Why is it in news?
- Recent RBI and Budget data show post-pandemic decline in Union government health spending, reviving debate on unmet National Health Policy targets and Centre–State imbalance in public health financing.
Relevance
- GS 2 (Governance/Policy): Federal fiscal relations, Union–State fiscal transfers, cooperative federalism, and budgetary priorities.
- GS 3 (Health & Development): Public health financing, National Health Policy goals, State expenditure trends, and international comparison of health investment.
Basics: public health financing in India
Constitutional and fiscal context
- Health is a State subject under the Seventh Schedule, but the Union plays a critical role through financing, national programmes, and Centrally Sponsored Schemes.
- Public health outcomes depend on combined spending of Centre and States, not Union allocations alone
Policy benchmark: National Health Policy (NHP), 2017
Stated commitments
- The NHP 2017 committed to raising public health expenditure to 2.5% of GDP by 2025, from about 1.15% at the time of formulation.
- It also envisaged the Union government contributing 40% of total public health spending, requiring a sharp scale-up in central allocations.
Status of targets
- By 2025–26, these targets remain far from achievement, primarily due to stagnation and decline in Union health spending post-pandemic.
Trend analysis: Centre vs States
State-level spending
- As per RBI data, health and family welfare spending by States and UTs increased from 0.67% of GDP in 2017–18 to 1.1% in 2025–26 (BE).
- Health’s share in total State budgets rose from 5% to 5.6%, showing sustained post-COVID prioritisation by States.
Union government spending
- Union health expenditure rose modestly during COVID-19 but declined sharply in real terms after the pandemic.
- Between 2020–21 and 2023–24, Union health allocations fell by 22.5% in real terms, indicating fiscal retrenchment.
International comparison: scale of underinvestment
- India’s per capita public health spending remains among the lowest globally.
- In 2021, Bhutan spent 2.5 times, Sri Lanka three times, and other BRICS countries 14–15 times more per capita than India.
- Thailand and Malaysia also spent nearly 10 times more per capita, highlighting India’s structural underinvestment.
Fiscal centralisation and scheme transfers
Decline in transfers to States
- In 2014–15, about 75.9% of Union health spending was transferred to States through schemes like the National Health Mission.
- By 2024–25 (BE), this share declined to 43%, insufficient to sustain basic public health services at the State level.
Implications
- This reflects hyper-centralisation of resources, despite States bearing the primary responsibility for service delivery.
Scheme-wise prioritisation: what is being cut?
National Health Mission (NHM)
- Launched in 2005, NHM is the backbone of rural and urban public healthcare delivery.
- NHM spending grew at 7.4% annually during FY14–FY19, but declined by 5.5% annually in real terms during the NDA’s second tenure.
Other critical schemes
- Pradhan Mantri Swasthya Suraksha Yojana, nutrition programmes, and health research schemes have faced significant cuts, despite proven performance during crises.
Health and Education Cess: unmet promise
- Introduced in 2018–19 as a 4% cess, the Health and Education Cess was intended to supplement public health spending, especially for poor and rural populations.
- However, there is no clear evidence of proportional enhancement in Union health allocations, weakening fiscal credibility.
Governance and federal concerns
- Reduced central transfers strain State capacities, widening inter-State inequalities in healthcare access and quality.
- The trend undermines cooperative federalism, as States are expected to deliver without commensurate fiscal support.
Implications for health outcomes
- Persistent low public spending pushes households towards out-of-pocket expenditure, increasing poverty, inequality, and delayed care-seeking.
- Underfunded primary healthcare weakens preparedness for future pandemics and demographic ageing.
Way forward: correcting the imbalance
- The Union government must progressively scale health spending towards 1% of GDP, as envisaged under NHP 2017.
- Restore and expand transfers for NHM and public health infrastructure, with predictable, untied funding for States.
- Align the Health and Education Cess transparently with measurable increases in health allocations.
