The Union Budget 2025-26 has allocated an impressive Rs 1,03,280 crore for health and family welfare, Ayush, and health research. This marks an 8.3-fold increase from Rs 12,482 crore in 2014-15, far outpacing the 2.8-fold growth of the overall Union Budget in the same period.
A Shift in Public Health Spending
A decade ago, public health expenditure was just 1% of GDP. Historically, in 1990-91, spending on health, including medical services, family welfare, sanitation, and nutrition, stood at 2.36% of GDP.
However, the wave of privatization in the post-LPG (Liberalization, Privatization, Globalization) era left citizens increasingly dependent on market-driven healthcare, pushing out-of-pocket (OOP) expenses to unsustainable levels. By 2013-14, public spending on health had plummeted, eroding the quality of government-run healthcare facilities.
Since 2014-15, renewed investment in public health has led to tangible improvements, reducing the burden on individual households. In 2004, total health expenditure was 4.2% of GDP, with a staggering 2.59% coming from private OOP payments.
The low public spending of less than 1% of GDP exacerbated economic hardships, forcing many into poverty. A 2015 Government of India report underscored this, stating that catastrophic healthcare costs were a major contributor to poverty, nullifying gains from income growth and poverty-alleviation schemes.
Declining Out-of-Pocket Expenditure
Non-Communicable Diseases (NCDs) have been a key driver of high OOP expenses, yet despite their rising prevalence, OOP expenditure has consistently declined over the last decade. Until 2013-14, OOP costs remained at 2.5% of GDP.
However, sustained public investment led to a significant drop—from 2.32% in 2015-16 to 1.55% in 2021-22. This relief has particularly benefited low- and middle-income households, breaking cycles of poverty exacerbated by healthcare costs.
Strengthening Government Spending
Government health expenditure as a share of GDP has steadily increased, from a mere 0.22% in 1950-51 to 1.84% in 2021-22. This rise is reflected in the government’s share of total health spending, growing from 20.4% in 2003-04 to 48% in 2021-22. These trends underscore a significant policy shift toward a more robust public healthcare system.
Ayushman Bharat: A Game Changer
The Ayushman Bharat initiative has played a crucial role in reducing private healthcare expenses. It has two components: the Pradhan Mantri-Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) for upgrading health infrastructure and Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) for health insurance.
By December 2024, 1.75 lakh Ayushman Arogya Mandirs (AAMs) had been set up or upgraded from existing Primary Health Centres (PHCs) and Sub-Health Centres (SHCs).
AB PM-JAY provides up to Rs 5 lakh in coverage for secondary and tertiary healthcare, initially for economically weaker sections and later expanded to those aged 70 and above. Government funding for the scheme increased from Rs 1,998 crore in 2018 to Rs 6,185 crore in 2022, benefiting millions. Price ceilings for Ayushman Card holders further ensure affordability, making India a leading destination for medical tourism.
The Road Ahead
Despite progress, India’s OOP healthcare expenditure remains high and varies significantly across regions. A region-specific, micro-level health policy is essential to address diverse disease burdens.
Strengthening the domestic medical industry is also crucial to drive innovation, tackle emerging health challenges, and boost economic growth. A healthier workforce will reduce poverty and enhance productivity, while advancements in medical technology can position India as a global leader in healthcare.
For this vision to materialize, local, state, and central governments must work in synergy, ensuring that healthcare remains a fundamental pillar of national development.
(Prof. Mahajan author is a Professor (retired), Dr. Nandan is an assistant professor; Views expressed are personal)
