Free vaccines, food to cost India an additional $11 billion

India will need to spend an additional 800 billion INR ($11 billion) to provide free vaccines and food to millions of people devastated by the deadly coronavirus wave, people with knowledge of the matter said.

The government will earmark an additional 700 billion INR for providing food to the poor and other eligible groups until November, said the people, who asked not to be identified as the numbers aren’t public. The administration will need an extra 100 billion INR to provide free vaccinations, they said.

Prime Minister Narendra Modi agreed Monday to provide free inoculations, reversing a policy where states ended up competing for supplies for certain age categories, leading to severe shortages. His administration also has been criticized for its handling of the second wave of the virus, which has killed thousands of people in India.

In an address on national television, Modi said all Indians above age 18 can be vaccinated for free starting June 21, to speed up the inoculation drive.

The government may not have to tap the bond market for the funds, the people familiar said, citing the 991.2 billion-rupee dividend the government received from the central bank and expected inflows from asset sales. With the extra money, the government will end up spending a total of 1.3 trillion on providing food, the people said, and has set aside 350 billion rupees for vaccinations in the budget.

A finance ministry spokesman declined to comment.

Even after accounting for the bumper dividend from the Reserve Bank of India and better growth numbers that should result in higher tax revenue, the “fiscal math will likely worsen,” said Madhavi Arora, an economist with Emkay Global Financial Services Ltd. in Mumbai. That’s because of higher payouts on food and fertilizer subsidies as well as for a rural jobs-guarantee program. There’s also a risk that the asset-divestment program could raise less money than anticipated.

“Amid various push and pull there is a likelihood of fiscal slippage, to the tune of around 0.5% from the initially budgeted 6.8% of gross domestic product,” she added, referring to the expected fiscal deficit.

India has administrated 232 million doses since the world’s biggest vaccination drive began Jan. 16, with 3.4% of the population now fully immunized. At that pace, it will take another 22 months to cover 75% of the population, according to the Bloomberg Vaccination Tracker.