India’s economy is unfolding into a V-M-W 💸

A V-shaped economy is turning into a W, thanks to the M-shaped spike in covid cases.

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Good morning,

India is hell-bent on increasing solar manufacturing in the country and is giving it everything it has got. A European body is holding the mirror to how India is investigating adverse reactions to vaccines. A V-shaped economy is turning into a W, thanks to the M-shaped spike in covid cases. 

M-shaped Covid cases and a W-shaped economy?

Everyone was puzzled when India’s Covid-19 cases dropped like a rock last year. The hope was that the worst was behind us. Scientists said it was a mystery and wanted to understand what Indians were doing right, and if it could be mimicked in other countries.  

Well, that didn’t last long. Covid cases have crossed the peak of 2020, and daily cases have jumped 6x from just a month ago to over 100,000 a day.  

Source: Google

And with that comes the deteriorating sentiments on the general economic situation, incomes, and prices as per the result of a survey on consumer confidence released on 7 April by India’s central bank. The future expectations of these factors (one-year ahead) aren’t very encouraging either. 

Which means, all that revenge spending that India has been waiting for to drive its consumption story, is probably not going to manifest itself. For who wants to spend when incomes and inflation are of concern?! 

Economists at UBS Securities India estimate that households have lost a whopping Rs 13 lakh crore (US$174 billion) of their incomes from the pandemic-induced job losses. That’s a permanent loss. And the report forecasts that as consumption demand slows down, the economy will lose its momentum by mid-2021 as well. So prepare to see GDP numbers looking a little wobbly. 

Sure, economists get plenty of forecasts wrong. But what about the consumer confidence survey of households by the RBI? That’s some hard ground-reality. 

To be fair, it’s not just India that could find itself in a rut. And it could be a long-term rut as the global middle class evaporates (we wrote about India’s stunted middle class in BFO #254).

Across the developing world, the class of people who are expected to propel consumption are falling behind. That means the future is a divergent two-track recovery with the developed world pulling significantly ahead. And that comes with its own set of problems of inequality.

In India, the government has tried spending its way out of it, but of course it doesn’t have the firepower of the US. The RBI has also promised to keep the interest rates benign for as long as possible. And in its policy announcement on 7 April, it even changed track and said its future decisions will be not dependent on ‘time’ but on the ‘state’ of the economy, thus giving it more flexibility. 

Now, India has only one option, really—for the pace of vaccinations to pick up. Only 0.8% of the population have received both doses of the Covid-19 vaccine and only 5% have received the first dose. Otherwise, the sharp recovery that was in the works will falter and look like a W (BFO #159). 

Adverse effects of vaccine opacity

Spooky revelations made by the European Medicines Agency (EMA)—a body responsible for evaluating medical products—regarding the safety profile of AstraZeneca’s Covishield vaccine, hold deep lessons for India. Lesson on how India should go about investigating adverse events following immunisation (AEFI). The EMA investigated side-effects on a case-by-case basis and revealed the results to the public. So the world has now become conscious of rare side-effects of clotting—some of them even fatal—that are being linked to the Covishield jab. India, on the other hand, has been shoving stories of suspected deaths under the carpet. 

By March, India was investigating at least 71 post-mortems related to deaths following vaccination, but there has not been much clarity on how these investigations have been conducted. In at least three cases of the eight deaths related to Covishield that were probed, India has said that Covishield could have triggered the death. Read the central government report here. 

There were concerns about the safety of Covishield even in November 2020, after a Chennai resident sued the company upon developing neurological complications post the jab. This was when the vaccine was under clinical trials. 

In January, there was palpable reluctance among healthcare workers to take the vaccines, because while Covishield had anecdotal safety concerns, scientific data for Bharat Biotech’s Covaxin had not yet been released. 

But factions of the government pushed ahead with arm-twisting methods. In Odisha, for instance, the civil surgeon of Koderma city, in an office order dated 15 January, stated that those who do not take the jab will not receive their salary. 

On 17 January, the news of one of the first deaths post-vaccination started trickling in. It was a ward boy in Uttar Pradesh’s Moradabad town, who had taken the first dose of Covishield the previous day, and later died of septicemic shock. Around the same time, another health worker in Sandur, Bellary also died of similar causes. 

