India's COVID-19 Crisis

India's COVID-19 cases have been rising at an alarmingly rapid rate since mid-March, and the virus is now killing thousands of people each day in India. 

Dan Rothschild, Executive Director here at Mercatus, talks to Shruti Rajagopalan, Senior Research Fellow and leader of Indian political economy research and Emergent Ventures India at Mercatus, about the rising COVID-19 cases in India, if lockdowns are the answer to halting India's rising cases, India's vaccine distribution, their hospital capacity, and how the United States can help one of their allies during this crisis. 

If you’d like to contact a scholar involved in this episode, please email [email protected].

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please send us an email.

Dan Rothchild: Good afternoon. I'm Dan Rothchild, the executive director of the Mercatus Center at George Mason University. I'm here today with Mercatus senior research fellow and director of Emergent Ventures India, Shruti Rajagopalan. Shruti, as we've been talking about recently, India is seeing its biggest wave of coronavirus today. What's happening in India is shocking and horrifying and it doesn't look like anything else anywhere in the world. It certainly doesn't look like what's happening in the United States where things are getting back to normal whereas, in India, COVID is worse than it's ever been. Can you start by just talking about what's the situation on the ground? What is happening with COVID in India right now?

Shruti Rajagopalan: This is very clearly a massive second wave that's going on in India. Some believe that there are multiple variants of the virus going around. Now, there is also an India variant in addition to the original variant of the virus in the UK and Brazil and the South African variant. They believe that the India variant is more infectious, but we don't have very good studies on it yet.

The spike that India has seen in the number of cases is like nothing before. It's about 10X of what the peak was last year in October after India lifted its lockdown. That's one thing that's very worrying. The second is this time around the fatalities are quite high. The body count is mounting. The last time, if you remember, there was this whole conversation about how India was one of those incredible countries which managed to keep very, very low fatality rates despite the fact that it was a developing country with very weak health care infrastructure. That is simply not the case this time.

We still don't know if medically this variant in India is more deadly. Many people think it is just likely more infectious which is making it more deadly because the health care system is so weak, and suddenly, it is being overwhelmed by a very massive spike in cases.

Dan: Numerically, India sees about as many new cases today as the United States did back in the peak in December. In terms of the video coming out of India, the reporting of it looks more like what New York and New Jersey did back in April of last year. Why is it that India seemed to have done so well for the first 12 or 14 months of this and then seems to have basically lost control just over the last couple of weeks?

Shruti: I think it's a few things. I think the big one is certainly complacency. India was very good about imposing a very, very early lockdown. In fact, it almost did it too early. It was the most severe lockdown anywhere in the world with the most stringent movement requirements. Some of that might have helped reduce the transmission rates early on, but India also was very good about masking. It wasn't a political issue to mask. Social distancing is difficult in urban areas in India, but people were pretty careful. India declared a premature victory over the virus and decided that things can go on as they need to.

If you've seen some recent footage before the horrors that have unfolded in the last week, India has had some superspreader events. It's had cricket matches with 80,000 to 200,000 people sitting in a stadium. Nobody has masks. Everyone is screaming and shouting like hordes of fans. There's something called the Kumbh Mela, which is this huge Hindu festival, 3 million worshippers at the banks of the Ganges, unmasked. That has become the latest superspreader event. There is a lot of complacency in large gatherings, political rally, there's a huge election going on in West Bengal, so on and so forth.

I think there are a couple of other things too. Some of this might also be the Peltzman Effect. India had a really good rollout of the vaccine. Now, even though the number of people vaccinated daily in India is as many or almost as many as the United States, as a proportion of the population, it's a drop in the ocean, but because it was such a successful initial rollout, I think there was some complacency and also what we call the Peltzman Effect, which is if you think the risk is now lower, you change your behavior accordingly and you take more risk.

Some of that might have been happening. There might have been other behavioral changes. I think the most important one is that it's the summer, so people are indoors, in air conditioning, especially the middle class and the elite. Now, we're seeing body count rise between the middle class and the elite. It's very uncomfortable to mask in the kind of Indian hot summer, so that might have something to do with it. The short answer is, we don't know. It could be none of the above, all of the above, a combination of them. Not sure yet.

