Do we still need more evidence?


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THE phrase ‘economic impact of HIV/AIDS’ has been bandied about for over a decade. Among the insiders – those who are directly or indirectly associated with the various aspects of the epidemic – there is no doubt that the AIDS epidemic will have a severe impact. However, for many of them and certainly for those not connected with the epidemic, it is still not clear what shape and size this impact is going to take, who should be prepared for it, and how best to prepare for it.

The other phrase doing the rounds for a while is that ‘AIDS is a developmental problem’. This has been said so many times that it has ceased to have much operational meaning even for those who work on developmental issues. Both these phrases, however, continue to be at the heart of the problem that is the HIV/AIDS epidemic. They are but two sides of the same coin, with development issues playing a large role in determining the extent of economic impact and vice versa.

The socioeconomic impact of any catastrophe can be broadly classified into three categories: macro, sectoral and household/individual. To take the last one first, the impact of a major shock to the household system emanating from the event of one or more household members falling sick or dying, will be felt on all fronts of the household economy. The greater the number of members sick/dying/dead, the greater the economic impact on the household, ceteris paribus. This impact will be felt in obvious ways on income, productivity, consumption, employment, health and non-health expenditures, schooling of children, health of other members of the household, asset holdings, and so on.

There have been several studies around the world – particularly in Africa – that have demonstrated the severity of the impact. In Botswana, a study calculated that household income in the poorest quarter of households was likely to fall by 13% because of HIV/AIDS (World Bank 2000). Another study (World Bank 1997) indicated that people with AIDS were more likely to seek medical care and incur out-of-pocket expenses than people who died of other causes. In Thailand, one-third of rural families experienced a halving of their agricultural output, and another 15% had to remove their children from school.

Evidence continues to pour in from around the world to indicate that individuals and households are going to be economically affected, and poorer households are going to be more vulnerable and less able to cope than better off households. The few studies in India also indicate severe strains on the socioeconomic wellbeing of households mainly via reduced income and increased health expenditures, and the special vulnerability of poorer households and individuals (Basu, et al. 1997, Gupta 1999).

Predictably, these household level impacts then translate into impact at the sectoral levels. Sectors like agriculture, education, health, industry as well as the government are all affected in various ways, as has been evidenced in countries of Africa. Industrial production can for instance be affected if a significant proportion of the workforce is infected. The health sector can be affected both from demand and supply sides. The former due to increased pressure on health services, and the latter due to a possible shortage of health care workers due to a voluntary withdrawal of these workers, as well as from increasing rates of infection among them.

The government sector will be affected both as a provider of services – including health – as well as in financing prevention, control and care efforts in direct and indirect ways. These findings are well documented (World Bank 1997) and more studies continue to uncover impact on different sectors. For example, a recent study investigating the impact of the epidemic on African businesses found that many of these countries lost their competitiveness over other regions of the world, mainly via loss in labour supply, reduced labour productivity and increased cost of production (USAID 2002).



In India, sectoral impact studies are quite rare largely due to lack of data. A study on the trucking industry indicates that this industry could suffer significant impact due to direct and indirect costs including replacement and training costs (Kanjilal 1995). In anticipation of the problem, there has been some response from the organised sector, particularly in prevention efforts among workers. The potential of a rising epidemic among the hard-to-reach informal and unorganised sector workers, however, continues to be a cause of concern.

Finally, these micro and sectoral impacts can, and do, translate into macro effects on the economy, affecting parameters like growth, national income, employment, productivity etc. It is clear now that a severe epidemic can reverse the growth and development process in developing countries, as has happened in sub-Saharan Africa. A very recent study of nine countries in the Middle East and North Africa indicates that on an average, GDP losses across countries for 2000-2025 could approximate 35% of the current GDP. In all countries it is possible to observe scenarios where losses surpass current GDP (Jenkins, et al. 2002). There is as yet no study on India that attempts to quantify the effects of the HIV/AIDS epidemic on growth and income in a general equilibrium framework.



