The second round of COVID raises 4 key challenges for India
In last few days, India had the dubious distinction of overtaking Brazil in terms of COVID cases. With more than 2 lakh fresh cases per day, COVID is becoming a health crisis. Here are 4 challenges.
Producing enough vaccines
The first challenge is to have enough of vaccines to inoculate the entire people twice over. It is hard to imagine why the vaccines are taking so long to come off the shelves. For example, in the case of the proposed Novavax, Poonawalla has requested the US to ease vaccine input export norms. It is also not clear why Bharat Biotech’s Covaxin is not available freely on the shelves as it should be. We could have moved much faster on the Sputnik-V and the J&J vaccine. It is just unacceptable if the vaccine capital of the world does not have enough shots.
Ensuring local vaccine logistics
It is tough to understand what holds the GOI from diverting transport as well as cold storage resources from other areas to making vaccines available. The Serum Covishield needs temperatures that are easily available commercially. The big lesson we need to learn about vaccine logistics is that it is always a push and not a pull strategy. Expecting people to come to get vaccinated will always be a slow process. The answer is to go to the people and stress mandatory inoculation as that is the only approach that works. The need of the hour is high speed.
Inflation could be a bugbear
One thing that is evident from the latest CPI inflation number is that it is getting tougher to control inflation. The base effect had pushed inflation lower in the months of Dec-20 and Jan-21 but we have seen inflation rally 146 bps in the last 2 months. Inflation is not so much about demand but about supply side bottlenecks. Most of these bottlenecks do not have short term solutions and may continue to fester for more time. That is evident if you look at the core inflation getting to a 29-month high of 5.96%. The core inflation is the sticky side of inflation which does not taper with the normal inflation cycles. The COVID has sustained high levels of core inflation due to supply chain blockages.
What about FY22 GDP?
In the midst of all the hullabaloo over prices and logistics, we must not lose sight of the core problem. A lot of the euphoria predicates on the expectation that Indian real GDP would grow at 12- 13% in FY22. If the high frequency data points like PMI, core sector and IIP are considered, then that looks increasingly difficult at this point of time. Anything lower than 12% GDP growth would put India at a disadvantage versus China and also make it tougher to sustain the stock market valuations at these levels. For the sake of markets, growth and jobs, GDP needs to pick. For that COVID must be reined in sooner than later!