Takshashila Working Paper - The Regressive Nature of Central Transfers for Health

Executive Summary

Financing public health in India is a vital challenge. As a response, the Union government transfers funds to the lower tiers of government, specifically meant to improve public health services. The stated goal of specific transfers is to ensure that at least certain minimum standards of healthcare are achieved all across the country. However, our analysis of this category of funds in the period 2005 to 2015 highlights several problems that make this goal difficult to achieve.

First, the transfers are poorly targeted, as these are not linked to health indicators. Instead, such transfers by and large tend to be incremental. Second, the specific purpose transfer system has not been very helpful in offsetting the fiscal disabilities of the poorer states. Third, there is evidence to suggest that States substitute grants received from the Union government for their own spending with the result that there has not been a commensurate increase in overall spending on healthcare.

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