The Covid-19 pandemic has made countries realize the importance of investment in health, both from the perspective of human rights and its contribution to the economic stability of a nation. In India, this has been amply acknowledged by three recent policy documents that collectively define the economic status of the country, their trends, and the future direction. These are the Economic Survey of India 2020-21, the 15th Finance Commission report,and the Union Budget 2021-22.

For the first time, health took a center stage in the Economic Survey, with two separate chapters on public spending and Ayushman Bharat- Pradhan Mantri Jan Arogya Yojana (PM-JAY). Low public spending on healthcare was clearly articulated, as was the need to increase public spending on healthcare.  It also demonstrated the positive impact of public spending on health systems outcomes, such as the decrease in infant and maternal mortality rates and the increased utilization of healthcare by the lowest quintile, as an outcome of public subsidy. The Economic Survey also focused on the increased availability of human resources for health (HRH) and its impact on health systems outcomes, making a case for increasing the number and types of HRH personnel and improving their distribution.

The 15th Finance Commission report also highlighted the effects of Covid-19 on health systems andthe need to strengthen health systems capacity in India. It took a note of the existing fault lines in health systems in India, including high out of pocket expenditure on health, skewed distribution ofHRH, and the need to enhance the efficiency and quality of the private sector healthcare provision. TheFinance Commission recommended an unconditional grant in aid worth Rs. 1,06,606 crores from the Centre to the states. It also recommended that states must increase their expenditure on healthto eight percent of the state GDP and collectively, at the country level, public expenditure on healthcare should progressively increase to 2.5 percent of GDP by 2025. Further, itrecommends prioritization of primary care services, increasing public healthcare delivery centres and giving autonomy to states in centrally sponsored schemes, along with transitioning from input to output/outcome-based financing.

The Union Budget put clear emphasis on strengthening infrastructure for public health and surveillance, in addition to a substantial allocation of Rs. 35, 000 crores towards the Covid-19 vaccination drive. The three key areas outlined in the budget include a) setting up of integrated public health labs in all districts and 3382 block public health units in 11 states, b) expansion of the Integrated Health Information Portal to all States/UTs to connect all public health labs and c) operationalization of 17 new public health units and strengthening of 33 existing public health units at points of entry, that is at 32 airports, 11 seaports and 7 land crossings.

With the introduction of the Allied and Healthcare Professions Bill, 2018 and The National Nursing and Midwifery Commission Bill, 2020 the Union Government has tried addressing issues related to human resources for health. It also commits establishing 12 central institutions, critical care hospitals in 602 blocks, labs in all districts, 3382 block public health units, strengthening health surveillance through the National Centre for Disease Control (NCDC),and focusing on creating infrastructure towards pandemic preparedness.It is important to measure the efficiency of public spending. The need for data is, therefore, crucial in developing policy and strategies, especially during times like theCovid-19 pandemic.The government has demonstrated its commitment in this areaby announcing the National Digital Mission and creating integrated information systems.

Despite the efforts, for achieving universal health coverage, the Government will need additional financial commitment through larger allocations to the health sector. The highest increase in allocations in the social sector has been to water and sanitation at 179 percent, year on year (YoY). This has increased the overall social sector spending by 16 percent. In fact, the allocation in healthcare has marginally increased by 11 percent, while education and nutrition have seen a decrease of seven percent and twelve percent respectively. These allocations need a larger discussion on what comes under the ambit of health. Water and Sanitation, and Nutrition are strong determinants of health status. But presently the National Health Accounts (NHA) framework[1] does not include them in the current estimation. The budgetary allocations towards health are much lower than what has been recommended by the 15th Finance Commission. The central level spending on healthcare is primarily through the National Health Mission (NHM). The overall allocation to NHM has increased by seven percent as compared to the previous year, but in absolute value, the increase has been marginal(at four percent YoY). This can be attributed to the increase in allocation of tertiary care programs by 34 percent YoY. Within the Ministry of Health and Family Welfare, allocation to central sector schemes has decreased by 55 percent, while other central sector schemes by one percent, primarily attributed to other sectoral allocation. It is important to note here that there is no substantial increase in the allocation to regulatory authorities or autonomous bodies, which are responsible for improving the quality of care as well as for being responsive to the delivery of healthcare.