Dan: Talk about some of the institutional responses to COVID and some of the ways in which Indian federalism has either been a good thing for the response or a negative thing. Also, one of the things that we talked about is in the context of vaccines, India has done relatively well compared to a lot of other similarly placed countries, especially when you control for the amount that's spent on the health care sector. Despite a relatively good rollout of the vaccines, it seems like there's just been a loss of institutional ability to address the virus at this point. Can you talk through the political economy of this?

Shruti: Yes. India is federal, but unlike the United States or Switzerland, it's very centripetal in its federalism. All the purse strings and a lot of the authority is completely controlled by the central or the union government, which is the Modi administration. Typically, what happens in times of an emergency or a disaster or a pandemic is that the states are caught a little bit by surprise. They haven't developed the fiscal capacity or the infrastructure capacity to deal with a big disaster, and they immediately look towards the central government to announce a package or a mandate or supply funds or something like that.

The exact same thing happened last year in March, which is when Prime Minister Modi announced the centralized one-size-fits-all lockdown across the country when about a dozen states hadn't even caught a single COVID positive case at the time. That's how it started, but over a period of time, the government response has been moving towards greater federalism. Slowly, the Modi administration decided to give states a little bit more control over how they manage the lockdown, how they actually, got out of the lockdown, and slowly got out, it was called Unlock phase 1, phase 2, phase 3, and have some adaptive triggers to manage local situations. Some of the richer states in India like Maharashtra, Kerala, Tamil Nadu, they were also affected early because they have international airports, they're prosperous financial or industrial states. Therefore, they also got the virus early. They responded in a big way by increasing health care capacity.

In the process, what has happened is a lot of the poorer states which did not get hit hard, in the first round, never improved the health care capacity. It was pre-pandemic levels, the last 14 months have just been squandered away, nothing new has been done. Not just is there confusion over the central and the local response, over the last year there has been a divergence in capability building, and now there are some poor states like Uttar Pradesh, which are just in the most disastrous situation.

Uttar Pradesh, just for those who don't know, is the same population as Brazil, but a fraction of the per capita, GDP per capita, and it spends about 40 times less than Brazil does on health care spending. We already know that Brazil is completely overwhelmed by the COVID pandemic, and they've had multiple waves of the pandemic. The health care infrastructure in Uttar Pradesh is just a fraction of that, so that's the next horror waiting to unfold. Right now all of you are seeing pictures from New Delhi, the next one coming is Uttar Pradesh, and then the next one after that will be Bihar and so on and so forth. That's the political economy situation.

It's still not too late, massive fiscal transfers can be made and given to states to increase health care capacity very, very quickly. Things like pop-up bed centers, and quarantine centers, testing centers can be supplied fairly quickly. India is good at logistics on a very large scale, so those things can be done. On the vaccine part, the political economy is a much better situation. Initially, India started out with a completely centralized vaccine rollout plan. The Modi administration had exclusive procurement for all the vaccines, which is sold at a controlled price at private hospitals, and free of charge at public health centers. Recently, as recently as earlier this week, the Modi administration has decided to liberalize this and allow states to buy and set pricing for their own vaccine allocation and delivery.

States which are a little bit farther along in the second wave and are trying to cope can maybe focus a little bit more on health care infrastructure. The states where the second wave hasn't hadn't yet hit, maybe they can focus a little bit more on the vaccine rollout, and start protecting their populations. There is now a sudden possibility, starting this week, if this is handled right of many states tailoring their response appropriately.

Dan: You were very critical when India went into the first lockdown which was an extreme lockdown. It wasn't the lockdown that we typically talk about in the United States. If I recall correctly, it was announced one day as going into place that night, it was one-size-fits-all across the country. There was little to no support that was given to farmers and the poor in society who are going to be hardest hit by this. It sounds like that's lost a lot of its political- it's not politically feasible anymore. What are the tools that are in the arsenal of either the federal government or the state governments to address this coming wave given the fact that they've got, it sounds like in most cases, days, not weeks or months to prepare?

Shruti: Initially, I actually did suggest a lockdown. This is because of one of the papers we wrote at the Mercatus Center as part of our COVID-19 series last year in March and April, where my coauthor and I assessed the health care capacity. We did a very basic count of what kind of infrastructure exists in every state. We found that India is woefully unprepared for the kind of pandemic preparation that was required or the response that was needed.

