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P. Srivatsan

The domino effect: Every incidence of AIDs triggers a chain reaction across all sectors from the micro level of home to the macro level of the economy.

HIV/AIDS is estimated to have affected 5 million persons in India. What are the economic consequences of the disease? First is the loss precious human resource in terms of manhours lost, loss of productivity and higher health cost to the employer, loss of income, break-up of families and finally loss of revenue to the government.

Among those most vulnerable to the virus are truck drivers, construction workers and casual and migrant labourers. Drug addiction is another cause for the spread of the disease. The effect of HIV is evident both in quantitative and in qualitative terms. At the micro or family level, majority of the children and the elderly will have to fend for themselves if the breadwinner of the family is afflicted with the disease. The change in labour force would mean change in skills and experience. These factors generally affect the GNP growth rate. The economy will suffer loss of potential production. Social cost for under utilising the available labour rises as labour constraints intensifies.

If the spread of HIV/AIDS is not checked, the impact will be severe. Groups such as truck drivers, migrant labourers and miners may be affected badly. Under these circumstances, it is then inevitable that the rise of per capita GNP will be slower than it would otherwise have been. The standard of living rises with decline in life expectancy, higher medical cost, reduced enrolments in schools, and higher infant mortality rate.

Consider a few examples. The mining industry employs skilled labour. Its costs will rise as a result of illness and higher incidence of HIV/AIDS. Agricultural producers, faced as they are by falling labour supply, may switch from cash crops, which are labour-intensive, to lower value-added food crops.

This will reduce incomes, lower foreign exchange earnings for the economy, and lower tax yields for the government. In all cases where there is an effective fall in labour supply, attempts will be made to economise on labour.

Secondly, the spread of HIV will affect the volume and use of savings. For a developing country, quantity of savings available and investments growth in GNP.

Additional health expenditure on HIV treatment will increase the burden on the domestic consumption expenditure and reduce savings. Many households will lose one or more productive members resulting in a fall in income.

As far as the government is concerned, revenues will fall as growth rate of the economy declines. For investment to be maintained there would have to be a rise in net foreign capital inflows sufficient to offset the decline in domestic savings, a development that seems improbable.

Foreign companies invest in India because of availability of labour at low cost. This equation could bedisturbed. Foreign investment has been critical to the transformation of developing economies, and any adverse change will have severe implications for economic performance.

In the business sector, labour costs will rise as productivity declines due to higher mortality, increased absenteeism and training cost on account of increase in labour turnover. Health and social expenditure will also rise. Under these circumstances, firms will find fewer resources available for financing capital expenditure.

The government as an employer will be similarly affected. Its current expenditure, especially on health, will rise. The government will also need to increase budgetary allocations to deal with increasing numbers of orphans and increasing poverty.

In short, the entire economy will face the brunt of the HIV epidemic. There is no way of estimating the total cost. These costs far exceed the direct costs of health care, and it is these indirect costs that will be the main source of the economic loss that countries affected by the HIV epidemic will have to incur. Economic systems are not static, they are characterised by behavioural responses to the changes that affect the decisions. The spread of HIV will have multiple effects and generate responses that need to be considered if there is to be proper understanding of the economic impact of the disease.

Treatment of people with HIV/AIDS

AIDS is assuming alarming proportions in Africa and South-East Asia. Major cities, such as Mumbai, which have a floating population, are particularly vulnerable.

In five States, more than one per cent of the general population is HIV positive. Ninety per cent of those affected fall within the most economically productive age group of 15 to 44; one in four is a woman, several of them pregnant.

Given the size of India's population, a mere 0.1 per cent increase in the prevalence rate would increase the number of adults living with AIDS by over half a million people. HIV/AIDS is affecting India's children both directly and due to loss of one of the parents to the disease.

Surveillance data shows that the virus has started to spread to the general population and to move from urban to rural areas. There is significant economic impact of HIV/AIDS at the national and family level, as it directly affects the workforce.

To curb the spread of AIDS, the WHO and UNAIDS have launched a global initiative called "3 by 5" with the objective of providing anti-retroviral therapy (ART) to three million people living with HIV/AIDS in developing countries by the end of 2005.

This global initiative coincides with the government's announcement, made on the eve of World AIDS Day 2003, to provide anti-retroviral treatment free of cost to 1,00,000 people with HIV/AIDS by end 2005 beginning from April 1, 2004.

However, the roll out of ART is not easy. The critical challenges in providing and scaling up access to ART calls for comprehensive efforts from all sectors involved in containing HIV/AIDS. Among the many challenges are:

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