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Photo: Hindustan Times
Photo: Hindustan Times

India’s economy needs big dose of health spending

India’s total healthcare spending (out-of-pocket and public), at 3.6% of GDP, as per OECD, is way lower than that of other countries

The Covid-19 pandemic crisis is a reminder of the importance of investing in the healthcare sector for any country. Mint examines how India has fared on this front and what it can do to raise its health expenditure as a percent of its gross domestic product (GDP).

How much does India spend on healthcare?

The total per capita government spending on healthcare has nearly doubled from 1,008 per person in FY15 to 1,944 in FY20, but is still low. The total expenditure by the Centre and states for FY20 was 2.6 trillion, or 1.29% of GDP, including establishment expenditure comprising salaries, gross budgetary support to various institutions and hospitals and transfers to states under centrally sponsored schemes such as Ayushman Bharat. Of the total public expenditure, the Centre’s share is 25%. Over the last five years, the total public expenditure on health has risen at 15% CAGR, much of this due to pay hikes.

Where does India figure vis-à-vis others?

India’s total healthcare spending (out-of-pocket and public), at 3.6% of GDP, as per OECD, is way lower than that of other countries. The average for OECD countries in 2018 was 8.8% of GDP. Developed nations—the US (16.9%), Germany (11.2%), France (11.2%) and Japan (10.9%)—spend even more. India spends the least among BRICS countries: Brazil spends the most (9.2%), followed by South Africa (8.1%), Russia (5.3%), China (5%). With public healthcare infrastructure stretched, out-of-pocket expenditure in urban centres is high in India. The Centre spends less as public health and sanitation are on the State list.

Graphic: Sarvesh Kumar Sharma/Mint
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Graphic: Sarvesh Kumar Sharma/Mint


Why is India’s healthcare expenditure so measly?

India has traditionally spent less on health, 90% of government expenditure being on the revenue side. In the First Five-Year Plan, 3.4% of the total plan investment was for health outlays. This rose to 6.5% by the Eleventh Five-Year Plan. In FY20, the per capita capital expenditure was less than 200 per person, with 12 states spending under 1% of GSDP on healthcare.

Can investing in health boost the economy?

IMF has said in its annual Article IV reports that India can boost its human capital’s productivity by investing in education and healthcare. In 2018, it identified poor public health as the 12th most important hurdle for ease of doing business, ahead of crime, tax regulations and policy instability. Health and working conditions are a key recommendation in its suggestions for labour market reforms. The health sector creates both high- and low-skill jobs and can be used for pump-priming the service and manufacturing sectors.

What do we need to do in the post-covid era?

India can raise its supply—8.5 hospital beds and 8 physicians per 10,000 people—to the standards of Japan and South Korea: over 100 beds per 10,000 people. For this, a specially designed fiscal stimulus can be funnelled into public health and policy bottlenecks removed so that the sector becomes the engine of GDP growth. Subsidized loans, earmarked land, single-window approvals, tax holidays, etc. can be used for making medical devices and drugs and setting up hospitals.

Puja Mehra is a Delhi-based journalist.

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