Has Health Spending by the Centre Increased in India?

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• Recent data show that while States have increased health expenditure, the Union government’s health spending as a share of GDP has declined in the post-pandemic period.

Background: Health Financing Commitments in India

• India’s health financing framework has long acknowledged the need for higher public investment. 
• The National Health Policy (NHP), 2017, committed to increasing total public health expenditure from 1.15% of GDP to 2.5% by 2025. 
• A key pillar of this commitment was enhancing the Union government’s contribution, envisaged at 40% of total public health spending.
• However, the policy target has not been achieved. As of 2025-26, India remains significantly below the stated goals, raising concerns about fiscal prioritisation of health in national budgeting.

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Trends in Public Health Spending in India

• India’s public health expenditure remains among the lowest globally. 
• Comparative data show that countries such as Bhutan, Sri Lanka, Thailand, and Malaysia spend several times more per capita on health than India. Even among BRICS nations, India’s per capita public health spending is markedly lower.
• During the COVID-19 pandemic, public health spending as a percentage of GDP rose temporarily. 
• However, this increase was driven largely by State governments, not by sustained expansion in Union government allocations.

Union Government Health Spending: Declining Priority

• According to Reserve Bank of India data, the Union government’s health expenditure declined from 0.37% of GDP in 2020-21 to 0.29% in 2025-26 (Budget Estimates). 
• In real terms, the 2025-26 health allocation is 4.7% lower than actual spending in 2020-21, after adjusting for inflation.
• This decline indicates that the modest priority accorded to health during the pandemic has not been sustained. 
• The share of health in the total Union Budget has also fallen from 2.26% to 2.05% during this period, signalling a relative de-prioritisation.

State Governments Driving Health Expenditure Growth

• In contrast, States and Union Territories have increased health spending consistently since 2017-18. 
• Health expenditure by States rose from 0.67% of GDP in 2017-18 to 1.1% in 2025-26, with the share of health in State budgets increasing from 5% to 5.6%.
• This trend highlights a structural imbalance: while health is primarily a State subject, the fiscal capacity of States depends heavily on Union transfers. Reduced Central spending, which directly affects frontline healthcare delivery.

Health and Education Cess: Limited Impact on Health Budgets

• The Health and Education Cess (HEC), introduced in 2018-19 at 4% of taxable income, was intended to augment health spending. 
• However, evidence suggests that cess collections have largely been absorbed into general revenues rather than used to expand health budgets.
• In FY 2023-24, only about one-fourth of the Rs. 71,180 crore collected through HEC was allocated to health. 
• Excluding cess contributions, the Union government’s health spending declined by 22.5% in real terms between 2020-21 and 2023-24.

Cuts in Centrally Sponsored Health Schemes

• Another major concern is the declining share of Union spending transferred to States through Centrally Sponsored Schemes (CSS). 
• This share fell from 75.9% in 2014-15 to about 43% in 2024-25.
• Key schemes such as the National Health Mission (NHM), which has been central to strengthening rural and urban health infrastructure since 2005, have seen stagnation or real-term declines in funding. 
• During the second tenure of the NDA government, NHM spending declined by 5.5% annually in real terms, weakening public health system capacity.

Implications for Public Health Outcomes

• Low and declining Central investment has several implications:
  • Increased out-of-pocket expenditure for households
  • Strain on State finances, especially poorer States
  • Weakened preventive and primary healthcare systems
  • Reduced preparedness for future health emergencies
• These trends undermine India’s ability to achieve Universal Health Coverage and meet Sustainable Development Goal targets related to health.

Source: TH