Mumbai: Across India, several lockdowns are coming into force, notably in Maharashtra, which has the highest number of cases across the country. The lockdown means two things: One, it is a public health response in order to help break the chain of transmission. But equally, it impacts the economy and is now leading to what Crisil, the ratings agency, is calling the "second shock". "Few countries have escaped a second wave of the pandemic and it is India's turn now, with daily cases crossing the previous peak of September 2020," Crisil has said. We are now at over 126,000 cases daily, and the sharp jump only came as recently as the last week of March.

What is the kind of economic damage we could see from the lockdowns, and what does this do to growth projections? And where are we in the public health response--both in terms of preventing the spread of the disease further, and increasing the pace of vaccination?

We speak with D.K. Joshi, chief economist at Crisil, and Ishwar Gilada, infectious disease specialist well known for his work against AIDS.

Edited excerpts:

Dr Gilada, where do we stand today from a public health point of view--given that the disease is still spreading, people are landing up in hospitals, and there is no space in hospitals, and at the same time, we are trying to step up vaccination efforts?

IG: We are in the second phase of the pandemic. If we did not presume that we would be in a second phase, then we were in fool's paradise. Wherever we have seen a second wave, it is much stronger than the first wave. Secondly, currently, this virus is highly infectious but less lethal. So it is bound to have more cases. Yesterday [on April 7], we reported 125,000 cases in India, but we might be going to almost 250,000 in just 10-15 days.

Thirdly, people are talking about Maharashtra. Don't go by numbers [of cases]. Go by the percentage of increase. Maharashtra was contributing 70% of new cases [in the country] 20 days back. Yesterday, it contributed to 45% cases. That means, there is a 25% gap. And this gap is filled by some adjoining states like Chhattisgarh, Madhya Pradesh, Gujarat and Karnataka.

I will give an example of two more states--Uttar Pradesh (UP) and Bihar. On March 10, UP had only 121 cases, and yesterday it had more than 6,000 cases. So there is a 50-fold jump in 25 days. Bihar had only 44 cases on March 10 and yesterday, there were more than 1,500. That means it is a 35-fold jump. Maharashtra's cases rose only four times.

I am not taking the side of Maharashtra, but if you are talking about economic impact, we should use the right figures. A country of the size of India, 140 crore people, is bound to be in the top two or three countries in terms of health problems, and many other problems. So rather than ranking based on numbers, we should rank based on cases per million and deaths per million. Among 210 countries, India ranks 120 in deaths per million and 125 in cases per million. The moment you start putting it like that, then the economic impact and projection that India is [in a very bad state] will stop automatically.

On vaccination, the current pace has to be manifold. And if at all it is increased, it is to prevent a third wave, and not the second wave. Vaccines' impact will be seen only 6-8 weeks after the first dose and two weeks after the second dose; so, a minimum of two-and-a-half months are required to see the impact of the vaccination going on currently.

Lastly, most importantly, we have to look at masks; test, treat and track; and vaccination--MTV. Vaccination is the last [measure] not the first, masking is the first.

When you said that we could go to 250,000 cases, did you mean that we would peak out at that number, or could that keep rising?

IG: We cannot say anything about this virus. But in Maharashtra, we are seeing cases in the range of 45,000-57,000 per day. It is not crossing 60,000, though about 200,000 tests are being done every day. So the positivity rate is remaining the same. So possibly, in the next two weeks or so, we may attain the peak. But when that happens, other states may surge. It could be a different peak in Maharashtra and different peaks in other states.

Mr Joshi, the projections on India's economy only a few weeks ago were a lot more optimistic, because they assumed that we were leveling off at only a few thousand cases a day, and that things would settle down. But clearly that is not the case. So, how are you seeing the numbers now?

DKJ: True, it's déjà vu in some sense. If I take you back to April 2020, I think [there were] similar concerns. Now we are facing the second wave. I would summarise it in four words: There is surprise, uncertainty, downside risk and frequent changes in economic outlook. And as you rightly said, we will see all of them play out.

We also looked at the data that Dr Gilada pointed out, and the second wave is typically much stronger than the first wave. But the economic impact is not that pronounced, because people have learned to live with the virus and work their way around it. There is not as much fear [as during the first wave]. And the experience of the US and Europe who have already had the second wave tells you that particularly the manufacturing sector is reasonably well placed to weather the second wave.

