Goods and Services Tax (GST)

Budget and the Health expenditure


From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: Government’s Budget and Healthcare



  • In her 2023-24 Union Budget speech, the finance minister announced that the total central government budget for health (not including research) will be roughly Rs 86,175 crore ($10 billion) that is, roughly Rs 615 for every citizen. This is a 2.7 per cent increase from the previous fiscal year and lower than the rate of inflation.

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Government’s current Health spending

  • Current health spending lower than middle income countries: India currently spends about Rs 8 lakh crore ($100 billion) or about 3.2 per cent of its GDP on health. This is much lower than the average health spending share of the GDP at around 5.2 per cent of the Lower- and Middle-Income Countries (LMIC)
  • Health expenditure in India compared to other countries: Of this, the government (Centre and states put together) spends about Rs 2.8 lakh crore (about $35 billion) roughly 1.1 per cent of the GDP. Contrast this with the government health expenditure in countries like China (3 per cent), Thailand (2.7 per cent), Vietnam (2.7 per cent) and Sri Lanka (1.4 per cent).

How health expenditure affects people especially poor?

  • Hospitalisation cost for a day: A Day of hospitalisation at a public hospital is estimated at Rs 2,800. At a private hospital, it is Rs 6,800.
  • Disproportionate financial impact on poor households: A greater proportion of disposable incomes is taken away from a poor household as compared to a non-poor one, further broadening the gap between the two.
  • Impact of Health expenditure on employment and income: If sickness hits a working member of the household, she/he must often withdraw from active employment and their main source of income dries up at the time when they urgently need more money for treatment.
  • Sell or mortgage of assets to cover treatment costs: Households have to often sell or mortgage their productive assets, such as land and cattle, to cover the treatment costs.
  • Burden of health expenditures on vulnerable populations: The poor, elderly and sick are already at a disadvantage and the burden of health expenditure makes this even worse.
  • Falling into poverty due to health expenditures: This further reduces their capacity to bounce back. According to the WHO, 55 million people fall into poverty or deeper poverty every year due to catastrophic expenditures on health.


Areas where greater spending by the government could help in the immediate term

  • Focus should be balanced for both communicable and noncommunicable: The National Health Mission allocates less than 3 per cent (Rs 717 crore) to non-communicable diseases (NCDs) compared to communicable diseases and reproductive and child health services, despite NCDs causing more than half of the total burden of disease and this proportion further increases in both rural as well as urban areas.
  • Public health and primary health care focus on rural areas: Urban areas have poorly developed infrastructure for primary care even if secondary and tertiary health care services are better. For example, immunisation coverage is now lower in urban India than in rural India. A third of the country now lives in urban areas and greater resources are needed to improve health here.
  • Health research has been neglected for too long: The allocation for the Department of Health Research in this year’s budget is Rs 2,980 crore, flat from last year. Spending Rs 20 per Indian is inconsistent with the need for innovations and technologies in the sector. The bulk of the resources provided to the Indian Council of Medical Research goes towards maintaining a large payroll of scientists and the output is poor.

Way forward

  • Maximizing India’s potential: India stands on the brink of a massive opportunity. Quality education and health for the 26 million children born each year and the 65 per cent of the population under the age of 35 could help provide a workforce that would propel India forward.
  • Harnessing the Demographic Dividend: India has a growing working-age population, but needs urgent action to harness the demographic dividend and potentially become a developed country within a generation.
  • Adopting Competitive funding System for health research: India should adopt a competitive grant system for government-funded health research like other successful countries, to encourage top-notch research. The Wellcome Trust/DBT-India Alliance is a successful example of this system.


  • The health (and education) of Indians is the most important determinant of what the country can achieve during the next 25 years of Amrit Kaal. We must find ways to both find more money for health, and also more health for the money to ensure that all Indians achieve their true potential.

Mains question

Q. Highlight the present status of Government’s healthcare spending. How out of pocket health expenditure affects people especially poor? Suggest what government must do and areas where it must focus in the immediate term?

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