What Covid second wave tells us about India

Government’s Achilles Heel is its tendency to control. For people, the weak point is an unwillingness to follow rules.

India should not have had a second wave of Covid-19. At the very least, it should not have had a second wave that is more virulent than the first. Yet, somehow, India has stumbled into a dangerous situation. No doubt, it will fight back. In many ways, India’s experience with Covid-19 is the story of India itself: a saga of underachievement and missed opportunities with a scattering of excellence and plenty of resilience. It is a story of what might have been, even while eschewing the prophets of doom. It is easy to lay blame on the door of the Government, and credit everyone else. But often, the Government and people combine their base instincts to produce suboptimal outcomes.

The Government’s Achilles Heel is its tendency to control. For people, the weak point is a lack of control: an unwillingness to follow rules, to comply with best practices and to adhere to discipline.

If there is one thing India ought to have learnt from its tryst with a controlled economy it is that administrators are not good managers of the forces of demand and supply. India was in an enviably good position on vaccine supply in January. Serum Institute of India had already stockpiled around 50 million doses of Covishield, while waiting for regulatory approval and would produce at least 70 million doses a month post-approval. Therefore, by the end of March 2021, between 200-250 million Covishield doses would have been readily available. Add to that Bharat Biotech’s Covaxin, and the number would be between 250-300 million doses. But India had only administered 65 million doses by the end of March. Even if you count the 65 million plus doses which were sent overseas, either through grants or exports, the supply of doses far outstripped demand. Why was the Government rationing so tightly? All the priority categories could have been bundled together in round one.

Now, when the vaccination needs rapid scaling up, there are reports of inadequate supply. These seem incorrect given the arithmetic, but inevitably there will be challenges on supply when vaccinations are opened for more categories. The Government’s main intervention on the supply side has been to cap the cost of the vaccine to be administered by private hospitals. Price cap is a disincentive for the two vaccine manufacturers, who have not scaled production to their full capacities. To enhance supply, the Government did well by granting emergency authorization to Covaxin early on, but thereafter has been less keen to give regulatory approval to others. If the Government had confined its intervention to subsidising the poor and developing a queueing system through Cowin, market forces would have ensured a far more efficient vaccination drive.

But old habits die hard. There are plenty of prices which remain controlled in different sectors of the economy—from industry to infrastructure to agriculture to education. And supply side interventions such as export bans, export duties, import duties/quotas are routinely applied ostensibly to manage demand and supply across a range of goods. Unsurprisingly, the economy is racked by inefficiencies. India will always underachieve on its economic aspirations as long as administrators try to manage demand and supply. In a market economy, it is unnecessary.

Of course, even if the Government missed a trick in letting Covid-19 bounce back, the people could have ensured it stayed subdued. To be fair to the Government, particularly Prime Minister Narendra Modi, the messaging about wearing masks, keeping social distance and hand hygiene has been smart and repetitive. It has also been thoroughly ignored. Some of it may have been driven by a false sense of security after the first wave ebbed, but much of it is the old habit of not following rules. That is why so few Indians pay income tax. That is why so many Indians die in traffic accidents. That is why the standards of cleanliness and hygiene are so low. India underachieves not just because of what the Government does or does not do, but because of what the people do and do not do.

This non-compliant behaviour has consequences because the Government is forced to design policies and rules based on the assumption that people will disobey. That is why policies and rules become complex and complicated. The response of people to added complexity is more ingenuity and further non-compliance. Eventually, any modicum of efficiency is killed.

Perhaps, the reason Indians are not agitated about any of this is because we still manage to produce some excellence amidst adversity. The country’s vaccine making capacity, which puts it among the top 5 nations in the world, is testament. And resilience is par excellence, of systems—the healthcare system has managed with limited resources—and of individuals—the wheels of the economy haven’t come undone under the weight of the second wave.

However, if India is to decisively win the battle against Covid-19 and the bigger war against general underachievement, islands of excellence and resilience are not enough. The government must be less controlling and people must become more compliant. Dhiraj Nayyar is Chief Economist, Vedanta.

Serum Institute of India had already stockpiled around 50 million doses of Covishield, while waiting for regulatory approval and would produce at least 70 million doses a month post-approval.