I think the worry is more on contact-based services such as tourism, restaurants or hospitality. These were anyway struggling for the last one year and they were hoping to come out, and the second wave actually hits them even harder. So in terms of the overall growth, the impact will be much less pronounced than the first wave but the inequalities in the system could continue because I think the segments which were hurt earlier are going to be hurt again this time around.

How are you looking at the impact of lockdowns in Maharashtra and many other states, which have some versions of lockdown. All of this is bound to have some impact, won't it?

DKJ: Yes, absolutely. What we look at these days typically is the Google mobility indicators. And they are already beginning to dive down. For states like Maharashtra, they are coming down faster. That's the first indicator. It is available on a daily basis and it kind of correlates with economic activity. But I must point out, I still remember in the first lockdown, all these hawkers etc. had disappeared. But this time, it is not the case. They are still operative. So I think the intensity of the lockdown this time, particularly for the vulnerable sections, is not that deep. As I said, the dichotomy in the economy--services vs manufacturing, small vs large--will get more pronounced. That's what we think.

Any early projections? Any difference from earlier projections? And to what extent?

DKJ: Well, it looks like April will be hit, depending on how it plays out. As I said, there is a huge amount of uncertainty associated with how the lockdowns will proceed, and how the virus will spread, etc. The last time, the rural areas were not that badly hit. But this time around, if it goes to the rural areas, then you have a different kind of scenario playing out. And we don't know much about that. So coming out with numbers that are reliable is extremely difficult.

Our forecast currently for the year as a whole (2021-22) is 11% GDP [gross domestic product] growth, which is a little lower than what the multilaterals and some others had projected. There is a downside to that number, I would say, but I have no ability to assess how much as of now. As things progress, as the virus plays out, and the lockdowns are implemented--because that's the only prophylactic till the time you have herd immunity--all that will impact economic activity. So in terms of overall growth, the impact will not be as pronounced as the last year. But in terms of inequalities, I think it could still be as pronounced as last year.

You are saying you had projected at 11%--and that is obviously on a very small base--and that itself is likely to come down?

DKJ: There is downside risk to that. We will have to see. Dr Gilada would be much better placed to comment, but if you do get some herd immunity and impact of vaccination in the second half, then you would see some of these activities which are very weak right now also surge. We have to watch it play out. Right now, we are giving guidance that there is a downside risk to this number.

Dr Gilada, you were saying that vaccination and all the other efforts will hopefully start taking effect in the second quarter, which is July onwards. So could one say whatever happens, the worse could be over by June? Or is that too ambitious a projection?

IG: Basically, we should not expect any worse because the current strain of the virus, as I said, is highly infectious but less lethal. People are not going to die or be seriously ill. What we are seeing with hospitals being full, they are not truly full. There is a lot of rush from the patients' side, and a lot of doctors are admitting patients who do not require hospitalisation. A lot of injections are administered when they are not required. So the medical side is totally different than what is projected currently.

Mr Joshi has raised the issue of herd immunity. Actually, there is nothing like herd immunity. We used to think we would acquire herd immunity. Till January or February, 55-60% of people coming to our clinic for non-COVID reasons were already antibody-positive. They were already infected. Despite that, we are seeing a lot of infections happening. So we don't know whether having had the infection in the past is protecting or not protecting [people from a re-infection]. People who have taken two doses of vaccination are also getting infected and we do not if that is causing herd immunity. So herd immunity is quite un-understood in COVID. The virus is very difficult to understand. It is changing its behaviour so often.

I do not understand the market, but it is inversely proportional to cases: [When] cases are low, the market is up and vice versa. We need to tell people that there is nothing to worry about [rising] cases. The graph is going to grow further, but deaths will be fewer because we were looking at a case fatality rate (CFR) of 3.5% earlier in Maharashtra. Currently, it is 0.7%--so it has come down to a fifth. So even if cases rise double or triple, we are still going to see fewer deaths and fewer people with serious illness [compared to the first wave].

Mr Joshi, one of the points I think you had mentioned when you did a similar study in the peak of 2020 was how the distribution was happening by economically advanced regions versus other regions--and that in turn, obviously, has an impact on the way economic growth pans out. How is it looking to you now?