At the time, when we saw news of Italy and Spain and New Jersey and New York, I thought it's really important that India shut things down, especially mass superspreader events, but I didn't anticipate what prime minister Modi did, which, as you pointed out, is just one-size-fits-all. You just shut the entire country down for 50 days, very little to no notice.

Dan: Your idea was to use that time to build the health care infrastructure rapidly, to address this before what we're seeing now.

Shruti: One of the oddities of a lockdown is the moment you lockdown, it is very difficult to respond to a pandemic situation because now you have to start making all kinds of exceptions. What is essential and nonessential in a pandemic? You can start saying food is essential and so on. No one thinks a steel industry is essential, but incidentally, steel industries can also divert industrial oxygen towards production for medical oxygen. Now suddenly, steel industry is essential, which no one would have predicted during a lockdown.

A lockdown is actually a very bad idea for a pandemic response, a one-size-fits-all lockdown because it completely clamps down on the economy and the system's ability to adapt and respond to the things one needs in a pandemic. That was also one of the reasons I think it didn't work out very well. The health care capacity didn't come about. The testing capacity did increase, but aside from the few places I mentioned before, Maharashtra and Tamil Nadu, there was no real major increase in the number of beds or the number of ventilators and so on and so forth.

Now, luckily because the lockdown went on so long, India's health care capacity was never really tested to the hilt. We have never seen the kind of photographs and videos that we have seen this week of people waiting outside hospitals and dying, waiting for oxygen, and so on. India never saw that in the last wave. I think everyone felt that, "Oh, things are going okay. India is a very young country,  this is probably a virus that really affects older people with comorbidities," they have all sorts of medical and non-medical reasons, including Hindus are a superior race and vegetarians have better immunity, and so on and so forth, but everyone believed that India was like this special case that escaped the virus, so they never really increased the capacity and now we're in a situation where it's very difficult to.

The current response of the Modi government, once again, we recently wrote a paper on this, it came out in the Southern Economic Journal, we analyzed the success of the lockdown that we had ourselves recommended last year and we found that it was not a good idea to have a one-size-fits-all lockdown, and what we recommend instead is allow state or rather even local governments to impose very, very limited curfews, just to make sure that people don't gather in places and you don't have any superspreader events at marketplaces or bus stops and so on, and control it at that level, rather than just locking down 1.35 billion people.

That would be our recommendation. That is exactly what the Modi government has decided to do. He has come under a lot of criticism for it because many people feel his abdicated responsibility as the body count is rising, but in fact, this is the better way to go. Right now, Delhi, Mumbai, Tamil Nadu, Lucknow, parts of Gujarat are seeing a huge spike, but the rest of the country is relatively removed from the second wave. There is time for those people to help the rest of their countrymen respond with oxygen, respond with ventilators, doctors, beds, and so on and avoid a nationalized lockdown as far as possible.

Dan: Why has India invested so little in its health care infrastructure relative to other countries controlling for GDP and population obviously?

Shruti: This goes back to your federalism question. For various historical reasons, which somehow always go back to the British Raj, health care was the subject of the provinces or the state. The colonial government never made huge investments in health care and the provincial governments under the colonial government under the crown in India never had the kind of budgets to. That's the legacy and system that India inherited. India has this multi-level system where the federal government could invest in health care should they wish and they have a number of programs, but it's really the state-level government's responsibility to do so.

What has happened in the process is, in richer states, the private sector has responded in a big way because as people get more prosperous, they demand more health care, so there are some areas in India where the health care response is very robust. You typically hear of Goa and Andhra Pradesh, which have medical tourism, some of the best surgeons in the world that Americans go to and so on, so forth, but in the poorer states, the governments have not invested very much, the private sector has not responded because people can't afford it, which means they're weaker at attracting doctors, nurses, equipment, innovations, and so on.

The other weird thing about Indian fiscal transfers is the union government gives money in a very programmatic way. If there's a program that they announced, like let's say they say, "We are announcing a particular kind of nurses and midwife program for postnatal health," for instance, if a particular state has not developed that program, they'll never receive the money. It just so happens in India that the richer states actually get more money from the central government because that's how the programs are allotted as opposed to the poorer states, which is typically what you would assume in any kind of inter-governmental transfer theory in fiscal federalism, that is one of the reasons.

