70 walk-in freezers, 45,000 ice-lined refrigerators, 41,000 deep freezers and 300 solar refrigerators. Authors of the study compared India’s vaccination strategy with that of other countries and found its performance more satisfactory, given the scale at which it was implemented.

According to their estimation, more than 34 lakh lives were saved in India due to vaccination drives. Taking the minimum wage at Rs 269 with Workforce participation rate of 38.2 per cent pins the direct impact of vaccination at Rs 11,000 crores. Given the fact that more than Rs 19,675 crores were spent in vaccination, it is a net loss.

But it is not the same when you calculate the total impact. According to RBI, 1 per cent change in initial expenditure raises income by 2.5 per cent. That puts the total impact of vaccination at Rs 27,400 crores. All in all, India’s vaccination drive helped in a contribution of Rs 7,725 crore to the Indian economy.

It helped bring a significant change on other metrics like GDP per capita and GDP per employed. The following two graphs give a much more nuanced and clearer picture of impact. The net benefit accrued due to vaccination is $15.42 billion.

India’s emergence

India’s success in tackling Covid has remained an uncovered story till now. Look at the post-Covid world. It is India and only India. Which country became the chief exporter of vaccines when the so-called developed world was pulling out its hand? It’s India. Which country has pitched in to secure food security during the Ukraine-Russia crisis? It’s India.

Which country is fighting tooth and nail against the discriminatory WTO regime? It’s India. Which country responded first to the Turkish earthquake? It’s India. Which country is the fastest growing major economy in the world? It’s India. Which country is recession proof? It’s India. Which country’s last budget before the election year is not populist? Not the United States of America, but India.

India has acquired a significant stature in post-Covid world. The Stanford University paper only puts a numerical stamp on it.