The Continued Asphyxiation of India’s Public Health Budgets

HEALTHCARE IN INDIA is not a political battle field. The historical underinvestment in public health continues and is perhaps getting worse each passing year. In the mid-1980s, India had reached a peak of 1.6 percent of GDP allocated to health with support of the Minimum Needs Program which then saw a massive expansion of public health, especially in rural India. But since then under the structural adjustment impact the trend in budget allocations for health took a U-turn and began its continued descent. Post 2006 under the National Rural Health Mission (now National Health Mission) we did see a brief revival in public health investment with budgetary allocations moving from 0.9 percent of GDP to up to 1.3 percent of GDP until 2015. However,since then we see stagnation at around 1.2 percent of GDP despite the 2017 National Health Policy (‘NHP’) commitment of reaching 2.5 percent of GDP by 2025. 

Since the 2017 NHP the trajectory of budget commitment to public health has shifted increasingly towards insurance based financing through programs like Aayushman Bharat Pradhan Mantri Jan Aarogya Yojana (‘PMJAY’), which directly support private hospitals for secondary and tertiary care for the bottom 40 percent of the poor families. Over three-fourths of the PMJAY resources benefit private hospitals and the public hospitals continue to be neglected. Of the remaining 60 percent population, about 10 percent is a privileged class of people who get assured healthcare through schemes like Central Government Health Scheme (‘CGHS’), Employee State Insurance and other similar social insurance schemes. Fifty  of India’s citizens (the “missing middle” of current health policy debates) are left to the mercy of markets where the burden is entirely out of pocket or partly paid via insurance for those who can afford to pay insurance premiums. 

It is a shame that our MPs and bureaucrats through CGHS acquire healthcare benefits of up to Rs 18,500 per capita, and that too mostly via the private sector. This is in sharp contrast to general citizens for whom Ministries of Health spend only Rs 2,500 per capita. This gross inequity to access for healthcare between the elected representatives and bureaucracy on one hand and the taxpayers and electors on the other hand is cruel. This model of healthcare needs to be dismantled and through system and structural changes we have to put in place a healthcare system that is equally accessible to all citizens irrespective of their economic, occupational or social status. We need a system which will provide the CGHS kind of health benefits to all and not just to MPs and bureaucrats.

Latest Budgetary Trends

The overall fiscal envelope of governments needs to be hugely extended to provide universal and equitable access to healthcare for all. Presently the Union and State governments together are able to rein in only 17 percent of the GDP through taxes. This is grossly inadequate. Global experience shows us that for a strong welfare state the minimum Tax:GDP ratio should be more than 25 percent. Hence countries which are able to provide universal and equitable access to healthcare have Tax:GDP ratios of 25-30 percent. 

In the latest budget 2026-27 (Table 1), the total budgeted expenditure of the Union government is down to 13.4 percent of GDP from 13.8 percent in the previous year. Also the nominal GDP increase is 10 percent but the increase in budgeted expenditure is only 7.6 percent. Thus the government has failed to increase the fiscal space and as a consequence social sectors like health and education are the first to experience cuts. This reduced space impacts transfers to state governments who then have to share a larger burden on their shoulders.