Rapid production and deployment of Covid-19 vaccination will be critical in taking forward the health stimulus deep into FY22 (FY 22), a report prepared by the Finance Ministry’s Economic Affairs Department said on Friday.
This remark has come at a time when the country is going through the second phase of vaccination that aims to cover 30 crore people by August.
The government has provided over ₹2.34-lakh crore for health and well-being in the Budget for FY 22.
According to the report, India is well-positioned to become the largest producer of vaccine in the world and currently ranked third behind the US and the UK in administering vaccine doses.
“To increase the health stimulus, the Covid-19 vaccination capacity has been ramped up with 10,000 private hospitals under Ayushman Bharat PMJAY, more than 600 private hospitals under the Centre’s health scheme and several other private hospitals empanelled with State governments ready for deployment. Development of 18-20 vaccines in the country is also underway to provide further stimulus to the economy,” the report noted.
Explaining health stimulus for the economy, the report said, it is not only about the Covid-19 vaccination programme. The stimulus has evolved into a comprehensive health care project in the country. Intensified Mission Indradhanush 3.0 launched in February 2021 for taking forward the Universal Immunisation Programme is an important pillar of the project.
GVA verus GDP
The report argued for using GVA (Gross Value Added) rather than GDP (Gross Domestic Products) for tracking the economy in a better way. Using the second advance estimates of National Income for FY21 where real GDP contraction is estimated at 8 per cent and GVA contraction at 6.5 per cent, the report said that this difference is not a normal occurrence though 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.
Annual growth of indirect taxes between 2012-13 and 2019-20 has been higher than the annual growth of subsidies, while FY 20 is an exception for the food and fertilizer subsidy from BE (Budget Estimate) to RE (Revised Estimate) of 2020-21 increased by ₹3.7 lakh crore.
The report explained that after making adjustments for pre-payment of loans of ₹2-lakh crore taken for paying subsidy of previous years, the balance ₹1.7-lakh crore emerged as the additional subsidy paid in the pandemic year.
This enhancement between BE and RE resulted in higher growth of subsidies the growth of indirect taxes.
Consequently, according to the report, GVA growth became higher or, in other words, GVA contraction became smaller than that of GDP. In FY21-22, the annual growth of subsidy estimated over the unusually large base of the previous year, will again become lower than the growth of indirect taxes. Real GDP growth will then exceed real GVA growth in FY21-22.
“Since GDP growth (or contraction) has been distorted in FY20-21 on account of significant growth of subsidies, GVA growth is a more appropriate measure to follow in the current year,” the report said.