Another approach examines costs emanating from life years lost. A few studies have attempted to quantify total cost comprising mainly medical costs and loss of productivity. One study indicated that these costs can be as much as 1% of GDP (Anand, et al. 1999). An earlier study indicated a total cost of $11 billion by 2000 (Bloom, et al. 1993), while a later study (Pandav, et al. 1997) indicated an even higher figure. Needless to say all these studies are based on different assumptions and scenarios, and can at best give an approximate range of costs. Nonetheless, these studies do establish that the epidemic is going to cost India dearly in terms of its scarce resources.

What is clear from the discussion so far is that the HIV/AIDS epidemic is closely related to poverty, growth and development. But what is so different about this epidemic? Will not any other epidemic have similar economic impacts? Will not a large-scale public health outbreak also elicit similar coping responses from economic agents, and potentially endanger development gains? What then is so different about the HIV/AIDS epidemic that so much time, energy and funding are being channelled to it? While there are political economic explanations in the context of international cooperation and donor assistance for the epidemic, there are a few important reasons why it might be useful to think of HIV/AIDS as being slightly different from other serious public health concerns. The following reasons indicate why the epidemic may have a greater impact than other public health problems, especially in India.

* Since the day the first case was discovered, HIV continues to spread, and does not seem to be slowing down to any significant extent.1 Newer areas continue to report HIV and AIDS cases.

* There is no cure so far, and evidence indicates that most HIV cases result in deaths, with different time lags. Thus, there is an irreversible economic loss.

* Due to the dominant mode of transmission – sexual – it disproportionately affects people in the productive age groups, and therefore creates a potential for economic impact at all levels of the productive economy. These effects are magnified if one takes into account dependants and families of the infected individual.

* The sexual mode of transmission being the dominant mode, there is a high probability of multiple HIV cases within the household.

* Women are especially vulnerable due to their low status and lack of control over economic as well as non-economic decisions, including safe sex.

* Costs of treatment of opportunistic infections can be very high, and due to multiple cases of illness till the time of death, medical costs alone can impose a severe economic burden on households.

* Costs of antiretroviral therapy are still high – despite recent price cuts – and out of reach for a majority of Indians. This is another potential source of economic burden on households and on the economy.

* High absolute number of cases translates into severe strain on the existing health resources of the country.

* HIV/AIDS remains a source of stigma and discrimination, and it therefore becomes difficult to normalise prevention as well as care interventions.



In any infectious outbreak, socio-economic vulnerability plays a key factor in the epidemiology of the disease, and HIV/AIDS is no exception. However, in this case, these factors are magnified due to the modes of transmission, some of which are still considered stigmatising. When one considers each mode of transmission separately, it is clear that apart from informed deliberate high-risk actions – the probability of which has to be low for rational individuals – each of these modes is likely to be associated with economic as well as non-economic poverty, which includes deprivation, marginalisation, disempowerment and underdevelopment.

The principal modes are sexual transmission, injecting drug use, unclean blood supply and mother to child transmission. All these modes are closely correlated with poverty and underdevelopment. Poverty – defined in this larger sense – is the reason why many women are forced into prostitution, why many women cannot ensure safe sexual behaviour of their partners, why many youths and adults take to drugs and then cannot give them up, why individuals cannot access the more costly but safe blood, why individuals and households migrate from rural to urban areas or across borders even though their status in the areas of destination is little more than that of slum dwellers.



Poverty also makes people more vulnerable to discrimination, whether based on caste, gender, sexual preference, or religious beliefs. As mentioned before, socioeconomic impact is felt most by the poor and the almost-poor, sending many individuals and households into fresh or further poverty. Most importantly, poverty and underdevelopment are also reasons why people are unable to relate to messages of behaviour change, which form an essential part of prevention and control strategies across countries including India.

An important question that needs an answer in India today is whether more evidence is needed to demonstrate impact, or can we learn from the collective world experience, and prepare ourselves for fighting back so that we do not end up undoing the precious gains made in development? The answer is somewhat obvious: the time has come when one must believe the evidence from the rest of the world, and use logic and common sense to understand that this kind of epidemic is bound to have an impact on the various development indicators. The size and magnitude of impact would definitely differ across countries, and some countries will cope better than others.

However, while these are important and interesting empirical questions that ideally one should have answers to, one does not have to wait for these answers to formulate policies to arrest the spread of infection and mitigate impact. It seems obvious that at this stage of the global epidemic, the only important figures one needs to know for proper planning are epidemiological ones. It is extremely important to know the magnitude, size, distribution and mode of transmission of infections in the country for effective policy formulation on both prevention and mitigation of impact.

