Pay private labs to test for Covid-19, it’s the best way to start India’s economic recovery

As India prepares exit strategy from lockdown, it must heed Nobel laureate Paul Romer’s words — spending a small percentage of GDP on testing can get big gains.

Covid-19 swab testing | Representational image | ANI File photo

India is now preparing its exit strategy from the 21-day nationwide lockdown. Vaccines and treatment for Covid-19 are some distance away, and uniform isolation, or a full lockdown, becomes more and more costly for the economy the longer it is in place.

The next stage after the full lockdown is lifted, whether now or later, is likely to be a partial lockdown — featuring cluster containment and restrictions on sectors, regions and activities.

But as it eases the lockdown, India should focus on ramping up testing facilities. The Supreme Court has directed the central government to tell private facilities to offer free testing facilities. The question of how the labs will be paid will be decided later.

Testing for Covid-19 has positive externalities. If the government wants to revive the economy, it must make testing and isolating patients a sustainable strategy. For this, it must start paying private labs for testing as soon as possible, so that labs have the finances to buy testing equipment, hire staff and invest in testing facilities. Devoting fiscal resources to expanding testing of Covid-19 is one of the best uses of public spending at the moment.

Testing high-risk occupations

According to epidemiologists, the way to control an epidemic is to bring down ‘R0’, or the number of people each Covid-19 patient infects.

This number is currently said to be around 2.5 for India. This means on average, each patient infects around two to three people.

The strategy to bring down R0 is to isolate those infected by the virus, so they are not in contact with the unaffected. When less each person infects less than one person, the virus eventually dies away. Under the conditions in which the R0 is below 1, the economy can start functioning again.

How can R0 be reduced? In addition to the present strategy of contact tracing, testing those with travel history, and those with symptoms, we will need to start testing those occupations that are at high risk. On top of the list should be healthcare workers, because they interact with many people who are likely to have the virus.

During the asymptomatic stage, health workers are also likely to spread the virus to other colleagues and patients. Their colleagues, or other healthcare workers, are the highest “value” in terms of who you don’t want falling ill, in order to contain the virus and treat the sick.

Intermediate stage/partial shutdown

If testing all individuals was possible, that would have been our strategy. But given our limited resources for testing and the size of the population, the intermediate stage or partial lockdown may be sectoral, regional and activity-based containment.

Urban clusters, where there is high risk of the pandemic spreading, may be put under lockdown in a cluster containment strategy, while farmers in rural areas, at low risk, and whose crop has to harvested, will be allowed to go to work.

Public transport like buses, flights and trains; congregations like the Tablighi Jamaat event where hundreds can be infected together; and schools and colleges where students can acquire the virus more easily may be kept locked down. But sooner or later, the present curfew-like conditions would be lifted for most sectors, regions and activities.

This strategy will allow saving lives while preventing the economy from collapse. The longer the economy is in a lockdown, the more damage it will see. The sooner the low-risk sectors are allowed to get back on track, with adequate health and safety measures, and with exceptions where required, the lower will be the fall in production and loss in income.

Most countries locked down when the disease was already widespread, patients were queuing up in hospitals, and when the health system was no longer able to cope. Italy and the UK might have thought that their health systems could cope.

The Indian government knew that even with very few cases, the Indian health system cannot cope, and opted for a very early lockdown. Considering the low capacity of India’s healthcare system, the government needed time to assess and prepare it for the pandemic.

In the last two weeks, the administration has prepared Covid-19-dedicated facilities like makeshift hospitals, schools, hostels and stadiums, and ordered ventilators, PPE kits, medicines, roped in the private sector and modified the Ayushman Bharat scheme.

But despite all these preparations, if the disease starts spreading in an uncontrolled manner, health facilities in India will be inadequate, and a policy of full removal of lockdown even for a few days may bring the system to its knees.

Long-term strategy 

Paul Romer, the 2018 Nobel Prize winner for economics, has argued that it would be fatal for any economy to go into an infinite on-off-on-off loop with full lockdowns. Instead, if it spends its resources on testing, and tries to improve the yield of testing, for example, by focusing testing on occupations like healthcare workers, sanitation workers, police personnel, grocery clerks, etc. who are at high risk and have a high risk of spreading the disease, then the country can bring the R0 down to below 1.

Among those at high risk themselves, it is more important to test individuals who may spread the virus to many more.

According to Romer, for an early economic recovery, it makes most sense to spend money and resources on testing. The decline in GDP due to the financial crisis of 2008 was 7.5 per cent of GDP. The decline due to Covid-19 may be much higher. If that can be prevented by spending a small percent of GDP on testing, collecting samples, free testing for all, the gains for the economy will be way beyond 1 per cent.

Looking forward, the test-and-isolate strategy may be the only long-term sustainable strategy for the Indian economy. Paying private labs to do testing would help implement this strategy.

The author is an economist and a professor at the National Institute of Public Finance and Policy. Views are personal.