Developmental impacts of HIV/AIDS

HIV and AIDS in South Asia: An Economic Development Risk

Publisher: World Bank, 2009

Access to effective treatment is vitally important to mitigate the health and economic impacts of HIV and AIDS. At the same time, the medical costs of treatment can put a substantial proportion of the affected population at risk of poverty, especially in a region where most health services are paid for out of pocket.

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The report finds the impacts of HIV and AIDS in South Asia on the aggregate level of economic activity to be small. For India, the effect on GDP (0.16%) corresponds to a one-off loss of about 1.5 weeks of GDP growth. However, the direct welfare costs of increased mortality and lower life expectancy are more substantial, accounting for three percent to four percent of GDP in India and Nepal, respectively.

Overall, the number of people living with HIV and AIDS in South Asia is about 2.6 million, of whom the lion’s share is in India. AIDS accounts for 1.5% of all deaths in South Asia and about two percent of all deaths in India.

The economic impact on individual households affected by the disease is substantial, the report says. In a household study on India, 36% of people living with HIV and AIDS who were able to retain their employment nevertheless reported an income loss, which averaged about nine percent. Among those who lost their employment (about nine percent), the income loss was severe, at about 66 percent.

The analysis centres on three risks to development:

Risk of escalation of concentrated epidemics: HIV prevalence rates so far remain low in the South Asia region, although there are areas with concentrated epidemics and high and rapidly increasing HIV prevalence rates among vulnerable groups at high risk. Therefore, prevention measures targeted at injecting drug use and sex work are crucial, and the financing of effective prevention programs, such as comprehensive harm reduction including clean needle exchange, condom use, and treatment of sexually transmitted infection (STI), are sound economic investments in low prevalence countries with concentrated epidemics.

Economic welfare costs: Available indicators for access to prevention and treatment are correlated with socio-economic parameters like gender, educational attainment, and wealth. At the same time, the ability to cope with catastrophic illnesses such as AIDS on the household level is limited for households below or in the vicinity of poverty thresholds.

Fiscal costs of scaling up treatment: The weak capacities of health systems in the region contribute to low access and utilization of treatment services. The limited ability of many households to pay health expenses associated with ART, and the negative externalities associated with poor adherence, suggest a large and central role for the public sector in the provision of ART.