Takshashila Working Paper: A Qualitative and Quantitative Analysis of Public Health Expenditure in India

By Pavan Srinath, Pranay Kotasthane, Devika Kher, Aashish Chhajer

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Executive Summary

Health policy is an essential pillar of human welfare. Given the high degree of externality, the State has to play a significant role in health and healthcare provision. Unfortunately, evidence shows that public spending on healthcare in India is low and out of pocket spending by people is more than four times the government spending. While the low level of public spending on health is a known fact, reliable data on the actual public expenditure on health and its trend over time is not easily accessible.

The objective of this study then is to compile a comprehensive dataset of public expenditure on health and related areas at Union and State levels as well as in different States on a comparable basis over the time-period 2005-06 to 2014-15.

The study will also outline challenges in data collection and data comparability so that further research in this area can improve on the estimates of public health expenditure.

Based on the data collected, the study goes on to make these preliminary observations on health expenditures in India.

  1. It is found that India spent only 1.41 per cent of its GDP on health and allied fields in 2005-06, which increased to 1.62 per cent in 2010-11 and then reduced again to 1.40 per cent in 2014-15. Of this, States contributed between 70 and 75 per cent of the overall public expenditure on health and allied fields.
  2. In 2014-15, major States spent anywhere between Rs 617 and Rs 2,026 per capita on health and allied subjects. Less populated, hilly or small Indian States spent between Rs 2,289 and Rs 7,409 per person. The per capita expenditure on health and allied subjects was correlated to per capita state GSDPs.
  3. States with better basic health outcome indicators such as Infant Mortality Rates (IMR) also show higher per capita expenditures. In other words, the states with poor health indicators continue to spend low levels of per capita expenditures. Inequality between states in health outcomes has not reduced, and a major cause is the continuing inequality in public health expenditure.
  4. Centrally Sponsored Schemes have been unable to ensure minimum standards of per capita health expenditure, nor are the transfers progressive or redistributive.