SBI report pegs total Covid vaccination cost in India at Rs 3.7 trillion

Poorer states with high population would not be able to vaccinate themselves quickly. Richer states may have to pay a much steeper price given the global oligopolistic market, the report said

A recent report by State Bank of India’s (SBI’s) economic wing has pegged the total vaccination cost across 20 major states in India at Rs 3.7 trillion (Rs 3.7 lakh crore), which it said, is far less than the economic loss arising due to the recent lockdown at Rs 5.5 trillion (Rs 5.5 lakh crore), assuming lockdown for states end mostly by June.

“The vaccine’s reported price, as per the data available with UNICEF, is in the range of $2-$40. If we construct simple scenarios with different price ranges, i.e., at $5, $10, $20, $30 and $40, with the Rupee-dollar exchange rate of 73, and assume that Centre gives 50 per cent of the vaccines for the states’ population, the vaccine expenditure for the rest 50 per cent for various Indian states would be in the range of Rs 0.2 billion for Sikkim (if the vaccine is procured at $5 per dose) and Rs 671 billion for Uttar Pradesh (if the vaccine is procured at $40 per dose),” wrote Dr. Soumya Kanti Ghosh, group chief economic adviser at SBI in their latest Ecowrap report.

These however, according to Ghosh, represent extreme scenarios and the cost for each state will lie somewhere in between. 

“If we map this scenario analysis with the budgeted FY22 total expenditure of 20 major states, at the highest price point, the vaccine procurement is 16 per cent of the total expenditure for Bihar, 12 per cent for states like Uttar Pradesh and Jharkhand,” the report said.

As per UNICEF data, globally, the reported production capacity (per dose) stands at 22.2 billion in 2021. Out of the reported production capacity of 22.2 billion, 13.74 billion doses’ agreements is already formalised and out of this, 9.34 billion doses are secured. India has secured 0.28 billion, as per the dashboard data in UNICEF, and is also exploring other options.

A humanitarian crisis

Those at Nomura, too, suggest that the Covid second wave in India is more a humanitarian crisis rather than an economic one. 

“India’s second wave has likely peaked, but in its wake, it has unleashed a devastating human cost. A more virulent virus strain and stretched hospital capacity have resulted in a sharp rise in fatalities,” wrote Sonal Varma, managing director and chief India economist at Nomura, in a co-authored note with Aurodeep Nandi.

Vaccine cost

The hit to mobility due to the rolling state-wide lockdowns, according to most experts, has been steep, and the economic impact is likely to be most severe in May. That said, the overall hit to sequential growth in Q2 (April-June) is likely to be much less severe than in 2020, as lockdowns are more nuanced this time and consumers and businesses have adapted.

“We expect the second wave impact to be localised in Q2 (April-June), with GDP contracting by -3.8 per cent q-o-q, much less than during the first wave (-24.6 per cent in Q2 2020), and overall GDP growth likely at 9.8 per cent y-o-y in 2021 and 10.8 per cent in fiscal 2021-22 (FY22),” Varma and Nandi wrote.

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Meanwhile, States and Centre, Ghosh of SBI suggests, must chalk out a cold chain infrastructure system at the earliest, while simultaneously targeting international vaccine manufacturers through advance purchase agreements. On its part, the government should focus on vaccinating people of the worst affected districts first so that the spread can be controlled.

“Poorer states with high population would not be able to vaccinate themselves quickly. Richer states may have to pay a much steeper price given the global oligopolistic market,” Ghosh said.