The COVID-19 pandemic has brought the status of the public health infrastructure in the country into sharp focus. The overall government spending on health has increased in 2020-21 because of the pandemic. However, it remains to be seen if this increase is going to be sustainable.
The second wave of COVID-19 infection across the country has put an unprecedented burden on the healthcare system. Barring a few, the public health system in most of the states is facing enormous challenges in coping up with the prevailing situation. Lack of adequate testing facilities, health infrastructure including hospital beds, oxygen support, etc. are a few of the major challenges across the country. While the States with better Private health infrastructure are able to manage better in comparative terms, the financial burden on those seeking private treatment is a concern even in these states.
While the pandemic has brought great visibility to the state of health infrastructure in the country, the precarious situation of the public health sector and the need to increase government spending on public health has been highlighted by multiple experts for a long time.
So, what is the extent of government spending on healthcare in the country? What are the trends and how does India compare with other countries around the world? We explore these aspects in this story with the focus on central government spending on health.
While there has been a manifold increase in the actual spending, the share in total expenditure increased only marginally.
In the latest Union Budget for 2021-22, the Budget Estimates (BE) for the Department of Health & Family Welfare (DoHFW) under the Ministry of Health & Family Welfare (MoHFW) was Rs. 71.26 thousand crores. It is an increase of nearly 10% compared to the BE of 2020-21 and a decrease of almost 10% compared to the Revised Estimates (RE) of 2020-21.
However, it varies from a trend observed in earlier years, where-in the BE of the current year is higher than the RE of the previous year, indicating that the government has been making changes to its estimates based on the actual spending during the year. One reason for the break in the trend could be the higher RE in 2020-21 in view of the COVID-19 pandemic when there was substantial out-of-budget spending to deal with the pandemic.
The RE for 2020-21 is Rs. 78.86 thousand cores whereas the initial budget estimate was Rs. 65.01 thousand crores. The BE for 2021-22 being less than the RE for 2020-21 could be because of the assumption that the higher expenditure in 2020-21 was a one-off case because of the pandemic. But with the second wave being more severe than the first wave, the government might incur a significantly higher expenditure even in 2021-22 compared to the BE.
Another trend that can be observed in the recent past is that the actual expenditure in a given financial year is slightly more than the BE of that year.
- In 2010-11, the Actual expenditure incurred was around 97% of the BE. It reduced in the ensuing years, with the lowest being, 81.6% of BE in 2013-14.
- Since 2015-16, the trend changed with the Actual expenditure being slightly higher than the BE for a given year.
Data of the last 10 years does indicate that the actual allocation & spending for DoHFW has increased. The BE in 2010-11 was Rs. 23.5 thousand crores which increased by close to three times in 2019-20 when the BE for DoHFW was Rs.62.65 crores.
In terms of the actual expenditure incurred, it increased from Rs. 22.76 crores in 2010-11 to Rs. 62.39 crores in 2019-20. However, this increase is mostly due to the overall increase in the total budget expenditure than a higher share of allocation for health or the DoHFW. In 2010-11, the actual expenditure by DoHFW was 1.9% of the total actual expenditure of the entire union budget which increased only slightly to around 2.3% of the total budget expenditure in 2019-20.
Apart from the expenditure on DoHFW, the expenditure incurred by MoHFW also includes the expenditure on Health Research and other autonomous bodies. For 2010-11, around Rs. 675 crores were spent on Health Research. This increased to Rs. 1.86 thousand crores for 2019-20.
No major change in the Government spending on Health as a percentage of GDP
Apart from the central government’s spending on health, state governments also spend on public health since ‘Public Health’ is a state subject. As per the Economic Survey of India 2020-21, around Rs. 2.66 lakh crores are spent on Health for the year 2018-19 by both the centre & the states. This spending is known as the overall Government spending (both Centre & States).
On the other hand, the overall government spending at the beginning of the decade i.e., in 2010-11 was Rs. 1.01 lakh crores. This indicates a near threefold increase in the overall government spending on health in 2018-19 compared to 2010-11. However, as observed in the case of expenditure by DoHFW, the increase in the spending is due to the expansion in the economy & budget size in general and not necessarily due to an increase in the share of spending on health.
This is much more evident when the total spending on health is measured in proportion to GDP. In 2010-11, the overall spending on health formed 1.3% of the GDP. Since then, the overall spending on health hovered between 1.2% & 1.3% in the ensuing years until 2016-17. The spending increased to 1.4 % of the GDP in 2016-17 and remained the same for the next few years. The RE for 2019-20 and BE for 2020-21 peg the share of overall spending on health at 1.5% and 1.8% of the GDP respectively. The increase in 2020-21 is due to the extra spending because of the pandemic. Whether the increased spending sustains in the coming years remains to be seen.
India’s government health spending as a percentage of GDP lower than many of the leading countries in the world
As per WHO’s data relating to Domestic General Government Health Expenditure (GGHE-D) as a percentage of GDP in the year 2018, India’s share of GGHE-D in GDP is 0.96%. This is comparatively much lower than many of the countries that India has key international relations with.
Among the BRICS nations, India’s public health spending as a share of GDP is the lowest. In the case of Brazil, it is 3.96 %, Russia is 3.16 %, South Africa (4.46%) and China (3.02%). Among India’s neighbours, Pakistan’s spending is 1.14% whereas Bangladesh’s spending is 0.4% of the GDP.
Among the developed countries, Japan’s GGHE-D to GDP ratio is 9.21%, U.S.A- 8.51%, U.K- 7.86% and Australia – 6.41%.
There is an urgent & sustained need for India to prioritize health sector
As observed from the data, India lags behind many other countries in terms of its expenditure as a share of GDP. In the recent Economic Survey of India 2020-21, there is a chapter dedicated to Health. This comes in the wake of the current COVID-19 pandemic. The economic survey refers to the National Health Policy of 2017 where-in it was envisaged to increase public spending on health from 1% of GDP to 2.5 -3 % of GDP. It further highlights the critical role of increasing the public expenditure on health in reducing the Out-of-Pocket expenditure.
The current COVID-19 pandemic further highlights the need for the Government to invest in Public Health. In a country like India where a large section of the population is poor & vulnerable, the government’s spending on health is critical to reducing their financial burden.
The examples of countries cited by the 2020-21 Economic Survey such as China, Indonesia, Philippines, Pakistan & Thailand validate the need to increase public spending on health. In all these countries, the out-of-pocket health expenditure of its citizens significantly decreased because of an increase in public health spending.
While the BE for 2020-21 pegs the overall government expenditure on health as a share of GDP at 1.8%, such increase in expenditure has to be sustained and increased further to reach an expenditure of 3% of GDP in the next five years or so. The increased expenditure has to be channelized to significantly improve public health infrastructure across the country.
Featured Image: Public Health Expenditure