Stigmatised capital

Poonawalla's comments reveal the pitfalls of doing business in India

India’s vaccination roll-out is already delayed. After opening up availability to those between 18 and 44, the pace of vaccination has unfortunately slowed further. In order to scale it up, whether in terms of distribution or supply, the government needs to partner the private sector more effectively. It appears, however, that old habits of thinking about private companies are getting in the way of this effort. The head of the Serum Institute of India (SII), Adar Poonawalla, said in a recent interview to The Times of London he had been receiving calls that were full of “aggression”, including those from political leaders. It was strongly implied that he had flown to the UK to escape this pressure of being “vilified and blamed”.

Meanwhile, the opposition parties have been accusing SII and the other Indian vaccine producer, Bharat Biotech, of “profiteering” for having set a higher price for the purchase of vaccines on the open market. In another statement issued on his Twitter account, Mr Poonawalla said that he had been cooperating with the government, and had received considerable support from it as well. But he also made it clear that scaling up would take time. Left unanswered were questions as to why the needed production scale could not have been built up in advance of the vaccine roll-out.

Former chief economic advisor Arvind Subramanian once pointed out that a major problem with private investment in the country was “stigmatised capital” — that private sector investors were essentially seen as a problem, not wealth creators, and that politics and policy tended to have an adversarial relationship with the profit motive rather than harnessing it for the general good. The problem of vaccine manufacturing in India appears to be a classic example of the negative consequences of stigmatising capital. Allowing SII and others to treat the vaccine roll-out as a remunerative business would have induced investment and allowed for a far more rapid roll-out across the country. Instead, an atmosphere has been created in which politicians feel empowered to bully the manufacturers into giving their region or state priority. Meanwhile, the Union government itself thinks it can also bully these manufacturers into giving them vaccines at a low cost. After the vaccine manufacturers announced the new prices of vaccines for states and private hospitals, the Centre stepped in and asked them to lower the prices. Such interference is clearly uncalled for.

It is essential that both the Union and state governments revisit this approach, both when it comes to investment in vaccines and to investors in general. Private companies that cooperate with governments must be allowed to make profits, or they will simply not enter into any agreements with the state. This is indeed what has happened in many infrastructure sectors in India over time. While it is true that Mr Poonawalla has been inconsistent in his statements as well as in his pricing (raising it to Rs 400, then cutting to Rs 300 as a “humanitarian” gesture), his interview did reveal to the world the pitfalls of running a vital enterprise in India: You become a target for intimidation. The government’s duty is to protect entrepreneurs and businessmen, not be another source of pressure. It is to be hoped that the vaccine roll-out struggle will have driven home the lesson that a more cooperative relationship with the private sector, and less stigmatisation of capital, are essential for efficiency, investment, and growth. Speaking at the Lok Sabha recently, the prime minister stressed the private sector’s vital role in the economy and asserted that the culture of “abusing” it was no longer acceptable. It’s a piece of advice everyone should follow.