Impact of Energy Consumption, GDP & Fiscal Deficit on Public Health Expenditure in India: An ARDL Bounds Testing Approach

Abstract

The purpose of this paper is to explore the impact of energy consumption (EC), fiscal deficit (FD) & gross domestic product (GDP) on public health expenditure (PHE) in the country. The data for this study is taken for the time period 1971-2011. Autoregressive distributed lag (ARDL) has been used to test for presence of cointegration among the variables while vector error correction model (VECM) has been employed to determine the direction of causality. The results reveal the presence of long run causal relationship between EC, FD & GDP and PHE while in the short run; only GDP was found to be significantly causally related to health expenditure. There are clear policy implications of our results. There has to be a reduction in the energy that we import from abroad as lot of our revenue goes into these imports. Similarly, the government will have to move towards deregulating the oil price regime and better targeting of subsidies to reduce the burden on the fiscal situation of the country. Also, the indigenous non-renewable resources should be developed as substitutes for oil. These steps will save government finances that can be invested in improving the situation of healthcare in the country.