The health nudge is merely a mirage

Given the possibility of a second wave of covid infections, or the threat of a new mutated virus strain, one would have thought that health research would be given a major boost. But FY22’s  ₹2,663 crore allocation represents a 34% decrease from FY21. (Photo: HT)
Given the possibility of a second wave of covid infections, or the threat of a new mutated virus strain, one would have thought that health research would be given a major boost. But FY22’s 2,663 crore allocation represents a 34% decrease from FY21. (Photo: HT)


  • Amid a pandemic, India has a unique opportunity to transform its health sector. How is the country faring?
  • In a year when everything should have gone into building a world-class healthcare system, what we see is the finance ministry resorting to minor tweaks in the existing public health edifice.

HYDERABAD : The Union Budget, as expected, focused on healthcare, recognizing the havoc that the pandemic has caused in the country. The Economic Survey too had announced last week that health has to now take centerstage. The finance minister’s Budget speech mentioned handsome allocations—a 2.24 trillion health booster shot, implying a 137% increase in the outlay. This amounts to slightly more than 1.5% of the Gross Domestic Product (GDP). While this figure in itself is an exaggeration (explained later), what it shows is that the government has been unable to bring health spends anywhere close to 2%, as it should have by 2021.

The 2.24-trillion figure sounds like a huge spike from the 72,934 crore budgetary allocation of pre-covid days. However, there is a note of caution here. This huge outlay includes 60,030 crore for drinking water and another 36,022 crore as a new grant, proposed by the Finance Commission, for water and sanitation. Keeping these allocations aside immediately brings the health outlay down to 1.28 trillion. Further removing the special one-time 35,000 crore meant for covid-19 vaccination, we are left with 92794 crore—a marginal hike over last year’s sum. This figure represents a health allocation of just about 0.6% of GDP, nowhere close to the 2.5-3% that has been promised now for years. Remove the grant for nutrition and the allocation comes down even further—to 0.34% of GDP.

The ministry of health and family welfare, on its own, has about 73,930 crore to spend in 2021-22—less than what it has already spent this year due to a ramp up in expenses as a result of the pandemic. For pure public health spends to reach anywhere close to the long-targeted, magic mark of 3% of GDP—which is the only way to reduce out-of-pocket expenses—at least 1 trillion crore should have been set aside this year for the ministry, with a clear roadmap for further hikes. Instead, pure health spends on some key verticals have actually come down.

The Economic Survey did point out that India has among the highest levels of out-of-pocket expenditure globally, and that all it takes is one episode of illness to push a household into financial insecurity and poverty. Catastrophic expenditure can be offset by providing insurance cover. The Survey cites how the Ayushman Bharat scheme has enabled greater access to insurance—with the share of households with a health insurance cover rising faster in states which have implemented the scheme over the past few years.

However, this has not translated into increased allocations for either of the insurance schemes—Ayushman Bharat or the variant which preceded it, the Rashtriya Swasthya Bima Yojana (RSBY). With current enrolment under RSBY and other state-run insurance schemes well below the target of 500 million, increased allocation of funds was a necessary step in order to expand health insurance coverage. The Budget’s failure to do so is a giant leap in the wrong direction.

In a year when everything should have gone into building a world-class healthcare system after India’s narrow and inexplicably lucky reprieve from acute mortality, what we see is the finance ministry resorting to minor tweaks in the existing edifice of public health system, despite loud exhortations in its own Economic Survey to spend a lot more.

Modest hike
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Modest hike

India needed larger outlays for vaccine research, testing, cold storage facilities, hiring of staff and for maintaining a high-quality tracking and tracing mechanism for all diseases. What we ended up with was an Aarogya Setu type of intervention—hyped beyond belief, destined to perhaps sink without a trace in 6 months.


What is surprising is that both the family welfare schemes and the RSBY have taken a huge hit in allocations. Family welfare schemes have been allocated 22% less in FY22, while the RSBY scheme will see a 97% decline ( 1 crore compared to 29 crore).

On insurance—which is what RSBY was meant to provide—it is worth noting a related significant decision. Foreign direct investment in insurance has been increased to 74% from the earlier cap of 49%. From being opposed to opening up the insurance sector earlier, and from emphasizing Atmanirbharta in every other sentence of the Budget speech, the finance minister surely has come a long way. Is this an admission of the failure to reach Ayushman’s ambitious targets solely through state funding? Or, could it be the pressure to open up one of the most lucrative and under-performing insurance markets in the world, where two-thirds of the country has no health insurance of any kind?

In any case, it is a huge decision that will leave behind ripples in the months ahead. The insurance sector witnessed unprecedented growth last year. Standalone health insurance companies saw their gross premium underwritten spike by nearly 10% year-on-year between April and December 2020 as per Irdai figures, largely due to the pandemic.