There is an even more important issue in the context of impact: without these dimensions, one actually cannot calculate the impact of the epidemic in any sensible way. Unfortunately, the available data does not permit us to know the distribution of the epidemic across population; thus, for instance, we do not have any way of estimating how the infections are distributed across income and education groups. We do not know what proportion of industrial workers are infected, or what proportion of HIV positive individuals access the public health care system. In the absence of data on these and various other related indicators, it is difficult to meaningfully say much more than the fact that there are economic impacts or that treatment costs are high or that the disease burden is high.



Ultimately economic impact is about resources. Whenever there is a catastrophe, individuals cope. Yet where do households, industries, health sector and the economy get resources to cope with the epidemic? Unfortunately, the answer does not always lie in getting more global funds or greater donor participation. The answer lies in the difficult zone of doing the best with the least possible resources. While it is hoped that rational households and micro agents will aim to maximise their welfare using the least amount of resources, it is not clear whether this is being achieved at the national level in India. How do we know whether the resources currently used for prevention and control are being used effectively? Or in a cost effective manner? Or whether or not some programmes should be abandoned and others adopted? Or that spending on specific HIV/AIDS programmes is better than making our primary health care system more functional so that access to treatment is guaranteed?



Though there may be many impressions and views, there are no scientific answers available in India as yet. While some part of prevention and control measures are undoubtedly necessary, the vast area of behaviour change – which is ultimately the vehicle to reduced transmission – is by and large unexplored. This area needs to be studied to understand what works in the long run in a sustained fashion, is possible to scale up, and is also cost-effective.

To conclude, it should be remembered that even after the virus has stopped spreading, the socioeconomic impact will be felt in the entire economy due to the large pool of infected individuals. Impact can be and will be mitigated in a variety of ways, but each way will be resource consuming – both financial and non-financial – and therefore welfare-reducing at least in the short and medium terms. Apart from emotional and psychological impact which can be mitigated to a certain extent by seeking professional help (this may also be expensive), other impacts can be dealt with only by spending more resources, for care and support, to increase productivity, to care for orphans, or greater investment to make up for lost output.

The bottom line is, impact mitigation is costly, but essential. Prevention of infection in a cost-effective manner is one of the ways to save our scarce resources that may have other alternate uses, so that fewer resources have to be spent to mitigate impact. It is clear that behavioural factors that are still by and large taboo in Indian society are propelling this epidemic. Ultimately, prevention and control measures can work only if these influence people’s perceptions of risk, and subsequently bring about behavioural change. Poverty and underdevelopment are key factors that play a role in how people perceive risks and how much control they have over their own behaviour. Thus, any prevention and control policy must address the issue of vulnerability itself. Till the time this happens, only short-term gains will be made.



The most effective way of dealing with vulnerability remains development of the kind that significantly improves the wellbeing of the population in significant ways, and not merely the kind that may exacerbate some of the features of the economy that facilitate the spread of the virus. At the same time, specific and cost-effective prevention and control interventions must continue.

Simultaneously of course, there will have to be direct impact mitigation policies that affect all those whose lives have been adversely affected by the virus. Ultimately, this means policies on poverty and health care. In such a situation there exists the danger of violating the equity principle: can one justify helping an AIDS orphan and not other orphans? Or helping only AIDS widows? Or giving employment only to those who have suffered income losses due to HIV/AIDS? There are no clear answers, but there is no getting away from the fact that help is needed.

One suggestion is to make the economy and economic agents as shockproof as possible by enhancing productive capabilities, by offering social safety nets and by making institutions and facilities work to the best of their abilities; ensuring that coping is less costly than it otherwise would have been. This brings us back to issues of development and growth: welfare-enhancing economic prosperity will remain the most effective way of arresting the spread of the virus as well as reduced socioeconomic impact.



1. NACO reports indicate that the number of new infections were lower in 2001 than in 2000, which is taken to be an indication of plateauing off. However, keeping in mind the inability of surveillance to monitor all the regions and corners of the country effectively, especially the general population, it may not be possible to really say this with great confidence. Also, it is too early to be optimistic, and a few more years’ data may better reveal the truth.



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