India's Covid test eats into a fourth of an average person's monthly income

India's coronavirus test is costlier than in developed countries in terms of purchasing power as well, while private insurance coverage is shallower here

The new human coronavirus SARS-nCoV2 is on a rampage around the world, spreading the new disease Covid-19 faster than we can comprehend. Almost everything concerned with the virus is still “unknown,” and on top of it, the pandemic has spared neither the middle class, nor the poor, nor Jair Bolsonaro, and nor even Boris Johnson.

At a time when infections are reaching the neighbours’ homes or the colleagues’ desks, people are taking up, or are thinking of taking up, Covid-19 tests to ensure that they are safe from the virus. This is exactly what Pravin Kamble thought, and ended up paying Rs 2,800 (about $40) for the RT-PCR, or the Reverse Transcription Polymerase Chain Reaction test that detects the coronavirus. 

A student in the city of Pune, a megacity 100 miles from country’s de facto financial capital Mumbai, he felt mildly feverish on June 15. A few days later, though he had started feeling better, he strongly wanted to get himself tested to shed his worries and to ensure the safety of his parents, with whom he stays. 

But the local public hospital denied him a test as his symptoms were mild. So he opted for a private lab test on June 17, which cost him a packet. 

“Had it been priced at Rs 1,000 or so, I would have got everyone in my house tested for safety. I am fortunate that my parents were not infected, but the reason I risked not testing them was that the test was too costly,” says Kamble. 

Falling in the range of Rs 2,800-3,000, even the middle class in India is finding it difficult to take up the Covid-19 test. According to a Business Standard analysis, the spending on a test would take up 23 per cent of the monthly income of an average Indian. This is one of the deepest cut in the pocket of an individual, in comparison to 14 other countries. 

But this is the situation only in big cities in India. Covid-19 tests in towns of, say, Madhya Pradesh, cost close to Rs 4,000. The Indian Council of Medical Research had earlier in the development of the epidemic, capped the cost at Rs 4,500 per test, which was later removed. The current analysis considers these voluntary tests done in private labs. Government hospitals across the country are providing tests free of cost to seriously ill patients who need hospitalisation. 

The market exchange rate, where one US dollar is nearly equal to Rs 75, is used for the calculation here. The price in dollars is then juxtaposed with the per capita income in USD (at current prices) to arrive at the estimate of the price of test as a share of per capita income. 

In Brazil, for example, a test would eat up about 8 per cent of the monthly individual income. In developed countries, it’s less than 2 per cent. Interestingly, China sits shoulder-to-shoulder with advanced economies in this respect. 

This analysis has considered the cost prices of the tests as charged by private labs, or the uniform cost across countries as in the case of some. Many countries in consideration offer a waiver of these charges if the person holds a valid national/provincial/private health insurance. 

Economists explain this kind of a situation using a simple term, “externality”. A positive externality is a situation where the impact of an event improves the condition for a bystander, or say, when a benefit to a private person also incentivises social good. A negative externality is the other way round. 

Avinash Tripathi, who teaches economics at The Takshashila Institution, cites an example. 

“Suppose a person washes her hand, uses mask, or decides to get herself tested for Covid-19, then she is not only saving herself but also others, from potential infection. In economics, we call it a positive externality, and ideally, such behaviour should be subsidised, and not taxed,” he tells Business Standard. 

There is clamour from public policy experts across the globe to make tests affordable, or incentivise taking up tests for the larger public good, rather than keeping them costly. At a fourth of her monthly income, the price paid for a Covid-19 test is clearly not an incentive for an average Indian. 

There is a clear trend that relatively weaker economies are struggling with this harder. Pakistan and Bangladesh, where individual incomes are smaller than in India, are charging more for these tests.

The comparisons become more interesting if we look at how these critical tests are priced in these countries according to the degree of ease of buying a basket of essential goods. 

For any currency, the purchasing power parity exchange rate with the US dollar gives a measure of how many units of the local currency are required to buy something that can be bought in US for $1. For India, the PPP exchange rate is Rs 21, meaning that a grocery item worth $10 in the US would probably be available in superstores in India at at Rs 210, and not Rs 750 (market exchange rate).

In purchasing power terms, China offers the cheapest Covid-19 test at $29, followed by Russia at $39. Russia is one of the most stricken countries like India. Put it another way, tests in these countries are half as priced as they are in France or Australia. 

A test in India costs four times as that in China, if we are to believe the data presented on a Chinese governmental website. Poland, Mexico, and the United Kingdom charge the highest among the lot, more than twice the price in India, and more than 10 times the price in China, the place where SARS-nCoV2 originated. 

While the actual burden on the individual greatly reduces in countries such as Germany, where health insurance (medical care) coverage is nearly 100 per cent. But in India, where only a third of the population is under insurance coverage—private or government-supported—the collective burden is higher even at a comparable price. 

This is the reason experts are calling for subsidising tests and general protective equipments that are necessary for combating Covid-19, rather than keeping them priced at unaffordable costs. A good analogy could be education: Subsidising education has had a great positive impact on bringing all children to school (the fact that learning outcomes still need to improve is a different challenge). 

Kamble feels that a cheaper test would actually prompt more people to voluntarily take up the Covid-19 test, help remove the stigma associated with it, and raise the levels of awareness among the populace.

The writer thanks Kunal Junawane from Poland, Bilge Kotan from Turkey, Ahmad Noorani from Pakistan, Shriyash Bhadbhade from Germany, Illia Ponomarenko from Ukraine, Khatia Shamanauri from Georgia, for helping by confirming the prices of tests in their respective countries. 

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