Right to Health: India Must Match G20 Health Spending Norms
AIIMS, New Delhi, and Prime Minister Narendra Modi! (Images X.com)
India’s Health Spending Must Rise Beyond 2.5% of GDP by 2025 to Secure Its Growth Future
By SAHASRANSHU DASH
As India’s average economic growth remains in the 6-6.5% band annually, one critical weakness remains largely overlooked: the persistent underfunding of public healthcare. In 2023, India’s government health spending stood at just 2.1% of GDP, far behind countries it often compares itself to.
South Korea, for instance, spends over 5%, while the G20 average is around 6.5%. Even among developing Asian countries, Thailand (3.7%), Vietnam (2.7%), and Indonesia (2.3%) do better.
But this is not just a question of fairness or welfare. It’s a matter of sound economics. Insufficient public investment in health weakens human capital, deepens inequality, lowers productivity, and traps families in cycles of poverty.
To make matters worse, the financial burden continues to fall on citizens. Although out-of-pocket expenditure (OOPE) has come down from 63% in 2015 to 48% in 2023, it remains unacceptably high.
At a time when India is aiming to unlock its demographic dividend and assert itself on the global stage, underinvestment in health is a serious policy blind spot.
There is now clear evidence—both in India and internationally—that public health spending is not a drain on the economy but a driver of it. Jayati Ghosh, for instance, has long argued that health sector investment can generate employment at scale.
According to various estimates, every ₹1 crore invested in health can create 150–200 direct and indirect jobs across different skill levels, from doctors and nurses to community health workers, lab technicians, and logistics staff. These jobs are labour-intensive, rooted in local economies, and far less susceptible to automation—making the sector one of the most promising avenues for inclusive employment generation in both rural and urban India.
Empirical research supports this. Dhruba Kumar, in a 2018 study using Indian evidence, found that public health spending Granger-causes GDP growth—meaning past health investment statistically helps predict future economic performance.
Fuhmei Wang, in a 2015 study looking at data from the advanced OECD economies, observed a similar pattern, reinforcing the idea that improved health systems contribute directly to long-term economic growth. Healthy people are more productive, less prone to illness, and less likely to drop out of the workforce.
India has taken some steps in recent years, but the focus has largely been on insurance-based schemes like the Pradhan Mantri Jan Arogya Yojana (PM-JAY). While this has expanded coverage on paper, the reality on the ground often looks different.
There are simply not enough hospitals, doctors, nurses, or rural clinics to back it up. As of 2022, India had 1 government doctor per 10,926 people, far below the WHO-recommended ratio of 1:1,000.
According to Rural Health Statistics (2021–22), over 70% of Primary Health Centres (PHCs) lacked a lab technician, and nearly 30% were without a pharmacist.
Contrast this with Thailand, which built a universal health system by strengthening primary care first. Or South Korea, which operates a regulated public-private mix, backed by strong public funding and oversight.
India, by comparison, lacks regulation, depends too heavily on private providers, and hasn’t invested enough in its public system. Moreover, the system is fragmented. Central and state schemes—PM-JAY, ESIC, CGHS, and others—often duplicate efforts without improving outcomes.
There is little risk pooling or unified governance, leading to inefficiencies and gaps. Since health is a state subject under the Constitution, success ultimately depends on robust coordination between the Centre and states.
Several Indian states—particularly Uttar Pradesh, Bihar, and Jharkhand—still struggle with poor health indicators, understaffed facilities, and low public spending. As per the National Family Health Survey (NFHS-5), Uttar Pradesh and Bihar continue to report some of the highest infant and maternal mortality rates in the country.
Jharkhand and Bihar spend less than ₹1,500 per capita annually on health—less than half of better-performing states like Tamil Nadu or Himachal Pradesh. Rural Health Statistics (2021–22) further show that many Community Health Centres in these states operate with fewer than half the required specialists, and primary facilities often lack essential staff and equipment.
Merely relying on insurance schemes will not solve these problems. These states must commit to recruiting and retaining frontline health workers, ensuring that essential drugs are available in all government facilities, and expanding primary and community health centres, especially in rural and tribal areas.
At the same time, healthcare must be integrated with social protection programmes like nutrition, sanitation, and maternal welfare. The Centre can support this effort by linking funding to performance and rewarding innovation. States that prioritise public health and show measurable improvement must be incentivised accordingly.
On the bright side, there’s growing civil society interest in health reform. In the aftermath of COVID-19, healthcare has gained greater attention—not least because the pandemic starkly exposed India’s underpreparedness.
The Jan Swasthya Abhiyan (People’s Health Movement) has called for raising public health expenditure to 3% of GDP and ensuring a right to health law. Organisations like the Public Health Foundation of India (PHFI) and the Indian Medical Association (IMA) have advocated for better regulation, training, and drug availability.
While India has some fiscal space to address such ambitions, it remains limited. Tax collections have improved in recent years, but the country’s tax-to-GDP ratio continues to hover around 11%—significantly lower than the OECD average of over 30% and even below many comparable emerging economies.
This constrains the government’s ability to make large, sustained investments in public health without resorting to borrowing, cutting expenditure in other areas, or raising user charges—all of which carry economic and political trade-offs.
Health does feature now in major planning documents, but it must compete with priorities like infrastructure, defence, and subsidy-heavy programmes. The real challenge is not just technical capacity but fiscal prioritisation.
If India meets its 2025 target of spending 2.5% of GDP on health, it could feasibly reach 3% by 2030. But achieving 5–6%, in line with the G20 average, will require a substantial reorientation of public spending—away from headline-grabbing capital outlays and towards long-term investment in human capital and foundational service delivery.
India’s health underinvestment risks undermining its growth story, but the path forward is clear. With political will, fiscal reprioritisation, and state-centre coordination, progress is achievable. The question is not whether India can afford to act—but whether it can afford not to, as time for reform steadily narrows.
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(This is an opinion piece, and views expressed are those of the author only)
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