DKJ: I think it is the same scenario playing out. Maharashtra, Gujarat, Karnataka are states that are economically stronger registering high growth. I think it looks similar in nature. The spread of the disease does not seem to be that much in poorer states like Bihar, UP etc. So it is concentrated in--or at least beginning from--the richer states.

Do you feel that it will have a disproportionate impact on economic growth like it did last time?

DKJ: I think it is hard to say right now. As Dr Gilada was saying, it is so unpredictable. Last year was full of surprises for all economic forecasters, they had to revise their numbers--not in small measures but quite drastically. First it was downward revision and then it was upward revision. So I wont stick my neck out too much on that because I'm not too sure how it will play out.

What is your sense when you look at the demand numbers or investment intentions that may have started fructifying today, but perhaps may get pushed or postponed to the end of the year or maybe even later?

DKJ: I think most of the investment would be from the public sector, which is the government, and I think the state governments have also planned higher investments in the coming fiscal year. Many of them can be pushed--road construction etc. As I said, you have learned to negotiate around the virus a little better. If you have lockdowns etc., there will be some implications of that on the labour availability also, like we had last time. But having said that, I would still say that it would be less pronounced compared to last year and the ability to invest will also depend on whether you have the adequate funds, the projects are ready and so on and so forth.

We do expect investments to do much better this year compared to last year because there are many projects in the pipeline and I think some of the things are working reasonably well. And particularly for some of the segments where a PLI [production-linked incentive] scheme has been announced, I think that will also give some fillip to the private sector participation in the investment story to some extent. The virus will of course make the path a little rocky, so to say, but nevertheless, the investment momentum would be much better than last year.

Dr Gilada, one key reason we are seeing this dramatic spread is behaviour. The lockdown is also an attempt to influence behaviour by keeping people bound to one place. Are the steps to curtail movement likely to stop things where they are, or have we in some ways let the horse already bolt from the stable because the cases that we are seeing today have obviously been contracted 15 days ago or more?

IG: The infections depend on a disease triangle--host behaviour, parasite/virus' behaviour and environment. I'm not going to go into the environment, but we really cannot blame only human behaviour--because it has not radically changed. Our 40% masking has not gone to 60% earlier and gone down to 40%. It has been remaining 40-45%. So when the virus was a little weaker, about three to four months back, we were reporting very few cases. But now the virus has become stronger, having more infections. So rather than blaming human behaviour, we should blame the virus, if at all.

Secondly, the lockdown's impact is a psychosocial impact. People [who would have otherwise been] going out casually for food or meeting some friends and family will not go out. And that is probably the only administrative or political decision, to keep that psychosocial impact. Otherwise, it doesn't change any spread of infection.

You have said that the case fatality is low and severity of the infection is less. At the same time, there are people who are landing up in hospitals and many of them are reaching the ICU or even the ventilator stage. And unlike the last time, many of us know many of these patients now. Are we medically prepared? Do we have enough drugs and medicines to battle this?

IG: First, we are medically prepared. Secondly, we are better equipped than last time. Number three, the shortage of beds is because last time, they had acquired a lot of private hospitals and made them COVID beds. It has not been done this time. It has been done very recently.

There is no shortage of drugs, but whatever shortage is created is artificial shortage. The Government of India can issue a compulsory license for remdesivir. Once that is done, there will be many more players who can produce that drug, so the cost can go down. This is in the hands of the Government of India: Using this opportunity of COVID to issue a compulsory license, so that these drugs can be made easily available.

There is no role of tocilizumab or any drug other than remdesivir and steroids. Steroids are in plenty and they are very much cost-effective. There is a little shortage of remdesivir in Maharashtra, but possibly some holes have been plugged recently. There can be a drug price control order (DPCO) where they can bring this product under DPCO so that hoarding can stop. Currently there's a margin between stockage (Rs 1,000) and supply (Rs 5,800 as maximum retail price or MRP). If you reduce MRP to Rs 2,000 or so by applying DPCO, then it can be managed. I think we are managing well. There has to be some good coordination between state and Centre and they should also listen to public health authorities or experts so that things can be managed properly.

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