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2021’s Health And Financial Challenges Likely To Linger

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Published on March 18, 2021 | Est Read Time: 3 min

According to the 2019 Global Health Security Index, which measures the level of preparedness countries have in the event of a pandemic, India ranked at 57th place and when global lockdowns were announced back in March last year, to say that it caused a disruption in the markets is an understatement. Combined with the mounting pressure on healthcare systems and rising social costs, the global economy suffered greatly. A number of sectors in the country saw their financials vastly contract. The aviation sector saw a 20% reduction in domestic travel, after being paralyzed for close to half a year, while hotel bookings declined from 70% to a mere 20%. To top it all off, the restaurant sector saw a decline of 35% in its business, as the industry bled 1500 crores daily.

All hopes were pegged on the delivery of a vaccine, which was set to take close to 18 months to deliver, as per general timelines. Come the concluding months of 2020 however, and multiple companies such as Pfiezer, the Oxford Astrazeneca tied up and even the domestic Bharat biotech were ready to launch their iterations of the Covid 19 vaccine in record time, with efficacy rates ranging in the high 90s for most major players.

Now, with national vaccination drives in full swing, and commercial and financial activity attempting to resume their usual operations, a certain level of cautious optimism has pervaded public discourse. Indeed, both the BSE Sensex and Nifty richest their highest-ever closes in early 2021, on the backs of positive global and national cues. Indeed, it is likely that the health challenges and financial challenges that emerged across 2020 and the start of 2021, are here to stay.

Financial hurdles

Based on the performance of the Indian economy during the pandemic in 2020, it is likely that the country’s GDP losses will touch 5-10 billion dollars. One key factor that is driving financial challenges in 2021 is the uncertainty that comes along with revolving Covid 19 guidelines. Despite mass vaccination drives being underway, several parts of the country are witnessing a spike in Covid 19 cases, which in turn forces governments to take actions to prevent the spread. The restaurant industry, for example, completely incapacitated for a good part of 2020, was given a breath of fresh air as a decline in cases allowed for restrictions to be lifted and restaurants to be reopened. However, as states noticed a rise in cases, new restrictions issued on a short term basis saw a number of restaurants being compelled to shut shop once again. This uncertainty pertaining to the possibility of new restrictions is likely to continue to fuel uncertainty in the market over 2021, detracting investment and compromising business operations and continuity, particularly for smaller firms.

Healthcare Challenges

For most companies in the healthcare sector, the increase in the cost of operations due to the Covid 19 pandemic could turn into a long term burden, which would inevitably trickle down onto the customers, posing strong healthcare challenges for the Indian healthcare system in 2021. Both private and public institutions witlessnessed a heavy drop in footfall, which is concerning and indicative of more than one aftereffect of the Covid 19 pandemic. For starters, the prime financial challenge posed by the drop in footfall is the subsequent reduction in revenue that these institutions will see. However, the drop in footfall is also indicative of the fact that individuals are straying away from visiting medical facilities due to uncertainty about the virus. Another challenge faced by the healthcare system is the shortage of required supplies. With the global supply of masks, sanitation supplies, ventilators and hospital beds surge, the Indian healthcare system struggled to keep pace. Bihar for instance had a measly 0.12 beds per 1000 people.

On the bright side, however, the weak links in India’s healthcare system were brought to the forefront by the pandemic, forcing the government to exponentially increase its spending on healthcare services and infrastructure in 2021 and beyond. For instance, India is set to more than double its spending on healthcare post the pandemic. Proposed by the Finance Minister, the provisions for healthcare under the new union budget are 2.23 lakh crores. This stands to be a staggering 137% higher than the previous budget of 94,452 crores.

However, one also has to note that this is far beyond anything the government was expecting to be spending. India’s sovereign debt was already significant even prior to COVID and with the fiscal stimulus packages released last year, the rising fiscal deficit and the sheer number of critical challenges that have become only more glaring due to COVID, financial and healthcare challenges will continue to linger across 2021.

Conclusion

Even by those estimates that do not steer on the right side of caution, the healthcare challenges and financial challenges caused by the Covid 19 pandemic is likely to push the economy to contract by 7.7% during the course of 2021-2022. With lockdowns and restrictions still being placed on short notice for haphazard durations, the uncertainty experienced in 2020 by the markets might continue to fuel financial hurdles and healthcare challenges for the country. The pandemic, however, has also led to big chinks in the armour of the healthcare system being exposed, coercing governments to increase their spends to fix these issues for good. While the government makes effort to ramp up healthcare facilities, one can always afford additional protection against the virus through health insurance. While it may not be possible to avoid getting infected, one could ensure they have the financial means to fight the virus.

Disclaimer:  The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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