Government Health Spending in India: Who Will Fund the Target of 2.5 Per Cent of GDP?

Abstract

India has set an ambitious goal of raising public health spending to 2.5 per cent of GDP by 2025. This is hardly comforting, given India’s track record of consistently missing the goals set previously in this regard. To avoid missing the goal this time around, it is necessary to have a good understanding of what it would take to achieve the goal. One of the important aspects in the realisation of this goal is how the financing responsibility will be shared between the centre and states. This has not been spelled out in the latest National Health Policy 2017. A counterfactual analysis provides some useful insights into the question of the split in financing responsibility between the centre and states. Specifically, we examine if the goal of 2.5 per cent of GDP were to be achieved in 2015–2016 itself, how this responsibility would have been split between the centre and states. The analysis suggests that while the states’ health spending would have doubled, the centre’s health spending would have more than tripled. More importantly, the centre’s share in total public health spending would have increased from 31 per cent to almost 42 per cent, indicating the need for centre’s health spending to grow faster than that of the states’ health spending. This result is significant in the wake of states getting greater say in prioritising their spending as reflected in the higher share for states in devolved central taxes, post-14th Finance Commission award.