Status Quo For Health In Budget. Can It Make India Viksit?

Combined health expenditures of the central and the state governments were 1.4 per cent of GDP every year between 2017-18 and 2019-20, according to the Economic Survey 2023-24. Before the pandemic, it rose to 1.6 per cent of GDP in 2020-21.

Afterwards, the combined health expenditure jumped to 1.9 per cent of GDP in 2022-23 and remained the same for the next year. To put this in context, real GDP growth (adjusted for inflation at 2011-12 prices) has been 8.2 per cent in 2023-24 provisional estimates.

Despite slowing down, the GDP growth rate is still 6.4 per cent according to the 2024-25 first advance estimates. So, though health allocations are on the rise in the recent budgets, the numbers are not commensurate with the income growth in the economy.

The 2017 National Health Policy (NHP) had envisaged raising the government's health expenditure to 2.5 per cent of GDP by 2025. So, continuing at a level of 1.9 per cent of the GDP implies falling short of that target.

Actual Spending Less Than Budget Allocations 

The budgetary health allocation grew 16.1 per cent year-on-year in 2022-23 to reach Rs 86,606 crore, from Rs 74,602 crore in 2021-22. This gave rise to expectations that the government might be on a path to rejuvenate healthcare to tackle any future disaster.

However, the allocations in the next two years belied that hope, when the yearly growth rate of the health budget fell to 2.7 per cent in 2023-24, and further down to 0.4 per cent in 2024-25, corresponding to health budget sizes of Rs 88,956 crore and Rs 89,287 crore, respectively.

The heartening fact is that the 2025-26 central budget has broken this trend of falling growth in government health spending. It has allocated Rs 98,311 crore for the next fiscal, which is a 10.1 per cent growth in allocations from the previous year.

Two years of the pandemic were a departure from the earlier trend of not spending the entire amount allocated in the Union Budget. The reason was obvious. But by FY2022-23, it had once again returned to the earlier trend, leaving Rs 13,055 crore unspent.

In the following two years, however, the unspent amount was substantially reduced. The difference between the budget estimate (BE) and actual spending was Rs 7,362 crore in 2023-24. It was down to Rs 1,255 crore in 2024-25.

So, the expectation is that entire budgetary health allocations will be utilised in 2025-26.

Existing Health Schemes Working, But Are They Adequate?

The flexible pool for RCH (reproductive and child health) and health system strengthening the National Health Programme and National Urban Health Mission remains the fulcrum of central government health spending. The allocation increased by Rs 1,227 crore in this budget.

Pradhan Mantri Poshan Shakti Nirman (PM-POSHAN), previously known as the National Programme for Mid-Day Meal in Schools, did not utilise Rs 2,500 crore in 2024-25.

The central government umbrella ICDS (Integrated Child Development Services) scheme, formally known as Saksham Anganwadi and POSHAN 2.0, has also not spent over Rs 1,000 crore in 2024-25. As a result, the budgeted allocation in 2025-26 has fallen slightly.

With child and mother malnutrition a distinct presence in the economy, the non-utilisation of central nutrition funds, followed by a marginal decline in allocation, may aggravate the scenario.

The national flagship public health insurance scheme — Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) — did better. The RE figures show that PMJAY spent more than Rs 300 crore than 2024-25 BE. 

The latest budget has proposed to include the gig workers under the ambit of PMJAY, and allocation has also increased.

Around Rs 200 crore less utilisation from the budgeted Rs 3,200 crore in Pradhan Mantri Ayushman Bharat Health Infrastructure Mission (PMABHIM) during 2024-25 highlights the lack of push to bridge the health infrastructure gap. The budget allocation for PMABHIM in 2025-26 has been increased to Rs 4,200 crore.

Swachh Bharat, the central government's flagship sanitation scheme, has direct effects on the overall health. The scheme used the Rs 7,192 crore fund fully in the rural areas in 2024-25, but more than Rs 2,800 crore went unspent for Swachh Bharat-Urban.

In 2025-26, budget allocations for the scheme in rural and urban areas, however, have remained the same, at Rs 7,192 crore and Rs 5,000 crore, respectively.

In the last few years, the Jal Jeevan Mission has played a transformative role in providing potable tap water connections to hitherto unsupplied households, particularly in rural areas. Unfortunately, nearly Rs 47,500 crore funds went unutilised in 2024-25.

The budget allocation for this has been kept at Rs 67,000 crore in 2025-26. The mission has been extended in this budget till 2028 to achieve 100 per cent coverage.

The finance minister has exempted 36 lifesaving drugs and medicines from basic customs duty in the latest budget, apart from adding 37 more medicines under Patient Assistance Programmes run by pharmaceutical companies (provided those are supplied free of cost to patients).

Relevance Of Elderly Care On The Rise

In its India Ageing Report 2023, the United Nations Population Fund (UNFPA) stated that there were 149 million persons aged 60 years and above in July 2022, which is around 10.5 per cent of the country’s population.

The report estimated that more than one-fifth of India’s population will be above 60 years of age by 2050. By then, the number of elderly people will exceed the number of children in the age group of 0 to 14 years.

The most alarming fact from the report is that more than 40 per cent of the elderly population currently is in the bracket of the poorest 20 per cent wealth holders in the country.

The central government has also taken note of this ageing population. Apart from providing a monthly pension of Rs 200 to elderly aged between 60 and 79 years in the BPL (below poverty line) category, it has announced the expansion of PMJAY to include senior citizens aged 70 years and above in October 2024, by issuing Ayushman Vay Vandana Cards.

By December 2024, the enrolment for these cards reached 25 lakhs and treatment worth more than Rs 40 crore has been availed, benefiting more than 22,000 senior citizens of 70 years and above.

There have been expectations of addressing the needs of this ageing population in this year’s budget — particularly in availing healthcare. However, not much transpired in that direction.

Way Towards Swasth Bharat

Post-pandemic expectations were that India may finally embark on the path towards universal basic healthcare. Gradually establishing adequate numbers of primary health centres at block and municipality levels, particularly in rural and remote areas, could have been a good starting point.

Private partnerships may be necessary for cutting-edge, tech-driven, high-end healthcare, but ensuring basic healthcare for all by the government is rudimentary for any economy with developed status ambition.

However, it was not meant to be so. Even in 2025, health expenditure as a percentage of GDP is yet to reach the 2.5 per cent target set by the 2017 NHP.

Financing such health expenditure expansion can be done by introducing healthcare cess on luxury and sin goods like tobacco, liquor, and sugar-rich foods. Indirect tax cuts and exemptions on basic medical devices and medicines can also help.

Trends in insurance-based central and state health schemes demonstrate the flow of most of the money spent towards private operators. However, the insurance-based model has neither made basic healthcare more accessible, nor more affordable. 

Medical research and innovations have also to be reoriented towards decreasing the costs of basic affordable healthcare. Such reorientation needs public investment. Private investment will remain concentrated at the high end for obvious reasons.

Unless these broad shifts are undertaken, the Indian population is likely to remain not so healthy. No nation in economic history has ever achieved developed country status with an unhealthy population and workforce.