Free vax load to add 40 bps to fiscal deficit

Mumbai: The government's move to freely supply coronavirus vaccines to the States for universal inoculation and extend free rations to help the poor tide over the pandemic will only add an additional 40 bps of GDP to fiscal deficit, says a report, which also called for more transparent vaccine distribution plan for efficient vaccine allocation to the States.

The increased allocation of free vaccines to all above 18 years coupled with extending free food and grain supplies through rations will add only 40 bps to the overall fiscal deficit in FY22, which poses upside risks to the estimated of 6.8 per cent of GDP, Tanvee Gupta-Jain, the economist at UBS Securities India said in a note on Tuesday.

Assuming an average price of Rs 150/dose, with a similar amount incurred on logistics and supply charges, we estimate the total fiscal cost to the Centre will be Rs 40,000-45,000 crore or 0.2 per cent of GDP and of this Rs 35,000 crore have already been provided in the budget, which means that the Centre will have to allocate a maximum of Rs 10,000 crore for this.

The much-delayed move announced on Monday, which came days after the Supreme Court said the vaccine procurement policy of the Centre was arbitrary and sought all file notings on the issue, she said it will ensure that vaccine distribution is now predicated on need, rather than the purchasing power of the States.