An HIV/AIDS epidemic in India will cut nearly one percentage point a year from economic growth over the next decade as higher health spending eats into investment and workers fall sick, an economic think tank said.

India has the largest number of people living with HIV/AIDS, according to UNAIDS, the United Nations AIDS agency, with 5.7 million people infected, and voluntary health groups say the government needs to scale up efforts to contain the disease.

“Economic growth could decline by 0.86 percentage points over the period and per capita gross domestic product by 0.55 percentage points,” the National Council of Applied Economic Research said in a study released on Thursday.

The report covers the period from April 2002 to March 2016.

The NCAER says the epidemic will push up health spending by both households and the state, eating into savings, crowding out investment and hitting growth. Sickness will also depress productivity.

“The financial demands of treatment are only beginning,” the report warns.

The study, backed by UNAIDS and India’s state-run National AIDS Control Organisation (NACO), said an increasing number of households with HIV will have to sell their land or borrow heavily to finance expensive medical treatment.

“This has a significant impact on household finances as well as the macroeconomy,” the study said.

The NCAER forecast that GDP per capita - currently at 21,000 ($450) rupees - would fall by 7,610.61 rupees in the next 10 years, and the growth of labour supply would slow, especially in the manufacturing, construction and tourism sectors.

“Action is called for,” said C. Rangarajan, chairman of Prime Minister Manmohan Singh’s Economic Advisory Council, at a meeting to release the report.

But the former Indian central bank head disagreed with the forecast that growth would be hit by almost one percentage point a year, saying India’s economy was growing robustly despite the widespread presence of diseases like tuberculosis.

“If we add all our diseases (according to the NCAER model), we will hardly have any growth rate.”

India’s GDP growth has been estimated at 8.4 percent for the year ending March 2006 and it expects to sustain 8 percent plus growth in the coming years and take it up to 10 percent.

But the world’s second most populous nation spends less than three percent of its national budget on public health, lower than many Asian nations.

“This is shameful given the fact we have many diseases to fight including AIDS. This needs to be ramped up immediately,” said Alok Mukhopadhyay, head of the Voluntary Health Association of India.

Though India has the world’s highest HIV/AIDS caseload, the adult prevalence rate is still slightly under one percent and health groups say this has bred complacency in the government.

A recent study in South Africa forecast economic growth would slow to 4 percent between 2000-2010 from a projected 4.4 percent in the absence of an HIV epidemic. One out of every nine South Africans is thought to be living with the virus.