The other reason is just poverty, in very large measure, so India still has very high levels of infant mortality, embarrassingly so in this day and age. It has a lot of public sanitation problems. All the efforts, even within the health care sector are never on prevention. They're always on cure, and the prevention needs to be done at the most local level, which is typically public health and sanitation. This is your city-level government, or even block-level, ward-level governments, and the urban local-level government in India is very weak, it's just a top-down socialist system that never invested in that branch of government, so that is floundering.

Dan: You've got research assistants, friends, colleagues in India, obviously. How has the mood changed on the Indian street in the last couple of weeks?

Shruti: Oh, wow, it's really devastating. I grew up in New Delhi, which is where the second wave of the pandemic is ripping through the city, I literally don't know a single friend or family member who doesn't have at least one family member down with COVID. Because this variant is so infectious, I think it's reasonable to assume if one person in the house or dwelling has it, everyone has it.

The numbers are garbage, they are a gross underestimate. There are a few reasons for it, one is testing capacity has really slowed down, it's completely overwhelmed, test positivity rates are now almost 40% in Delhi, even at the peak in October last year, they were pretty stable at 3% to 4%. Testing capacity being overwhelmed means a lot of people don't even get tested because they know it's going to take three days for the test to return, and they just start getting treatment, so that's the situation in Delhi.

The morale is down, there are pictures coming out of mass cremations and, mass burials and so on, and they can literally feel it in the air. You're constantly getting messages of someone dying while waiting for oxygen, I have myself received a number of- this is going to sound horrific, but Zoom funerals, and Zoom memorials. Zoom funerals, because of COVID protocol, you are not allowed to gather, so one person is allowed to identify the family member, and you can broadcast the funeral to the rest of your family. Now, Zoom funeral is becoming a thing in Delhi. It's just devastating, frankly, what is going on.

I don't know how the city comes out of something like this. I'm particularly worried that we haven't yet reached the peak of the second wave in Delhi and I don't know if the health care infrastructure will survive it. Already we are seeing a massive collapse within the system, and I just hope that the doctors can survive doing 72-hour shifts. I've heard of a number of hospitals where the CT scan machines are broken down because they're doing about 10 times the number they would normally do in a day and the people who maintain those machines are down with COVID. Just small things like that, which add up in a big way and really collapse the health care infrastructure, that's the big worry that's going on in Delhi, but the morale is down, people are panicked. It's frankly, just terrifying.

Dan: What have you learned about Indian state capacity in the last 15 months and the overall response to the COVID crisis that you wouldn't have expected going into this?

Shruti: Well, not much that was unexpected, to be honest. Indian state capacity is very, very weak. I knew that going in, just to be safe, at Mercatus, we did a proper headcount of the healthcare-specific infrastructure and the fiscal infrastructure. We found it wanting, and we were very worried that it-- Actually, I was very worried that what's happening right now, I expected it to happen last year, April. Thankfully, I was wrong then. I'm terribly devastated that I am right now. That's what's happening in terms of capacity.

I truly am disappointed on two other margins. Post-liberalization India, we made a very big deal about leaving things to the market, having a permissionless exchange, having greater federalism, fiscal federalism, more decentralized thinking, and all of that just flew out of the window in the event of a national emergency or a pandemic. The Modi government just doubled down on every aspect of centralized control that is so deeply ingrained in Indian society and Indian governance.

Everything from vaccine procurement, to vaccine delivery, from which trucks are going to be running and supplying oxygen, what kind of hospitals are going to remain open, do we allow one event for one religion or another, or do not allow one for the other, everything is done centrally. I think that's the recipe for disaster. This kind of command and control thinking does not even work in non-pandemic times. It's certainly doesn't work in pandemic times.

Another area that has been concerning that has surprised me is how bad the courts are. In Delhi, when hospitals started running out of oxygen yesterday and the day before, the high court said we need to put in price controls and make sure that you divert all the oxygen to Delhi which of course is the best way to kill people who are Indian but not in Delhi because putting in price controls means that you are not going to get greater supply for oxygen to places when they're needed the most. On the other hand, you are going to divert very valuable resources and maybe deprive someone in some other city who also needs it. They just don't have the Delhi high court policing them.

