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Covid-19 could do for the biomedical industry what the Y2K scare did for Indian IT sector

Ubiquitous testing will likely be a worldwide phenomenon over the next year or two. If Indian businesses can respond to the challenge by quickly building capacity to produce relatively cheap testing kits, this could spark a boom in the biomedical industry.

Written by Amartya Lahiri , Urjit R Patel | Updated: May 21, 2020 9:13:36 am
coronavirus, coronavirus India lockdown, India lockdown coronavirus, COVID-19 India Lockdown, Express Opinion, Indian Express The main driver of increased COVID testing globally is the need to make people safe, and for them to feel safe, while engaging in market activities. This is fundamental for getting the economy to move again.

There seems to be a plateau in the number of COVID tests per day that India seeks to do — about 1,00,000. At this rate, close to two years would elapse before 5 per cent of Indians are tested once. So why is a country of 1.3 billion seemingly sanguine about the pace of testing when it has accepted one of the strictest lockdowns for two months, which means it has not under-estimated the public health challenge? Or, why are countries with smaller populations trying to enhance their testing capacity from current levels? The US is aiming for a million daily tests. Germany already has walk-in test centres.

The main driver of increased COVID testing globally is the need to make people safe, and for them to feel safe, while engaging in market activities. This is fundamental for getting the economy to move again. One might think that the necessity of earning a living will force people to report for work. But decisions regarding market activity are not just about going to work. In normal times people go for outings — to shop, dine outside, and go on vacations. These actions sustain a whole ecosystem of businesses and livelihoods. As an example, the tourism and hospitality sector in India employs 40 million workers, which is estimated to be about 10 per cent of total employment. Unless Indians begin to engage with some of these activities on a regular basis, this component of the economy, and those whose livelihoods are derived from these sectors, cannot recover.

More generally, the virus has impacted activities involving interactions between people. Interactions occur both at work and while consuming outside the home; those latter activities create their own business supply chain. As demand dries up in downstream consumption industries, businesses upstream, who are suppliers to these downstream industries, will shut down as well. This chain of broken links is what needs to be repaired, and fixed quickly, for which a plausible requisite is making people more confident to engage in market activities.

It is perhaps a sign of our times that in the incessant cacophony and the consequent disappointment over fiscal and financial packages, relatively little discussion has taken place over the potential expenditure required for public health safety. To the best of our knowledge, little beyond the Rs 150 billion announced in March by the Union government for increased budgetary spending for the sector has been heard. And yet, without safety on the health front, the risk of a sharper and longer decline in economic activity stays elevated. It is perhaps not an exaggeration to surmise that global investment destinations will be influenced by the relative reputation of national testing protocols.

Ubiquitous testing is expected to be a necessary ingredient for multiple reasons. The virus currently has no effective treatment and a safe vaccine is possibly a year away. Moreover, even recovery from infection doesn’t guarantee immunity from future infection. At this time, there is uncertainty about both the level and the longevity of immunity that is acquired through infection. This is at the heart of the necessity of multiple and regular testing of workers to protect workplaces and impart confidence to co-workers that they will be safe. Hence, even the previously infected will have to continue to be tested. In addition, all tests have false negative and false positive chances associated with them. Both errors are problematic.

So how widespread must testing be and how much will it cost? If one only targets urban workers in India, we are considering a testing pool of approximately 200 million people. To make workplaces safe, at a minimum, every worker needs to be tested at least once every week over the next year, or till such time as a vaccine becomes available. On a daily basis, this is around 21 tests per 1,000 people. By comparison, 1,00,000 daily tests imply a rate of only 0.08 per 1,000 people.

The cost of RT-PCR tests in India currently ranges between Rs 1,000 and Rs 2,500. This will undoubtedly decline going forward as more private players enter the field, and the government refrains from a licence-permit raj predilection. With scale economies and extensive pool testing, it may not be unreasonable to budget an average price of Rs 500 per test. The total outlay on this testing plan would amount to 2.5 per cent of GDP. While not an amount to be sneezed at, this money can be found. The cost of having a comatose economy due to limited testing will possibly be higher than this.

Implementation of this strategy will require mobilisation on a war footing. The number of labs that can test for the virus will have to be increased to at least 2,000 with each lab having the capacity to test 5,000 samples a day. Moreover, labs need to be spread out across the country; presently, a third of all authorised testing labs are concentrated in three states. Another approach would be to incentivise private investment in point-of-care testing machines; these give quick results and facilitate decentralisation.

Testing at this scale will also demand a quantum increase in supplies of components like swabs and reagents. These can be constraints. University labs in the US have developed alternative testing methods that do not require reagents. India will have to incentivise its universities, research laboratories and biomedical supply chains to join this mission to develop cheaper and faster testing methods.

The approach needs massive hiring of testers, transporters and contact tracers. The resultant increase in demand for labour should provide jobs to unemployed workers. Hence, it will provide employment insurance while simultaneously stimulating demand.

Ubiquitous testing will likely be a worldwide phenomenon over the next year or two. Consequently, world demand for testing kits will explode. If Indian businesses can respond to the challenge by quickly building capacity to produce relatively cheap testing kits, this could spark a boom in the biomedical industry. The pandemic could do for the biomedical industry what the Y2K scare did for the Indian IT sector. India needs to give an unambiguous signal to its entrepreneurs about the centrality of this mission. The skill and enterprise are both available.

Meeting the challenge could be a perfect launchpad for a global “Make in India” offering. We have already reached an analogous position in parts of the pharmaceutical industry. A bottom of the pyramid virus testing product will be a game changer.

This article first appeared in the print edition on May 21, 2020 under the title ‘Can’t avoid ubiquitous testing’. Amartya Lahiri is Royal Bank Professor of Economics at the University of British Columbia; Urjit R Patel is former Governor, Reserve Bank of India

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