Public spending on health in India has historically remained low. Recently, many think tanks claimed that India, which has always spent a little more than 1% of its GDP on healthcare, is inching close to 2% under the current regime. An increase in public spending is welcome. But is it correct to attribute it to the Union government?
First, public spending on health in India continues to be abysmal compared to many countries. Second, while public spending on health has indeed increased, much of the rise is due to the States and not the Centre. In fact, the Union Health Ministry has been transferring a lower share of its resources to States in recent years. Moreover, the Centre has also cut the budget for the National Health Mission (NHM) in recent years, while increasing disproportionately the spending on government-funded health insurance schemes (GFHIs).
Chart 1 shows the per capita public spending on health in India compared to other countries in 2021. Bhutan’s spending on health was 2.5 times more than India’s while Sri Lanka’s was three times more. Many BRICS nations (old list) spent 14-15 times more than India.
Chart 1 | The chart compares India’s public spending on health with other countries (2021) (in $ PPP)
The increase in public spending on health in recent years, particularly during the COVID-19 pandemic, can be attributed to the States and Union Territories (Chart 2). The States have sustained the increase post-COVID-19 as well. Given the resource constraints they face, this is commendable. In contrast, the Union government’s spending on health as a percentage of GDP, which increased moderately during the pandemic, has decreased post-pandemic.
Chart 2 | The chart shows expenditure on health ministries and departments (as % of GDP) by the Union and all state governments.
Note: Union government spending includes spending by Ministry of Health and Family Welfare and Min of AYUSH
Furthermore, a significant part of the increase in health investment as a percentage of GDP during the pandemic needs to be attributed to the negative and low growth of GDP, while absolute increase in expenditure remained modest, in real terms (Chart 3).
Chart 3 | The chart shows Union Government spending on health from 2019-20 (in constant prices)
More concerning is the decline in the share of resources transferred to the States by the Union Health Ministry. In FY14, three-fourth (75.9%) of the Union spending on health was transferred to the States (Figure 4). Within the first three years of the National Democratic Alliance government, the share came down to little more than half (53.4%) and declined consistently to reach a new low of 43% in FY24 (Budget Estimates). The trend reflects increased centralisation of financial resources on health, a subject which largely falls within the domain of States.
Chart 4 | The chart shows the share of transfer to states in the Union expenditure on health (%)
Launched in 2005, the NHM was a crucial intervention by the Union government. But expenditure on the scheme has mostly remained stagnant or has come down in the last seven years (Chart 5). Between FY14 and FY19, the spending on NHM grew at 7.4% on average, largely due to a sudden jump in FY18. During the second tenure of the NDA government, spending on NHM declined in real terms at 5.5% on average.
Chart 5 | The chart shows Union government expenditure on National Health Mission (in constant prices)
The Modi government’s emphasis on Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) is visible in its spending patterns. A look at the expenditure on various GFHIs such as PMJAY shows a steady increase in expenditure. Between FY15 and FY20, expenditure in real terms nearly doubled, growing at an average of 18% per annum. Even though the Centre draws a lot of mileage from these schemes, a bigger share of the spending is incurred by the States.
Chart 6 | The chart shows Union and state spending on government funded health insurance schemes (in constant 2013-14 prices)
The COVID-19 pandemic had shown the cracks in India’s health system and highlighted the need for increased public investment in healthcare. While the States have risen up to the challenge, despite financial constraints, the Union government has done little.
Indranil Mukhopadhyay is a faculty member at the Jindal School of Government and Public Policy, O.P. Jindal Global University, Sonipat, Haryana
