India’s Low Public Health Spending | 31 Jan 2026

Source: TH 

Why in News? 

India's public health spending continues to fall critically short, as the Union government has failed to meet the spending targets set by the National Health Policy (NHP) 2017. 

What is the Status of Public Health Spending in India? 

• Missed National Targets: NHP 2017 target of raising public health spending to 2.5% of GDP by 2025 remains unfulfilled. The Union government's share, aimed at 40% of total public spending (1% of GDP), stands at a mere 0.29% of GDP (2025-26). 
  • Post-Covid-19, the Union government's health spending declined drastically from 0.37% (2020-21) to 0.29% (2025-26). 
• State vs. Centre Trend: While states have increased their health spending from 0.67% (2017-18) to 1.1% of GDP (2025-26), the Centre has reduced its share, leading to a trend of financial hyper-centralisation. 
  • Also, the Union's share of health transfers to states for Centrally Sponsored Schemes has plummeted from 75.9% (2014-15) to 43% (2024-25), undermining state capacity to deliver healthcare. 
• Cess Misallocation: Funds from the Health and Education Cess (HEC), intended to expand healthcare for the poor, are not supplementing but largely substituting the core health budget. In 2023-24, only one-fourth of HEC collection was allocated to health. 
• Global Disparity: India's per capita public health spending is among the world's lowest, significantly less than neighbours like Bhutan (2.5 times more) and Sri Lanka (3 times more) in 2021, and far behind BRICS nations (14–15 times more) and Thailand/Malaysia (10 times more). 

What are the Reasons for Low Public Health Spending in India? 

• Political Economy of "Visible" Infrastructure: Electorally, spending on physical infrastructure (roads, bridges) or direct cash transfers yields more immediate and visible political returns than investing in the slow, systemic strengthening of public health, which is a long-term good with diffused benefits. 
• Fragmented Health Financing Architecture: India lacks a unified, ring-fenced health financing pool. Health budgets are vulnerable to annual political bargaining and compete internally with other sectors, unlike systems with dedicated health taxes or insurance funds. 
• Weak "Health in All Policies" Approach: The NHP 2017 advocates this, but in practice, major determinants of health—sanitation, nutrition, air pollution—are handled by separate ministries with separate budgets. This siloed approach underestimates the total public investment needed for health and prevents pooled resource allocation for holistic outcomes. 
• Dominance of Private Healthcare Narrative: The massive growth of the private health sector creates a public perception and political rationale that healthcare is primarily a private consumer good, not a public good requiring state investment. This reduces demand-side pressure on the state to fund public systems. 
• Absence of Cost, Time-Bound Roadmaps: While the NHP 2017 sets a GDP percentage target, there is no legally backed, year-on-year, cost implementation plan with mandatory milestones for central and state governments, allowing the target to remain aspirational rather than actionable. 

What Steps are Necessary to Increase Public Health Spending in India? 

• Enhance Fiscal Capacity: Strengthen government revenue by improving the tax-to-GDP ratio through tax reforms, base broadening, digital compliance, and GST rationalization, per NITI Aayog’s 2025 Fiscal Health Index. Establish a health cess or higher GST (e.g., 35%) on harmful goods to earmark funding for healthcare. 
  • Accelerate disbursement of the 15th Finance Commission’s health grants to build infrastructure like PHCs (Primary Health Centre), CHCs (Community Health Centres). 
• Leverage Blended Finance: Expand blended finance models combining public, philanthropic, and private capital, as per NITI Aayog’s 2022 report. Strengthen PM-JAY by subsidizing premiums for the "missing middle" and covering indirect costs to reduce out-of-pocket burdens. 
• Improve Efficiency and Accountability: Wastage must be reduced by strengthening procurement and adopting outcome-based budgeting, while leakages should be prevented through Direct Benefit Transfers and ensuring audit transparency with published health account reports. 
  • Reframe health as an economic investment to foster political will. Rebalance budgets toward primary and preventive care, allocating two-thirds to primary healthcare as per NHP 2017. 
• Legal & Policy Reforms: A Right to Health Act should be enacted to legally mandate adequate health provisioning, and consideration should be given to amending the Constitution to place "public health" in the Concurrent List for stronger national standards. 

Conclusion 

India’s persistent underinvestment in public health reflects a critical policy–implementation gap in the National Health Policy 2017. Without enhanced Union government spending, better fiscal federalism, and legally backed financing mechanisms, goals such as Universal Health Coverage, reduced out-of-pocket expenditure, and equitable healthcare will remain unattainable.