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Surge in COVID-19 cases poses downside risks to growth: Finance Ministry

The 'Monthly Economic Review' for February also stated that higher-than-expected subsidy outlay in 2020-21 has led to real GDP contraction projections to be larger than that of real GVA, an unusual occurrence in itself.

March 05, 2021 / 02:54 PM IST
Union Finance Ministry. (PC-PTI)

Union Finance Ministry. (PC-PTI)

An increase in the number of active COVID-19 cases in India poses a major downside risk to economic growth, the Finance Ministry said in its monthly economic report on March 5.

The 'Monthly Economic Review' for February also stated that a higher-than-expected subsidy outlay in 2020-21 has led to real gross domestic product (GDP) contraction projections to be larger than that of real Gross value added (GVA), an unusual occurrence in itself.

"While India continues to avoid the second wave of pandemic, there has been a surge in cases in eight states underscoring once again the inevitability of social distancing in keeping the pandemic at bay until a critical mass of inoculated population builds up immunity to control the growth of infection in the country," the report said, adding that the pace and spread of the vaccination programme will be crucial over the coming months.

"Rapid production and deployment of COVID-19 vaccination will be critical to taking forward the health stimulus deep into FY22 and India is well in position to do so having become the largest producer of vaccine in the world and currently ranked third behind the US and the UK in administering vaccine doses," it said.

On March 4, nearly 17,000 new active cases were reported from across India, even as 13.8 lakh people received COVID-19 vaccine doses. Cumulative cases stand at 1.12 crore, with 1.08 crore recoveries and 1.8 crore vaccination doses administered.

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COVID-19 Vaccine

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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On the issue of the official advance estimates for 2020-21, the review said that the real GDP forecast of 8 percent contraction was larger than the real GVA forecast of 6.5 percent contraction.

"This is not a normal occurrence. Real GDP growth has been higher than real GVA growth since 2011-12. Recalling that GDP is GVA plus indirect taxes net of subsidies, GDP growth is higher than GVA growth when growth of indirect taxes is higher than growth of subsidies.

"The food and fertiliser subsidy from budget estimates to revised estimates of 2020-21 increased by Rs 3.7 lakh crore. After making adjustments for pre-payment of loans of Rs 2 lakh crore taken for paying subsidy of previous years, the balance Rs 1.7 lakh crore emerged as the additional subsidy paid in the pandemic year. This enhancement caused the growth of subsidies to be significantly higher than the growth of indirect taxes," it said.

The report said that in 2021-22, annual growth of subsidy estimated over the unusually large base of 2020-21 will again become lower than the growth of indirect taxes.
Arup Roychoudhury
first published: Mar 5, 2021 02:54 pm

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