Herd immunity & Economy | Gist of Rajya Sabha TV / RSTV (now Sansad TV) - UPSC PDF Download

Introduction

The Finance Ministry has proposed for holding 24×7 vaccination against Covid-19 in the country for the next few months so as to quicken the vaccination coverage, thereby regaining the country’s economic growth momentum. In its monthly economic report released on Wednesday, the ministry said vaccinating 70 crore adults with at least the first dose by September will be crucial to achieving herd immunity, that could boost consumer and producer confidence, and reinvigorate the engines of economic growth. This means, with around four months left till 30 September, India will have to carry out 93 lakh vaccinations per day to achieve herd immunity. The peak daily vaccination rate attained till date is a little over 4 lakh, although that was achieved using one shift of 8-9 hours of vaccination. The proposal now is to make it 24X7 and target more than 90 lakh inoculations a day from now.

Clarity about Herd Immunity

• Herd immunity (or community immunity) occurs when a high percentage of the community is immune to a disease (through vaccination and/or prior illness), making the spread of this disease from person to person unlikely.
• Even individuals not vaccinated (such as new borns and the immunocompromised) are offered some protection because the disease has little opportunity to spread within the community.
• Vaccines prevent many dangerous and deadly diseases. In the United States, smallpox and polio have both been stamped out because of vaccination.
• However, there are certain groups of people who cannot get vaccinated and are vulnerable to disease: babies, pregnant women, and immunocompromised people, such as those receiving chemotherapy or organ transplants.
• For example, the earliest a baby can receive their first pertussis or whooping cough vaccine is at two months, and the earliest a child can receive their first measles vaccine is at one year, making them vulnerable to these diseases.
• Herd immunity depends on the contagiousness of the disease. Diseases that spread easily, such as measles, require a higher number of immune individuals in a community to reach herd immunity.
• Herd immunity protects the most vulnerable members of our population. If enough people are vaccinated against dangerous diseases, those who are susceptible and cannot get vaccinated are protected because the germ will not be able to “find” those susceptible individuals.

Breaking the transmission chain through vaccination

We need a clear enunciation of the plan. If it is to vaccinate a subset of the population, we need to see a scientific rationale for that choice, and how the decision to select the subset was made.

Uneven transmission of virus spreading

• For instance, the levels of immunisation needed for herd immunity are determined by how the virus spreads in the population, and makes the assumption that spread is homogenous.
• But SARS-CoV-2 virus spread exhibits a high level of uneven transmission. This is the reason why there have been a number of super-spreading events where some infected individuals spread the virus to very a large number of people while most infected individuals transmit the virus only to a few or none.
• While targeted vaccination of sex workers and injection drug users, where more HIV cases are seen, can help prevent the virus from spreading to the general population, such concentration of cases is not seen in the case of coronavirus.
• Unlike HIV, for SARS-CoV-2 we do not have any such groups. Even healthcare workers with PPE now have low levels of transmission so much so that many countries are thinking about not prioritising them.
• Considering that two doses of the vaccine are needed for full protection and increased vaccine hesitancy particularly as the vaccine development and testing are seen to be rushed, achieving herd immunity of 70% to break the chain would be challenging.
• It was only in January this year that India achieved 90% coverage of all vaccines to be given in infancy.
• If there is a drop in vaccine coverage in children beyond their first year of life in the immunisation programme, it becomes particularly difficult in the case of SARS-CoV-2.

Economic Consequences of Covid-19

• Indirect hit to confidence (wealth effect): A classic transmission of exogenous shocks to the real economy is via financial markets (and more broadly financial conditions) — they become part of the problem. As markets fall and household wealth contracts, household savings rates move up and thus consumption must fall.
• Direct hit to consumer confidence: While financial market performance and consumer confidence correlate strongly, long-run data also shows that consumer confidence can drop even when markets are up. Covid-19 appears to be a potentially potent direct hit on confidence, keeping consumers at home, weary of discretionary spending, and perhaps pessimistic about the longer term.
• Supply-side shock: The above two channels are demand shocks, but there is additional transmission risk via supply disruption. As the virus shuts down production and disables critical components of supply chains, gaps turn into problems, production could halt, furloughs and layoffs could occur. There will be huge variability across economies and industries, but taking the U.S. economy as an example, we think it would take quite a prolonged crisis for this to feed through in a significant way. Relative to the demand impact, we see this as secondary.

Policy measures for higher growth and reducing inequality

The government should have a three-pronged approach.

• First, an aggressive vaccination programme and improving the healthcare facilities in both rural and urban areas is needed.
• Reducing the health crisis can lead to an economic revival. Vaccine inequality between urban and rural areas has to be reduced.
• As rural areas have poor health infrastructure, more efforts are needed to reach the rural areas for vaccination.
• The crisis can be used as an opportunity to create universal healthcare facilities for all, particularly rural areas. Other states can learn from Kerala on building health infrastructure.
• Second, the budget offered some good announcements relating to capital investment in infrastructure.
• The Development Financial Institution (DFI) for funding long-term infrastructure projects is being established.
• A boost to infrastructure investment, including in rural areas, can lift the economy out of the Covid-19 induced slowdown.
• Third, there is a need for safety nets including cash transfers. The informal workers and other vulnerable sections including MSMEs have been dealt back-to-back blows in the last 13 months due to the first and second waves.
• A majority of workers have experienced a loss of earnings. Therefore, apart from its focus on infrastructure, the government has to provide safety nets in the form of free food grains for six more months, expand work offered under MGNREGA in both rural and urban areas and undertake a cash transfer to provide minimum basic income.

Conclusion

Monetary policy is already very accommodative and there are limits to more accommodation. In the near term, fiscal policy has to play a more important role in achieving the objectives of growth, jobs and equity by expanding the fiscal space by restructuring expenditure, widening the tax base and increasing non-tax revenue.