Despite the government maintaining that these events are ‘unrelated’ to the vaccine, EMA’s EU conclusion sets a precedent. “Committee carried out an in-depth review of 62 cases of cerebral venous sinus thrombosis and 24 cases of splanchnic vein thrombosis reported in the EU drug safety database (EudraVigilance) as of 22 March 2021, 18 of which were fatal,” it read.

This is the first time that a government agency has admitted that Covishield causes deadly side effects in rare cases, something the Indian government has been too shy to admit. 

Questions also arise on whether the beneficiaries were screened comprehensively for morbidities and conditions which are not suitable for taking the vaccines.

By 20 January, two more deaths had occurred in patients who had taken Covishield, but the government was quick to dismiss them. 

Two days later, a 56-year-old health worker in Gurgaon died—six days after taking Covishield—and her family filed a police complaint. Yet another health worker in Guntur died of brain stroke on 24 January, four days after the Covishield jab.

Demands to disclose results of the probe have fallen on deaf years. Back-to-back reports of deaths following the vaccination are too much of a coincidence. 

By 25 February, up to 45 deaths were reported post-vaccination, after which the Indian government stopped sharing data. 

On 1 March, Prime Minister Narendra Modi took the safer counterpart Covaxin manufactured by Bharat Biotech. It has, till now, managed to maintain an unscathed reputation, with no reports of deaths following its vaccination. While people were hesitant about Covaxin earlier due to the lack of data, release of phase-III trial data built confidence.

But while Covaxin has always been available in lesser quantities—with the majority of the centres administering Covidshield—the problem of short supply has now come up.

Even after concerning EMA revelations, which conclude that 1 in 100,000 may suffer from side-effects of Covishield, investigations into these deaths have not been transparent in India. And one can only hope things change for the better, after the upheaval EMA has caused.

India throws the kitchen sink at solar imports

You know how hard it is to quit something you are really hooked to. 

It’s no different for the Indian government. For three years now, it’s been desperate to reduce the country’s dependence on imported solar photovoltaic cells and modules.  

In July 2018, India introduced a two-year safeguard duty on module and cell imports from China and Malaysia. But the duty started at 25%, before tapering to 20% after a year and falling further to 15% in the last six months. It’s safe to say the duty bombed. 

The safeguard duty failed at augmenting Indian manufacturing. Local companies felt there would be no incentive beyond two years, which is how long it takes to set up a new plant. China’s share in India’s cell and module imports may have declined from 90% to 78% between the years ended March 2018 and March 2020; but the share of imports in meeting India’s requirement has not budged from 85%

So India decided to up the ante with a steeper levy. Last month, the government said solar modules will attract a basic customs duty of 40% and cells 25% from March 2022. It will likely be for a longer period than the safeguard duty. 

These levies are akin to digging a moat to protect Indian solar manufacturers from their Chinese rivals—a line of defence that has been breached before. So the government has decided to do one better by bolstering the arsenal of Indian solar module makers. 

Enter the production-linked incentive (PLI) scheme—the government’s new favourite tool to push local manufacturing. 

The government on 7 April said it’s setting aside Rs 4,500 crore (US$600 million) to hand out to module makers over five years. Not too many of the other sectors that have been included in the PLI scheme can boast of the government’s help in both fending off foreign competition and in expanding their manufacturing capacity. So there is little else left for India to do in its desire to indigenise its targeted 8X solar power capacity addition to 300 GW by 2030. 

Over to the manufacturers now. 

Shortages: In Chips & Dips

There still aren’t enough chips to go around. And no, I’m not talking about potato chips (or french fries), but semiconductor chips. Although, as far as shortages go, I wouldn’t be too surprised even if the shortage was in potato chips. After all, its accompanying dip, the famed ketchup, is facing a supply-chain squeeze.

The pandemic turned many sit-down restaurants into takeout specialists, making individual ketchup packets the primary condiment currency for both national chains and mom-and-pop restaurants. Packet prices are up 13% since January 2020, and their market share has exploded at the expense of tabletop bottles, according to restaurant-business platform Plate IQ.

I guess all those packets I’ve been hoarding over the years will serve me well now. 

PS: Find me a saucier headline than this: Ketchup Can’t Catch Up 

That’s a wrap for today.

Don’t forget to write in with your thoughts and observations on how this pandemic is reshaping businesses, societies, and economies. We will be back on Monday.

Stay safe,
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