Asymmetric Fiscal Federalism and Public Provision of Healthcare: New Insights from India

Abstract

In this article, we show undesirable consequences of a market-based system and argue for a public provision of healthcare. We examine the healthcare provision from the fiscal federalism perspective. With the asymmetric fiscal federal structure characterised by vertical and horizontal imbalances, states are dependent on transfers from union to provide public goods. Our analysis shows a widespread disparity in the public provision of healthcare in India due to fiscal imbalances. The performance of states in the management of the COVID-19 pandemic reveals that a robust public healthcare system is a prerequisite in managing a health emergency. We identify the withdrawal of governments from healthcare provision and concentration of resources with the union government as critical impediments to achieving universal healthcare access. In light of our analysis, we emphasise the need for resource devolution and cooperative federalism to ensure public provision for a dignified life in a functioning democracy.