The Macro-Economic and Sectoral Impacts of HIV and AIDS in India: A CGE Analysis

31 Dec 2006
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Summary

While most studies focus on the impact of HIV and AIDS on affected households, this study goes a step further in analysing the macro-economic and sectoral impacts of HIV and AIDS in India using the computable general equilibrium model, a model that includes various sectors in its ambit and provides a realistic estimate rather than an overestimate.


The adverse economic impact of HIV and AIDS occurs at three levels: the individual/household, sector, and national or macro-levels. In the early phase of the epidemic, the impacts at the sector and macro-levels are rather mild and, hence, not easily measurable or quantifiable. So far in India, given the low overall prevalence, the focus has been on the effects at the level of the individual and the household.

The enlisted study, by Pradhan, Sundar and Singh (2006)1 also focuses on the impact of HIV and AIDS on affected households, which it finds to be seriously adverse, and, therefore, a matter of acute concern. At the same time, the study underplays the adverse economywide impact of AIDS. Given the current prevalence rate, the extrapolation of the household-level impact to the level of the state or the national economy does not reveal a large macro-economic impact. But, this is because the survey, on which the study is based, captures the snapshot of the economy at a given point of time, while the question of the macroeconomic impact of AIDS is essentially a dynamic one.

As the HIV epidemic unfolds, its impacts are bound to be deeply compounded. These impacts cannot be assessed in their totality by a mere extrapolation of the household level impact. Furthermore, in 2005, the number of HIV-infected persons exceeds 5 million, and this number is expected to quintuple to between 20 million and 25 million by 2010. With that kind of a jump in the number of HIV cases in the next 5-10 years, there is bound to be a visible impact on the national economy.

At present, little or nothing is known about the potential macro-economic impact of HIV and AIDS on the Indian economy. The rough-and-ready estimates of the macro-economic costs of AIDS that are available are of no help in guiding and accelerating the response of the Government of India to the potential threat to the economy imposed by this epidemic. A quantitative assessment of the macro-economic impact of AIDS on the Indian economy, therefore, needs to be undertaken urgently to assist the policy makers.

Keeping this in mind, the study analyses the macro-economic and sectoral impacts of HIV and AIDS in India, using a fivesector computable general equilibrium (CGE) model. Why the CGE model.

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