Having endured the pandemic for over a year and a half, the world is waiting restlessly for the global vaccination rollout and herd immunity from the novel Coronavirus. The present situation in India is tragic, no doubt, but it is ironic as the country is one of the leading producers of the AstraZeneca coronavirus vaccine AZD1222 (known as Covishield locally). The Serum Institute of India (SII), the largest vaccine manufacturer in the world, is currently producing between 50 and 70 million doses every month, which is grossly insufficient to meet the current world requirement.
India's 1.30 billion citizens have to be vaccinated while orders for the said vaccine from other countries like Brazil, Morocco, Bangladesh and South Africa, etc. have to be fulfilled. With cases rising rapidly in India and demand from other countries growing, the SII had requested for a grant of over $400 million from the government to ramp up production to 100 million doses per month by the end of May. Serum's Chief Executive, Adar Poonawalla, had earlier stated that the first 100 million doses sold to the Indian government would be priced at US$3-4/dose, whereas the price in the private market would be five times, at US$15-20.
Earlier this year, the SII was criticised by the Indian populace as they were donating or selling vaccines instead of meeting the increasing domestic needs due to the rising caseload in India. Consequently, the SII reduced vaccine exports to meet the local demand. The Indian officials forced the SII to temporarily stop export of the vaccines to increase local supply. This decision affected roughly about 190 countries that were under the Covax scheme that depended on the AstraZeneca vaccines produced in India to be sent to vaccinate their population.
Additionally, the UK and US have brokered deals with Pfizer which will give them over 5 doses per person by 2023. The EU and Canada have also struck such deals which leave a large stockpile of the Pfizer vaccines in the hands of a few rich countries. To fight this, Oxford-AstraZeneca has committed to provide 64 per cent of its doses to developing countries. This puts even more pressure on the SII to ramp up production. This extreme demand in conjunction with criticism from the Indian general public with regard to the country donating and exporting more vaccines than they were administering within the country led to halting vaccine exports in late May 2021.
In the fiscal year 2020/21, India saw a 0.2 per cent deficit in its current account balance of 1.7 billion US$ in Q3 which the Reserve Bank of India (RBI) - the country's central bank -attributed to the merchandise trade in the previous quarter and the increase in net investment income payments. However, after two consecutive surpluses, the current account balance went back to its "normal" deficit in the last quarter of the 2020 calendar year. In Q3, the capital account had repayments exceeding fresh disbursals, non-resident deposits increased, and external commercial borrowings were at a net outflow, which led to a surplus that was approximately 50 per cent higher than what it was in the same period last year. Therefore, the balance of payments was overall at a surplus in Q3.
AstraZeneca is sold globally at US$3-4 per dose. The SII currently produces approximately 70 million doses per month and is looking to increase that number quickly. Since different countries have different requirements for those who can be vaccinated, let us assume that only individuals aged 15 years and over will be administered the vaccine. If India were to target at supplying AstraZeneca to 20 per cent of the eligible world population excluding its own, they would be providing vaccines to 1 billion people or 2 billion doses. Dr. Susan Bailey, the president of the American Medical Association, indicated that there may later be a need for booster shots because of the numerous mutations of the virus. Taking this and the previously mentioned 2 billion shots into consideration, India could be looking at getting about US$9 billion in revenue from vaccine exports alone, each year.
A paper from the UK's National Health Service (NHS) and the University of Manchester pointed out stark differences in cases, admissions and deaths for elderly people who had been vaccinated compared to those who had not. The study concluded that vaccination is significantly more effective than lockdowns in controlling the spread of the coronavirus. This is evident as countries are racing to vaccinate their population to restore some sense of normalcy. Since India has started producing vaccines again, they have an opportunity to supply AstraZeneca vaccines to countries that have not already entered into an agreement with other vaccine producers. Considering AstraZeneca as one of the most economical vaccines in the market today and only about 25 per cent of the world population is vaccinated, it is more than likely that countries would jump at a chance to ensure that they get a steady supply of the vaccine. This could bring in significant revenue and help increase India's current account.
Furthermore, a new medication called Molnupiravir has been developed by US biotech company, Ridgeback Biotherapeutics in collaboration with multinational pharmaceutical company, Merck & Co., who have recently announced that it may be the long-awaited cure for Covid. The results from phase II/III trials of the drug have been promising.
If the experimental pill proves to be safe and effective, Merck will begin producing it soon. At present, the company has the capacity to produce 100 million of the pills, which will be able to treat 10 million people by the end of 2021. Merck has factories spread across 226 locations in the world, 4 of which are in India. In the past, India has produced several drugs for the pharma giant, making it a good contender to produce Molnupiravir. If the little brown pill gets the requisite approval, India could become one of the chief producers for Merck. Since Merck hopes that the drug can be used beyond the fight against Covid-19, all future production and export of Molnupiravir could lead to a surplus in India's current account.
If in the near future, India is able to successfully ramp up AstraZeneca production while also producing Molnupiravir for Merck & Co., there is a possibility that the country will achieve a current account surplus. However, this notion is merely hypothetical as there are many unknown variables. Many questions still remain.
Will India, being a vaccine and drug manufacturing hub, be able to meet the world demand for the Coronavirus antidote in a timely manner? Can it increase its current account surplus with this increased vaccine export? In doing so, will India prove that it is a force to be reckoned with? Only time will tell.
Chloe Cecilia Reyland and Ursita Kurian Mooleplackal are graduates from the School of Economics at the University of Nottingham Malaysia.
chloececilia99@gamil.com and ursita.kurian@gmail.com