India’s Public Health Spending

Copyright infringement not intended

Picture Courtesy: The Hindu

Context:

Union government health spending as a share of GDP has actually declined in the post-pandemic period, according to recent Reserve Bank of India data, whereas states share has increased.

Current status of public health spending:

• India’s total public health expenditure (combined Centre + States) remains well below global norms and far short of policy targets. India spends under 2% of GDP on public health, significantly lower than the 5% target set by the National Health Policy for 2025.

• Most of the recent increase in public health spending has come from State and Union Territory budgets, not the Centre. States increased their allocations from about 67% of GDP in 2017–18 to around 1.1% of GDP in 2025–26 (BE).

• India remains among the lowest spenders on health internationally as a % of GDP. Even within the region, other countries like Sri Lanka, Bhutan, Thailand, Malaysia have higher public health spending per capita, and many spend a higher share of GDP.

Key highlights of RBI data on declining health expenditure:

• The Union government’s allocation for health (health & family welfare) declined as a share of GDP from about 37% in 2020–21 (actual expenditure during the pandemic) to around 0.29% in the 2025–26 Budget Estimates.
• Accounting for inflation (price increase), the 2025–26 health budget allocation is about 4.7% lower than what the Centre actually spent in 2020-21.

• Health’s portion of the entire Union government budget has fallen from 2.26% to 2.05% over the same period. This shows health has been receiving a smaller slice of the overall budget pie.

• The 2017 National Health Policy set a goal of raising total government health expenditure to 5% of GDP by 2025, with the Centre’s share being 40% of that total (= 1% of GDP). In reality, the Centre remains far below that target at ~0.29% of GDP in 2025-26.

Reasons for low public health spending in India:

• Low fiscal priority to health: Public health has historically received a small share of total government expenditure, with the Union government allocating only around 2% of its total budget to health and about 29% of GDP in 2025 - 26, far below the 2.5% GDP target set under the National Health Policy, showing that health has not been treated as a core development priority compared to sectors like infrastructure and defence.

• Heavy dependence on states with limited fiscal capacity: Since health is primarily a state responsibility, poorer States with weaker tax bases struggle to invest adequately, and although RBI data show States increased health spending from 67% of GDP (2017-18) to about 1.1% (2025-26), this rise still remains insufficient to compensate for the declining relative contribution of the Centre.

• High out-of-pocket expenditure reduces political pressure: India’s health system is characterised by high out-of-pocket expenditure (around 45–50% of total health spending), meaning households directly pay for care, which reduces immediate fiscal pressure on governments to expand public provisioning despite the resulting medical impoverishment.

• Greater emphasis on insurance over public provisioning: Recent policy focus has shifted toward insurance-based schemes rather than strengthening public hospitals and primary care infrastructure, which limits long-term capital formation in the public health system and diverts attention from increasing routine budgetary allocations for frontline services.

• Stagnation in Centrally Sponsored Scheme funding: Funding for key schemes like the National Health Mission has remained stagnant or declined in real terms in recent years, even though NHM is the backbone of rural and urban primary healthcare delivery, leading to constrained service expansion and workforce shortages.

• Post-pandemic fiscal consolidation: After the temporary spike in spending during COVID-19, the Union government returned to fiscal deficit reduction targets, resulting in real-term cuts in health allocations compared to 2020-21, showing that emergency health investments were not converted into sustained structural increases.

• Competing Developmental Priorities: Large commitments toward infrastructure, capital expenditure, and welfare transfers have crowded out space for higher health allocations, even though India’s per capita public health spending remains far below peers like Sri Lanka and Thailand.

Major challenges arising from low public health spending in India:

• Overburdened public health infrastructure: Low government spending still below 2% of GDP combined results in shortages of hospital beds, doctors, and diagnostic facilities, causing overcrowding in public hospitals and long waiting times, especially in urban tertiary centres.

• High out-of-pocket expenditure and medical poverty: Because public facilities are inadequate, households rely on private care, leading to out-of-pocket expenditure of around 45–50% of total health spending, which pushes millions into poverty every year due to catastrophic health expenses.

• Regional inequality in healthcare access: Since States bear most health costs, poorer States with weaker revenues struggle to invest, leading to wide interstate disparities in doctor availability, infrastructure, and health outcomes such as maternal and infant mortality.

• Weak primary healthcare system: Underfunding of frontline systems like the National Health Mission has led to staff shortages, medicine stock-outs, and poorly equipped primary health centres, undermining preventive care and early disease detection.

• Inadequate public health workforce: India faces shortages of specialists, nurses, and public health professionals, particularly in rural areas, because limited budget allocations restrict recruitment, training, and retention incentives in the public sector.

• Poor preparedness for health emergencies: The pandemic exposed gaps in surveillance systems, laboratory networks, ICU capacity, and oxygen infrastructure, and without sustained funding increases, India remains vulnerable to future outbreaks and climate-linked health crises.

• Rising burden of Non-Communicable Diseases (NCDs): With cardiovascular diseases, diabetes, cancers, and mental health disorders rising rapidly, low investment in screening, early diagnosis, and chronic disease management leads to late treatment and higher long-term costs.

Key Government Initiatives for Health in India:

• Ayushman Bharat: Ayushman Bharat is the flagship health reform aimed at Universal Health Coverage (UHC) and has two pillars Health and Wellness Centres (HWCs) delivering comprehensive primary care, and the Pradhan Mantri Jan Arogya Yojana (PM-JAY) which provides ₹5 lakh per family per year for secondary and tertiary hospitalisation to over 10 crore vulnerable families.

• National Health Mission (NHM): NHM remains the backbone of public health delivery and supports maternal health, child health, immunisation, and disease control programmes, while strengthening rural and urban primary health infrastructure through funding support to States.

• Pradhan Mantri Ayushman Bharat Health Infrastructure Mission (PM-ABHIM): Launched post-COVID, this mission focuses on strengthening disease surveillance, laboratories, critical care blocks, and public health units, aiming to improve India’s preparedness for future pandemics and health emergencies.

• Ayushman Bharat Digital Mission (ABDM): This initiative is creating a digital health ecosystem with unique health IDs, digital health records, and interoperable hospital systems, improving continuity of care and reducing duplication of tests.

• Mission Indradhanush: Mission Indradhanush aims to increase full immunisation coverage for children and pregnant women against vaccine-preventable diseases, targeting districts with historically low immunisation rates.

• Pradhan Mantri Swasthya Suraksha Yojana (PMSSY): PMSSY works to correct regional imbalances in tertiary healthcare by establishing new AIIMS institutions and upgrading government medical colleges to improve access to advanced care.

• National Tuberculosis Elimination Programme (NTEP): India’s TB programme aims to eliminate tuberculosis by 2025, focusing on early diagnosis, free treatment, nutritional support, and digital adherence technologies.

• eSanjeevani Telemedicine Services: eSanjeevani provides doctor-to-doctor and doctor-to-patient teleconsultations, improving healthcare access in remote and underserved areas.

Conclusion:

India’s persistently low public health spending, still hovering around 1.5–2% of GDP combined, which reflects limited fiscal prioritisation and an overreliance on private expenditure, which keeps essential services underfunded and households financially vulnerable. Unless government investment rises in line with the National Health Policy target of 2.5% of GDP, gaps in infrastructure, workforce, and primary care will continue to hinder progress toward equitable and universal healthcare.

Source: The Hindu