Just over a year ago, I wrote a piece in this publication, urging the imposition of a modest “Covid tax” on the country’s ultra-wealthy. The essay was not written in a spirit of wide-eyed innocence: it was written altogether less with the expectation of being received positively than as a gesture, plain and simple, that demanded to be performed as part of a professional economist’s sense of public responsibility. It is in much the same spirit that this theme is revisited, very briefly, in what follows.
From May 1, the Centre has determined that it will be the states’ responsibility to find the means of vaccinating the country’s 18-45 years age cohort, numbering around 60 crore. What – assuming the vaccine is available – would be the likely cost of this massive operation? As Rohan Venkataramakrishnan has pointed out in Scroll.in, there is little clarity on the government’s vaccine policy, which it seems to have left to a private vaccine producer, Adar Poonawalla, the CEO of the Serum Institute of India, to spell out to the public.
From what one can gather, the new Central dispensation is that the Serum Institute and the much smaller Bharat Biotech will be free to supply up to 50% of their production to state governments and private hospitals. (The stipulation presumably includes the freedom to supply 0% as well.)
Further, the vaccine will not be available at the “historical” rate of Rs 150 per dose at which the Central government initially procured the vaccine: state governments were to pay Rs 300 per dose, and private hospitals Rs 600 per dose for Serum Institute’s Covishield. Bharat Biotech announced on April 29 that Covaxin will be available at the rate of Rs 400 per dose to state government, and at Rs 1,200 for private hospitals.
In this scheme, state governments are not of course obliged to procure the vaccine: they can leave that to the private hospitals. Indeed, they may have no option but to do so: why should a private producer sell any part of their product at a price lower than what the market (as mediated by private hospitals’ demand) is willing to pay?
In any event, let us assume a worst-case outcome in which the vaccine is available only to those willing to pay the highest cited price for Covishield, that is, Rs 600 per dose or Rs 1,200 per vaccinated person (each complete vaccination requiring two doses of the vaccine). Then, the cost of inoculating 60 crore people in the 18-45 age segment of the population would be Rs 0.72 lakh crore (= 60 crore people at Rs 1,200 per person).
Let us remind ourselves that India’s states would be struggling to find Rs 0.72 lakh crore to inoculate their people (their people, not the Centre’s, apparently) at a time when the cumulative Goods and Services Tax due from the Centre to the states is between Rs 0.78 lakh crore and Rs 1.08 lakh crore, depending on whether the Centre actually transferred a sum of Rs. 0.3 lakh crore to the states in March 2021 (these figures are based on a March 23 report in The Hindu).
The transfer of these funds from the Centre to the states – if and when that happens – would represent not a gift but a debtor’s dues, dues which would greatly ease the states’ liquidity crunch in this present time of crisis and desperate need.
Doing the maths
Setting that aside for the moment, what sorts of resources are available to meet the country’s 18-45 age cohort’s vaccine requirements? Let us consider the wealth holding of the richest entities in India, i.e. those with a net worth in excess of Rs 1,000 crore each. According to the 2019 report of IIFL Hurun India Rich List, the compilation is “…a list of 953 individuals ranked by their net worth…The average wealth in the list is around INR 5,278 crores”. The combined wealth of the 953 entities is then Rs 50.29 crore (= 953 entities Rs.5,278 per entity).
The list, however, includes Non Resident Indians. If we took account of only the 871 Resident Indians in the list, then a conservative estimate of their aggregate wealth holding would be of the order of Rs 37.08 lakh crore. This suggests a Resident Indians’ share in the aggregate wealth of India’s richest of around 74% (= Rs.37.08 lakh crore/Rs.50.29 lakh crore) in 2019. This share of 74% is of interest only because I shall assume it can also be applied to the 2020 figure of the super-rich’s aggregate wealth, which is what is of immediate relevance.
Pandemic or no pandemic, the very wealthy of Indian origin have done well for themselves. According to IIFL Wealth (2020):
“IIFL Wealth Hurun India Rich Listers’ wealth has grown twice as fast as the net market capitalization growth of all the companies listed in the BSE. IIFL Wealth Hurun India Rich List 2020 … record[ed] a cumulative wealth growth of 20% or INR 10 lakh Cr compared to last year.
The combined wealth of India’s richest is a staggering USD 823bn, equating to 1/3rd of India’s GDP and more than the combined GDP of Pakistan, Bangladesh, Sri Lanka, Afghanistan and Bhutan. IIFL Wealth Hurun India Rich List 2020, identified 827 individuals… with at least INR 1,000 cr…. The average wealth in the list is INR 7,300 Cr… The list features self-made founders and professional managers, inheritors, CEOs, NRIs, investors, cashed out entrepreneurs and so on.”
Of arithmetical interest to us is that IIFL Wealth’s estimate of the total net worth of entities of Indian origin in 2020 was of the order of Rs 60.37 lakh crore (= 827 entities Rs.7,300 crore per entity). Applying the 74% 2019 share of Resident Indians’ wealth to the 2020 aggregate wealth figure yields an estimated total wealth, for the richest Resident Indians, of Rs.44.67 lakh crore (= 74% of Rs.60.37 lakh crore).
To recall, a liberal estimate of the states’ requirement in order to fund a vaccination programme for the country’s 18-45 age group is Rs.0.72 lakh crore. As a fraction of the wealth of fewer than a thousand of India’s wealthiest in 2020, this works out to just 1.61% (= Rs.0.72 lakh crore/Rs.44.67 lakh crore). (All this, of course, is subject to the assumption of availability of the vaccine; if it is not going to be available, then what, in any case, is one to make of the Centre’s generous relaxation of the vaccine’s targeted population to include the 18-45 age cohort?)
That is all it takes – a one-off tax of 1.6% on the net worth of a handful of people whose combined wealth exceeds the combined GDP of five South Asian countries – to secure the possibility of saving millions of Indian lives (though admittedly we speak of the lives of people with a wealth-holding of laughably much less than Rs 1,000 crore each).
But then perhaps the tradeoff is unfair to India’s super-rich: after all, it is possible that there are those among the nation’s wealthiest (and their beneficiaries) who believe that, in the act of donation to the Electoral Bond Scheme, they have exhausted all that could reasonably be expected of them by way of duty toward their country.
The author is an economist who lives and works in Chennai.