We have some really bad pandemic policy also coming from the courts because they think the governments are flailing and their capacity is lacking. I think the lack of capacity has been the biggest challenge in the last week, and going forward, that's the part that they'll have to double down and focus on. Also, you will understand this intuitively, state capacity freed is state capacity earned. If you stop doing all this command and control nonsense. then the Modi administration can actually focus on what is required.

For instance, right now there're lots of imports for vaccines which are stuck in the global supply chain. The Modi government could go a long way towards smoothing those over. There are a lot of transportation problems, given the second wave outbreak and people dying and border closures, and so on within India. These are the sorts of things that the government could do, that it should do as opposed to telling you which district should get how many vaccines, at what time of day, and so on and so forth. 

Dan: What does the Biden administration need to know to support India at this point? What is the Biden administration not doing that it should be doing?

Shruti: The Biden administration should, first of all, know that it needs to help India on two counts. One is just humanitarian grounds. There's a massive body count that is piling up in India and it is unseemly for the rest of the world to watch and not do anything about it, especially for an ally and a "partner" like the United States. The second thing the Biden administration needs to know is putting America first does not mean not putting the rest of the world first when it is the case of a pandemic. This might work on other kinds of policy measures, but the biggest threat to Americans today is new variants. New variants emerge in areas where people are unvaccinated. The faster the Biden administration can help the world get vaccinated, the more it can protect Americans alongside Americans also getting vaccinated.

A few things to know about India. India has the largest vaccine manufacturer in the world. It's the largest manufacturer for developing countries. It produces vaccines at scale at incredibly low cost.

One particular firm, the Serum Institute actually vaccinates half the children in the entire world. Half the kids in the world today are vaccinated by this one firm. It's critical that India's health care and vaccine systems don't collapse. There's a couple of things very specifically where the Biden administration has made a wrong move and I think they should correct it. They invoked the Defense Production Act, which is a de facto embargo on a number of essentials. It was a well-meaning idea. They thought that because Americans also need vaccines and they need to scale up American vaccine manufacturing, a lot of the critical ingredients like filters and lipids and tubing, these are very medically specific inputs and equipment, they are typically approved by the FDA or some other medical council, they're not easily substitutable. The Biden Administration figured that we will keep them for the United States and anyone wishing to export them needs permission from the Biden Administration.

What has happened in the process is, Indian vaccine manufacturers cannot get access to these ingredients. The number one thing that the Biden Administration must do is lift the embargo because then India can vaccinate itself, it can also export to the rest of the world. India has already exported vaccines to 70 different countries more than the United States. Maybe it can also refill the coffers for the United States when the time comes, once the vaccine production scales.

The second thing is, for very poor reasons, the United States has not yet approved the AstraZeneca Oxford vaccine and it has halted the Johnson & Johnson vaccine. Now, I want to point out here that I think this is a bad move. This is not a good idea. I would strongly recommend that they approve these two vaccines and actually start vaccinating Americans. Having said that, if the Biden Administration is not going to approve these vaccines, the least that they could do is send the stockpiles over to other countries. Right now, India is most in need. For the AstraZeneca vaccine, the Biden Administration has a purchase agreement of 300 million doses and it has a stockpile of 20 million doses sitting not too far from where we're sitting right now.

The 20 million doses should be shipped right away. For Johnson & Johnson, again, there's a 100 million purchase agreement and I don't know when the distribution halted, but there are a couple of million doses at the very least, maybe as much as 10 million doses of Johnson & Johnson vaccine. This would go a long way towards helping India get restarted while the embargo is being lifted. All the ingredients for vaccine production can go back to India and it can resume production.

In addition to that, the United States has the maximum number of ventilators per capita. Incredible capacity to quickly scale up production of ventilators, sending equipment like this to India on humanitarian grounds would be a very, very big bonus at the moment. Every single oxygen tank and ventilator counts in India right now. I think that would go a long way.

Dan: Shruti, thanks very much for helping us understand what's going on in this humanitarian crisis that the world is not paying enough attention to, and thanks for all of your work in helping us understand from a policy perspective what can be done better.

Shruti: Thanks so much, Dan. I hope next time I have better news.

Dan: Indeed.