Health Status, Government Health Expenditure and Economic Growth Nexus in India: A Toda–Yamamoto Causality Approach

Abstract

This article attempts to examine the causal linkage among government health expenditure, health status and economic growth in India for the period from 1981–1982 to 2015–2016. The results of Johansen co-integration test indicate that government health expenditure, health status and economic growth have long-run relationship in India. The results of Toda–Yamamoto causality test showed that there existed unidirectional causal relationship running from government health expenditure to gross domestic product—GDP (economic growth); GDP (economic growth) to life expectancy; government health expenditure to infant mortality rate and infant mortality rate to life expectancy. On the other hand, there is no evidence showing causality in any direction between infant mortality rate to GDP (economic growth) and government health expenditure to life expectancy. The study strongly confirmed that the government health expenditure has an effect on GDP (economic growth) and infant mortality rate (which depicts health status) in India. The health outcomes, namely life expectancy and infant mortality rare, reveal unidirectional causality between them. Therefore, the study concludes that policymakers and the government should pay proper attention to the health sector in order to ultimately achieve economic growth in the country.