The Economic Survey strangely asserted that better health infrastructure is no guarantee that a country would deal better with a pandemic. It mentions over and over again the Spanish flu that surfaced nearly a hundred years ago. The Survey claimed, and most of us have never heard anyone in the health ministry make this argument till now, that it was data and research from the Spanish Flu outbreak which guided India’s lockdown harshness. Elsewhere, the same Survey rationalizes the poor state of health infrastructure by claiming that countries with good health infrastructure actually fared badly in 2020. Nirmala Sitharaman’s Budget speech, however, made exactly the opposite point—extolling the importance of the newly launched Atmanirbhar Swasthya Yojana, which is expected to build at least some new public health infrastructure.

The Survey also stated that telemedicine will be harnessed by investing in internet connectivity and using online platforms to widen access. But the National Digital Health Mission’s annual allocation is stuck at 30 crore, exactly the same that the government spent this year.

Given the possibility of a second wave of covid infections, or the threat of a new mutated virus strain in the future, one would have thought that health research would be given a major boost. But FY22’s 2,663 crore allocation represents a 34% decrease from FY21.

Health Infrastructure

One of the major problems that patients faced last year was the inability to get hospital beds. Several tragic stories played out in cities and towns across India, with patients who were gasping for breath managing to reach hospitals, only to be denied admission. In many hospitals, patients waited forever even to get oxygen support. India is ranked 155 of 167 on its bed density (0.5 per 1000 residents), behind most other developing economies.

Thankfully, the mortality rate remained low, but the covid-19 virus still killed more than 150,000 Indians and infected more than 10 million people. In one of the youngest countries in the world, such a high fatality rate cannot be brushed under the carpet. Better infrastructure would have saved more people.

It is in this light that the 64,000 crore allocation, over the next years, for creating new public health infrastructure must be seen. It’s the proverbial drop in the ocean. Even if one assumes that for each new government facility, the private sector will chip in with three of its own, India will still have a steep shortage of doctors by the later part of this decade.

More than 50% of India’s doctors are located in just five states. The FY21 Budget, which was presented on 1 February 2020, just before the pandemic hit, talked about an ambitious scheme to provide bridge courses that would create a pool of well-trained doctors. There is no record of what happened to this announcement.

At the height of the pandemic in 2020, women and children suffered the most. Anganwadis were closed. Pregnant women did not get antenatal care or the nutritional supplements that they needed (given that more than 50% of them suffer from poor iron count and anemia). Children, who usually get at least one hot mid-day meal scheme at school, did not get that simple nutrition for months. Despite all this, the allocation on anganwadis, on the Poshan Abhiyan, and on all Mahila Kendras has been slashed.

Several of these schemes—like most things in the country today—have been renamed and, therefore, it would take some time for people to figure out the actual cuts.

For example, the Saksham scheme, a new name for Anganwadis plus creches plus Poshan, faces a cut compared to the ongoing fiscal year. The Matru Vandana Yojana’s outlay, which includes the erstwhile Beti bachao and Mahila Shakti Kendras, has been reduced to a little over 2,500 from about 4000 in the current year.

Old wine

Among all the new schemes, it is the Atmanirbhar Swasthya Yojana that has gotten the highest billing from government quarters. This is slated to strengthen existing institutions and create new ones which will be responsible for detecting and curing new and emerging diseases. With a Budget allocation of 64,180 crore to be invested over six years, the goal is to improve all three tiers of healthcare. Effectively, with roughly 10,000 crore a year, this scheme will support over 17,000 rural and 7,000 urban health and wellness centres. Not just that, the same allocation will then be used to set up 3,448 health labs in all districts. With the money that is left after doing all this, critical care blocks will be created in several public hospitals.

Where does this leave Ayushman Bharat or PM-JAY? The Budget estimate in FY21 for Ayushman Bharat was 6,400 crore and the revised was 3,100 crore. It has again been allocated 6,400 crore. And this was the scheme that was supposed to have reached 100 million families and increased health insurance coverage to 50% of the population. It was also meant to lay the foundation for a movement towards universal health coverage. Under this scheme, 150,000 health and wellness centres were to be set up.

While the Survey and the Budget gave no information on this, the new Swasthya Yojana scheme targets the creation of 24,000 rural and urban wellness centers.

This maze of schemes and targets is confusing to say the least. And this started in 2017, when the National Health Protection Scheme was rechristened PM-JAY, which also subsumed the RSBY (although RSBY still figures in the Budget documents with a grand allocation of 1 crore for FY22).

The prime minister’s Swasth Suraksha Yojana was set up to create affordable healthcare facilities in underserved parts of the country. It was also meant to augment medical education, create an AIIMS in every state, and help government-run medical colleges improve their performance.

In 2020, when all the well-known gaps and concerns in our public health system showed up once again in painful detail, the jumble of schemes that have been launched in recent years offered modest help at best. And it looks like India will exit the pandemic and enter a new decade with no real fix.

Amir Ullah Khan is professor of development economics at the MCRHRDI and Saleema Razvi is a senior research economist at the Copenhagen Consensus Centr

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