At the moment, all discussion revolves around Omicron, or other possibly more virulent versions of the virus. On January 2, the Ministry of Health and Family Welfare issued a press release, aptly titled: “Covid-19: Myth vs Facts”. To quote, “In a recently published news article by a reputed international news agency, it has been claimed that India has missed its vaccination target. This is misleading and does not represent the complete picture.” Indeed, that particular news agency has done several stories on how India’s vaccination drive has stumbled, or has met with resistance, or masks a divide. It has also done a story on how India’s delayed action on the Delta variant caused cases to spiral around the world. No one, including the WHO, has of course pinned down blame on the country where the virus originated initially. China is spared the culpability and conversely, there are those, some Indians included, who would like India to fail. There are cross-country figures on vaccination and in these, India doesn’t compare at all unfavourably with more advanced countries. In such numbers, the metric used is typically the percentage of total population. India’s vaccination for 15- to 18-year-olds has started recently. Therefore, a better metric is the percentage of eligible population, not the total. Let’s take the US as an example. As that press release stated, in first-dose coverage, India has covered 90% of the population and the US 73.2%. In second-dose coverage, India has covered 65% and the US 61.5%.
True, cumulatively, there have been more than 4,80,000 deaths in India and that’s a reason for regret. However, whether it is deaths, new deaths, active cases or tests, India’s management doesn’t compare that unfavourably, especially when normalised for its population. In that event, why is there a paranoia over Omicron? New cases are certainly climbing sharply, particularly in Maharashtra, West Bengal and Kerala. So are positivity rates. Given inevitable socially irresponsible behaviour and time lags in transmission, infection numbers will increase, until they taper off. But severity, hospitalisation and deaths, expressed as percentages, will remain low. The paranoia, in citizens and in government responses, is understandable, given the trauma associated with the second wave in the first half of 2021. Vaccination numbers are higher now, there is heightened immunity, and the medical systems are better geared. True, beyond mortality, we don’t know the adverse morbidity consequences of Covid on health or even on educational attainments. Nevertheless, when the economy is on the rebound, knee-jerk reactions are likely to stifle it. Almost one decade ago, Gurcharan Das wrote a book titled, “India Grows at Night”. The subsumed second half of the expression was “When the Government Sleeps”. This is a colourful image when several states have imposed night curfews. Or consider Delhi’s rule of opening markets and shops on alternate days, odd versus even. December 31 was followed by January 1, both odd numbers, admittedly a rare event. But there was confusion about whether odd/even would override the alternate day rule.
There can be no debate about the economy rebounding. This is evident across a broad set of indicators. Every year, the Department of Economic Affairs (DEA) brings out a “Monthly Economic Report”. The last such was for November 2021, not factoring in Omicron completely. Nevertheless, let me quote from this: “Latest GDP estimates released by NSO showed that Indian economy grew at 8.4% YoY in Q2 of FY 2021–22 after clocking 20.1% YoY growth in the preceding quarter … With this, more than 95.6% of the H1 output of 2019–20, the pre-pandemic year, stands recovered … Among the 19 HFIs (high frequency indicators), there are some indicators whose recovery is way beyond 100% such as power consumption, E-Way bill volume, merchandise exports, coal production, rail freight traffic, etc., which suggests that not only the recovery is complete, but also the economic growth is steadily gathering momentum over corresponding pre-pandemic levels of output. … However, the new Omicron variant of Covid-19 poses a challenge to the sustained recovery, and Covid-19 appropriate behaviour is warranted. That said, the economy is better prepared to work with Covid, with rapidly growing vaccination coverage and lessons learnt from the second wave in containing the contagion.”
This quote doesn’t give a specific real growth number for 2021–22. Most forecasters, including those outside the government, expect real GDP growth of around 9.5%. This isn’t just about growth, but levels too, a point made in the quote. With that kind of growth in 2021–22, the economy more than recovers losses suffered in 2020–21. Of the four drivers of growth, consumption, government expenditure and exports (net) have performed well, and it was only a matter of time before investments (once capacity utilisation improves) and labour markets revived. This augured well for 2022–23 too, since construction, services and contact-intensive sectors (travel, tourism) that hadn’t recovered in 2021–22 would have normally done so in 2022–23. We are less than a month away from the Union Budget for 2022–23 and we shall soon know the real and nominal growth the government expects next year and its proposals to nurse the fragile recovery and sustain it in 2023–24 and beyond. This depends on productivity and that’s a function of efficient land and labour markets. In both, the Union government has limited degrees of freedom. The Centre also has limited degrees of freedom on expenditure and indirect taxes. One should remember both statements when one has expectations about the Budget. Knee-jerk reactions to Omicron (with an anagram of moronic) can derail growth prospects and recovery.
(Views are personal)
Bibek Debroy
Chairman, Economic Advisory Council to the PM
(Tweets @bibekdebroy)