HIV/AIDS to affect economic growth of India, reduce household inco

New Delhi, July 20 (UNI) The potential costs to the economy arising from the continued and unchecked march of the HIV epidemic could be quite high for India, in the absence of remedial policy measures.

This has been highlighted in a report on 'The Macroeconomic and Sectoral Impacts of HIV and AIDS in India', conducted by the National Council of Applied Economic Research (NCAER), and supported by the National AIDS Control Organisation (NACO) and the United Nations Development Programme (UNDP).

The study, based on a CGE (computable general equilibrium) analysis of the likely impact of the epidemic over a 14-year period between 2002-03 and 2015-16, shows that with an unchecked spread of the HIV and AIDS epidemic in India, the country's achievements in terms of economic growth in the next 10-15 years will be noticeably less than its potential.

"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, 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. 7,610.61, the report notes.

The increase in health spending by both households and the government leads to a fall in their savings, which then crowds out investment and causes growth to slow down. Government savings as percentage of GDP are likely to fall by 0.67 percentage points, household savings by 1.15 percentage points and investment by 1.16 per cent.

"It is time to see policy action against AIDS as a growth-enhancing policy endeavour, and, first and foremost, dedicate adequate resources for this purpose," the report urges.

The impact of the epidemic on the economy comes through five routes - maximum being slower growth in population and supply of labour due to AIDS-related deaths. Labour supply is likely to fall by 0.31 percentage points over the 14-year period, with unskilled labour showing the largest decline of 0.35 percentage points and skilled labour the least by 0.22 percentage points.

The economy would also be affected due to lower labour productivity of HIV-affected workers and declines in sectoral total factor productivity growth rates. A 10 per cent increase in share of health expenditure in household budgets, which cuts into other non-food expenditures. A 5 per cent increase in share of health spending in overall government expenditure by 10 per cent from 2002-2003, and by 15 per cent from 2012-13 to 2015-16.

Under the impact of AIDS, poverty will inevitably increase since the real wages for unskilled labour will fall the most among the three labour groups.

The epidemic hits the sectors that used unskilled labour intensively harder, the study notes, with the tourism sub-sector of the services sector suffering the highest loss in value-added - 18.31 per cent - by 2015-16. The manufacturing sector comes second with a 12.48 per cent fall.

The services sector will lose 10.13 per cent in value added.

Agriculture is affected to the extent of 9.08 percentage points in value added. Within industry, five segments have been identified as particularly vulnerable: construction, chemicals, mining and quarrying, capital goods and textiles.

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