Political competition and public healthcare expenditure: Evidence from Indian states

Abstract

In-spite of being the largest democracy in the world, Indian states are spending only around 1% of net state domestic product on public healthcare which is way lower than the world average. This low level of public healthcare spending resulted in a high out of pocket healthcare spending and poor health outcome in India. But democratically elected governments are responsible for spending significant amount of their budget on healthcare for the benefit of the masses. It is generally believed that, in a democracy, political competition drives the elected government to spend more on healthcare, education, infrastructure, etc. for the welfare of the citizens. This is especially true in developing countries, like India, where a significant section of population is poor. We empirically argue that intense political competition forces the incumbent government to spend more on public healthcare in order to win the election. Empirical analysis is done by creating a state level panel of 16 major Indian states, covering a span of two decades (1991–2011).