Vaccination is not merely a health response, but is critical for opening up the economy. As such, the Covid-19 inoculation coverage should be treated for now as a macro-economic indicator, the India Economic Survey 2021-22, tabled in Parliament today, has argued.

Over the course of the past 12 months, India delivered 157 crore doses that covered 91 crore people with at least one dose and 66 crore with both doses. The vaccination process for boosters and for the 15-18 age group was also gathering pace at the time of writing, the Survey noted.

"Vaccination is not merely a health response but is critical for opening up the economy, particularly contact-intensive services," it highlighted.

Macro-economic indicators - such as GDP growth, inflation, foreign exchange reserves – are high-frequency data releases that mirror the output of an economy.

India’s vaccination drive, which began in January last year, was slammed for its tardy pace and many blamed Prime Minister Narendra Modi’s government for not placing advance orders for vaccine doses, potentially hurting the capacity-expansion plans of its two main suppliers – Serum Institute of India, which makes Covishield, and Bharat Biotech, which manufactures the indigenously developed Covaxin. If the supply crunch wasn’t bad enough, the triumphalism that was on display during election rallies early in 2021, as well as in religious gatherings, worked to convey a false sense of normalcy. Soon, India was engulfed by a disastrous second wave of the pandemic, overwhelming hospitals and crematoriums and leaving families scrambling for scarce medicine and oxygen supplies.

Given this backdrop, the vaccination drive was really crucial for not just saving people’s lives but also salvaging the economy, which contracted by a record 7.3% in 2020-21. India has done remarkably well in administering doses to its adult population, three-fourths of which is now fully inoculated.  

India’s services sector, which includes contact-intensive segments such as hotels and transportation, accounts for over half of the country's nearly $3-trillion economy, and was hit the hardest by the pandemic-related restrictions. But, it was impacted the most by the pandemic- related restrictions, especially for activities that need human contact.

Following India’s lockdown in March 2020, which was billed as the world’s strictest, the overall services sector contracted by 8.4% in 2020-21, but is now estimated to grow by 8.2% in 2021-22. However, the Survey notes, there is a wide dispersion of performance by different sub-sectors. “Both the Finance/Real Estate and the Public Administration segments are now well above pre-COVID levels. However, segments like Travel, Trade and Hotels are yet to fully recover. It should be added that the stop-start nature of repeated pandemic waves makes it especially difficult for these sub-sectors to gather momentum.”

India’s economy is expected to grow at 9.2% in the financial year ending March, the pre-budget Economic Survey said.  

This expansion comes on a low base after the economy contracted in the previous financial year, as harsh restrictions to curb the Covid-19 pandemic froze commercial activity, denting demand for goods and services, and upending supply chains.

The Survey 2022 expects the economy to grow by 8% - 8.5% in the financial year starting April 1.

Growth will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending, the Survey said. 

Credits - Cleartax.in