Social Sector spending[2]:2015-16 (A)2016-17 (A)2017-18 (A)2018-19 (A)2019-20 (A)2020-21 (BE)2021-22 (BE)
% of Union Budget3.
% of Union Budget1.972.042.552.432.472.282.21
Ayushman Bharat1998320064006400
Water and Sanitation11081164762393918412182642151860030
Total Social Sector Spending129606143972175347174665192580214621250261
% Change YoY of total SS Spending 11.0821.79-0.0510.2511.4416.06

(A)=Actuals, (BE) = Budget Estimates, Adapted from Budget Documents

Budget Allocation for Ministry of Health and Family Welfare:

Allocations to NHM are made through gross budget allocations and the National Investment Fund (NIF). There have been changes in allocation from gross budget as well as the NIF to NHM, the Reproductive and Child Healthflexi pool contribution has gone up from Rs. 7751.54 crores to Rs. 8139.22 YoY, of which Rs. 1865.90 is allocated from the NIF. Health systems strengthening budget under the NRHM through gross budget has gone down from Rs. 1999.01 crores to Rs. 608.59 crores. The overall health systems strengthening budget has gone up though, as Rs. 12150crore is allocated through the Pradhan Mantri Swasthya Suraksha Yojana (PMSSY). Whether these changes in the fund flow change the overall framework of health systems support, needs to be seen. Through the NIF, an allocation of Rs. 717 crores. has also been made to non-communicable diseases, injury, and trauma.

It is important to keep in mind the major heads[3] under which the budget for the Ministry of Health and Family Welfare is allocated, as each of them will have administrative and governance differences. The current budget of Rs. 71268.82 crores is distributed under 14 major heads. It is important to take a close look at changes in allocation to each of the major heads. The North-Eastern Areas head has seen a 1000 percent increase from Rs. 796.75 crores to Rs.8788.47 crores, while the aid and medical equipment head has seen a decrease of around 85 percent.

Major head wise expenditure: (in INR crores)

Revenue SectionsMajor Head2019-20202020-20212021-2022% Change YoY
Secretariat-Social Services2251189.2202.49228.8713.03
Council of Ministers20133.453566.67
Pension and other retirement benefits20712617.2328052300-18.00
Medical and Public Health221028216.0736701.4144646.5621.65
Family Welfare22112861.293036.252927.46-3.58
Social Security and Welfare223500.010.1900
North Eastern Areas25520796.758788.471003.04
Grant in Aid to states360132253.860506.4153810.76-11.07
Grant in Aid to Union Territories3602429.523102.941954.37-37.02
Aid in Material and equipment36065750.62110-85.35
Capital Outlay Medical and Public Health42102777.544166.34229.21.51
Capital Outlay Family Welfare42118.947.1510.2242.94
Capital Outlay Housing421617.7510.0516.1961.09
Capital Outlay North Eastern Areas4552050100100
Total Grant Accounted 69379.79112138.38119127.2 
Total Receipts 6977.7139572.3847858.38 
Total Expenditure accounted 62402.087256671268.82 

Adapted from:Source: https://www.indiabudget.gov.in/doc/eb/dg44.pdf

The Department of Health Research, which falls under the major head “Medical and Public Health” has seen a decrease in allocation from previous years. The overall budget allocation has gone down to Rs. 2663 crores from Rs. 4062 crores previous year, translating to a decrease of 35 percent.

Department of Health Research:

Major Head2019-2020 Actuals2020-2021 Revised Estimates2021-2022 Budget Estimates

Adapted from: Source: https://www.indiabudget.gov.in/doc/eb/dg45.pdf

The above policy decisions, align with the National Health Policy, 2017 that promotes strengthening and prioritizing the role of the government in shaping health systems— prevention of diseases and promotion of good health and to better organization of healthcare services through access to technologies, developing human resources, and better financial protection strategies.

Since finance also plays a strong role in shaping market structures, the current policy needs to focus more on creating better financial vehicles and structures that can enhance the efficiency of the mixed healthcare system of India and also enhance the quality and efficiency of the private sector.  Governments will also have to move towards a more inclusive approach, with efforts to strengthen both the public as well as private healthcare sector, giving them a level playing field. The distribution of budgetary allocation across the different major heads of the Union Budget also demands a better coordination mechanism amongst various departments that can enhance the efficiency and improve the equity of allocated resources.

Written by Maulik Chokshi, Tushar Mokashi and Arun Nair


[1]Poullier, J.P., Hernandez, P., Kawabata, K. and Savedoff, D.W., 2002. National health accounts: concepts, data sources and methodology. World Health Organization, https://www.who.int/health-accounts/documentation/en/NHA_concepts_datasources_methodology.pdf

[2]Budgeted estimates (BE) are budget allocations announced at the beginning of each financial year. Revised Estimates (RE) are estimates of projected amounts of receipts and expenditure until the end of the financial year. Actual amounts are audited accounts of expenditure and receipts in a year.

[3]Major head indicates the functions of the Government such as agriculture, education, health etc.

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