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A basic principle of consumer behaviour drawn from microeconomics is that individuals should allocate resources across items of consumption to equalize the marginal utility derived per rupee spent. The same principle can be applied to optimizing public health expenditure as well; we should aim to equalize the public good derived from the last rupee spent across disease types. When there is greater ‘bang per buck’ for Disease A as compared to Disease B, resources should be moved away from B to A.

Of course, evaluating public good derived from a certain outlay is not easy. But the principle gives us a valuable framework of thought to assess if public finances are being managed efficiently.

While it is true that India has made significant strides in public health, for instance with regard to the medication of smallpox and polio, we continue to face significant challenges with respect to diseases like tuberculosis, also a communicable disease. The World Health Organisation (WHO) TB statistics for India for 2018 give an estimated incidence figure of 2.69 million cases with the annual number of deaths at 440,000. This translates into roughly 850 deaths per week.

The first confirmed death due to covid-19 took place on 12 March. To date, there have been about 1,000 deaths in India, a rate approximately 5 times lower. How do the budget allocations across the two types of diseases compare? While it is not possible to estimate spending on TB alone, the WHO ranks India 184th out of 191 in terms of percentage of gross domestic product (GDP) spend on healthcare. Even countries like Sri Lanka, China, and Thailand invest three to four times more per capita on healthcare. At present, government spending on the healthcare industry stands at 1.15% of GDP. Prime Minister Narendra Modi has promised to double annual spending on healthcare to 2.5% of GDP by 2025.


One week of lockdown accounts for approximately 2% of GDP. A five-week lockdown would amount to a loss of close to 10% of GDP. This does not take into account the loss of GDP that takes place after the lockdown is lifted owing to the loss of economic momentum. So we have already spent 9 times the entire annual health budget of the Indian government in just 5 weeks on one disease alone, a disease which at present has a mortality impact which is five times lower than a disease like tuberculosis (TB).

But what of reports suggesting that the infection rate in India would have been several multiple times higher were it not for the lockdown? The elephant in the room is that these conclusions are based on unreliable testing data. As reported by www.statista.com , as of 27 April, the number of people tested per million population in India stood at 482 as compared to 10,656 in Turkey, 16,500 in the US, and 32,400 in Portugal. Hence, the data on the number of infected people reflects our limitations of testing capacity rather than the actual number of infections. Even in the US, where testing has been far more aggressive, a study by Professor Jay Bhattacharya of Stanford University indicated an infection rate 50 times higher than reported figures. The ratio of actual cases to reported cases might be of similar magnitude in India. This conclusion is supported by ground realities like the fact that 260 million Indians live in urban slums. A lockdown can prevent slum dwellers from working but probably not from getting infected.

A high number of infections is both good and bad news. The bad news is that we could have reached the stage of community transmission. The good news is that mortality rates in India, at 3.5%, already one of the lowest among highly affected countries, are very likely to be much lower. In other words, in India covid-19 is probably much less lethal than it is made out to be, and our efforts should be targeted to the vulnerable sections of the population like the elderly and not with the citizenry as a whole.

Indeed, large parts of India are cutoff from the comings and goings of the global economy. People living in those areas would have had a minimal chance of being infected, unless migrants from urban areas were forced to return. So while a total lockdown is ineffective for Indians in urban slums, it is unnecessary for Indians in relatively cutoff areas. Hence, what was needed was a partial, targeted lockdown that made advance plans to ensure that internal migration did not take place.

Further newspaper reports have quoted Indian Council for Medical Research (ICMR), India’s leading medical research body, as saying that the lockdown would only delay transmission of the virus unless certain measures like house-to-house screening and scaling up of quarantine for those showing symptoms in affected communities were taken during the period of the lockdown. The inability to successfully implement detailed plans with respect to these measures has reduced the public good resulting from the lockdown.

The second economic argument against the lockdown is macroeconomic. Nearly 90% of the Indian workforce is in the unorganized sector. Assuming that workers in agriculture have food supplies, this leaves 40% of the workforce and their dependents without a source of food. Many of these people also need to pay monthly rents. So the government has to take responsibility for 500 million people in addition to the already onerous task of buttressing an economy that was in decline even before the virus struck.

Finally, a political economy argument. The difference between covid-19 and other diseases is that there is no cure for covid. For the poorer sections without access to medical facilities, it is no different from a disease with a cure. But the better off sections of the population feel vulnerable in a way they don’t with curable diseases. This is one factor explaining the disproportionate response to covid-19.

With regard to lockdowns and the associated testing strategy, there are a wide variety of responses including localized recommendations, national recommendations, localized lockdown with national recommendations, and finally a national lockdown. India’s response puts it in the list of countries with the most stringent measures. But public policy is a matter of context. Our desire to be a role model for the leading countries of the world should not blind us to the realities of our national interest.


Rohit Prasad is professor, MDI Gurgaon

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