Two main highlights of Budget 2024-25 from the macroeconomic sustainability standpoint are: (i) fiscal consolidation; and (ii) the continuing improvement in the quality of expenditure. However, the Budget is disappointing from the health spending perspective as the allocation for health for 2024-25 has been budgeted at 0.3 per cent of GDP, broadly at the same level as last year.

A recent study on ‘Evolution of the Healthcare Policy Framework in India’ by the present authors along with Shauryavir Dalal, suggests that the relative neglect of health can be traced back to pre-Independent India. An in-depth report submitted by the Bhore Committee in 1946 painted a grim picture of the country’s health landscape and poor infrastructure. The wide-ranging recommendations by the committee had all the ingredients of universal health coverage or UHC (though the term was not used), which implies access to quality health services without incurring financial hardship. A key recommendation of the committee was to introduce the national health system (NHS) through a rural-focussed primary and secondary healthcare infrastructure financed by the government. The report of the committee was also well ahead of its time to recognise the positive impact of health on economic growth.

India, which faced multiple challenges at the time of Independence such as (i) widespread poverty; (ii) high morbidity and mortality; (iii) and a fragile economy, could not afford the implementation of NHS recommended by the committee. Also, for more than three decades after Independence, the country remained occupied with managing several communicable diseases and ensuring immunisation of its population. It was only in the early 1980s that the authorities began to focus on designing a comprehensive framework for providing healthcare services.

The thrust of the first NHP (National Health Policy) announced in 1983 was on ‘health for all’, but intriguingly the policy intended to reduce government spending on health and suggested that it should be covered by the private sector. NHP 1983 was replaced by NHP 2002, which was later also replaced by NHP 2017. In 2005, a flagship healthcare programme — National Rural Health Mission (NRHM) — was launched (later subsumed into National Health Mission — NHM). Two common threads running through NHP 2002, NHP 2017 and NHM were to (i) raise public health spending to 2-3 per cent of GDP; and (ii) develop primary healthcare infrastructure.

Excluding water supply and sanitation, public health spending (Centre and States), which stagnated at around 1 per cent of GDP for almost 30 years up to 2019-20, inched up to 1.4 per cent of GDP in 2023-24 due to increased health spending by States, going up from 0.7 per cent in 2019-20 to 1.1 per cent in 2023-24 (budget estimate). However, it will be extremely challenging to achieve the public health spending target of 2.5 per cent of GDP set for 2025 in NHP 2017.

In 2023-24, States budgeted to spend only 6.2 per cent of their total expenditure on health, on average, even as NHP 2017 exhorted them to spend at least 8 per cent. That health spending reflects more of an intent than financial capacity is evident at the State level. Economically well-off States such as Maharashtra (4.6 per cent of total budget), Karnataka (4.9 per cent) and Punjab (4.2 per cent) spend far less on health compared with economically not so well-off States such as Meghalaya (8.6 per cent) and Uttar Pradesh (7.3 per cent).

Infra bottleneck

No doubt, the country has made good progress in improving the demographic indicators. However, the primary healthcare infrastructure continues to be inadequate. As of July 2022, there was a significant shortfall of 25 per cent of sub-centres, 31 per cent of primary health centres (PHCs), and 36 per cent of community healthcare centres (CHCs) in rural areas. In urban areas, PHCs fell short by 40 per cent. There was also a shortfall of specialists of as high as 80 per cent in rural CHCs and 47 per cent in urban CHCs.

India lags many of its peers in the UHC index. According to the World Health Organization, the UHC index of India was 63.3 in 2021, compared with 81 of China, 80.4 of Brazil, 76 of Malaysia, and 74.5 of Mexico. Inadequate UHC leaves a significant section of the population vulnerable to health spending and impoverishment.

Research in the international context suggests that public spending on health needs to be raised to at least 5 per cent of GDP for achieving the goal of UHC. Thus, it is imperative to increase public health spending in a time-bound manner. The Central and State governments need to raise health spending by at least 0.2 per cent of GDP every year over the next eight years.

For this, public health expenditure will need to grow every year by 18-21 per cent (from the existing growth rate of 9 per cent).

At this rate, the target of 3 per cent of GDP can be reached in the next eight years, which is the average public health spending to GDP ratio of low- and middle-income countries. Once this stage is reached, the next target should be to raise public health spending gradually to 5 per cent of GDP.

Raj is Senior Fellow and Gupta is Research Associate at the Centre for Social and Economic Progress (CSEP). Views are personal