HIV/AIDS Epidemic to Cause Adverse Effects to Indian Economy

The increasingly unchecked spread of the HIV/AIDS epidemic could affect the Indian economy adversely in the coming years according to a report on the Macroeconomic and Sectoral Impacts of HIV/AIDS.

The study was conducted by the National Council of Applied Economic Research (NCAER) and supported by the the United Nations Development Programme (UNDP) and National AIDS Control Organisation (NACO).

The report was based on a Computable General Equilibrium analysis of the expected impact of the epidemic between 2002-03 and 2015-16. According to the report an unchecked spread of the epidemic in India would cause the economic growth of the country in the next 10-15 years to be less than its potential.

The report notes, "Economic growth could decline by 0.86 percentage points over the period and per capita gross domestic product (GDP) by 0.55 percentage points. According to the model projections, the GDP at 2002-03 prices would decline in 2015-16 by Rs.11,097.93 billion. The GDP per capita (at 2002-2003 prices), according to projections made using the CGE model, would decline in 2015-16 by Rs. 7610.61."

The increased expenditure towards health by government by about 5 percent and households by 10 percent causing a fall in their savings, leaving no room for investment and causing a slowing down of growth. The report estimates that investment as a part of GDP is expected to fall by 1.16 per cent, Government savings as by 0.67 percentage points and household savings by 1.15 percentage points.

Labor supply is predicted to fall by 0.31 percentage points over the next 14 years with unskilled labor declining by 0.35 percent and skilled labor by 0.22 percent.

In addition there will be lower labor productivity of HIV-affected workers as well as a decline in sectoral total factor productivity growth rates. Inevitably there will by impoverishment with the real wage rate falling by 0.10 percentage points of which unskilled labor wages would suffer the most.

Total incomes of HIV affected households could decrease by 9.24 percent following morbidity or death due to HIV and AIDS which would lead to reduced savings and investment causing a deleterious impact on the economy as a whole.

Further loss of earnings due to leave or absence from work could have a still more negative impact on consumption and savings, leading to a whole range of second rung impacts.