Monday, March 25, 2019

Government health expenditure in India

Surajit Das

Indian government spends only 1% of Gross Domestic Product (GDP) on health (in 2015, excluding expenditure on water supply and sanitation), which is one of the lowest in the world (Source: World Development Indicators of the World Bank). According to the World Health Organisation (WHO), the world average public spending on health was 3.5% of GDP in 2015. According to the World Bank data, in the Euro area and in North America, the public expenditure on health is more than 8% of GDP on an average. Even the poor Latin American countries & Caribbean and Sub-Saharan African countries spend much more than India (3.8% and 1.8% of GDP,respectively)on health. China has recently increased government health expenditure from less than 1% of GDP in 2000 to 3.2% of GDP in 2015. Many people have raised this issue of abysmally low government expenditure and extremely high out of pocket expenditure on health in India time and again but, there has been no marked change in the government health expenditure to GDP ratio in our country. There has been some improvement in private sector led health services in India in the recent past; however, most of the Indian population cannot afford to avail these services because of exorbitantly high cost, given their low level of income.

The national common minimum programme (NCMP) of the United Progressive Alliance (UPA) government (2004-2014) promised to spend at least 3% of GDP on health but, they failed to keep their promise. The present National Democratic Alliance (NDA) government also could not make any marked difference vis-à-vis public sector spending on health as proportion to GDP. The advanced estimate of GDP in the financial year 2019-20 has been projected to be Rs. 210 Trillion (Source: Union budget of 2019-20). Therefore, 1% of GDP would be more than Rs. 2 lakh crore. Even if our health expenditure to GDP ratio has to reach 2% of GDP (instead of earlier NCMP promise of 3% of GDP), we have to spend more than Rs. 2 lakh crore extra. Even if the nominal GDP goes up by 10% every year on an average for next five years, by the end of five-year period, we need to spend almost Rs. 3 lakh crore extra. Roughly, an additional spending of Rs. 12.25 lakh crore is required over next five year on health in India to cross 2% of GDP. There are total 725 districts in India. Even if we assume that the average cost of building a state-of-the-art multi-specialty hospital (with 1000 beds) cum medical college cum nursing school with enough number of ambulances and mobile PHC-vans to be Rs. 1000 crore, we can build such new government hospitals in every district within Rs. 7.25 lakh crore. The running cost of these can easily be taken care of by the rest Rs. 5 lakh crore for the next five years.

Health is a state subject in India – the state governments have to be given enough autonomy without putting much pressure on the state finances. To strike this crucial balance, we can think of designing some kind of central sector scheme (CSS) where, the central government can incur the initial capital expenditure and the states can bear the running cost of it. As far as financing of this extra 1% of GDP amount of expenditure is concerned, already there is a shortfall of 1.4 lakh crore in the GST collection in the current financial year for the central government alone. Including the states, it would exceed 1% of GDP for sure. The direct tax compliance (without raising the tax rates) also needs to improve. We should implement wealth tax and property inheritance tax to the super-rich people, effectively, in this country. Even if the fiscal deficit rises by 1% of GDP to incur this much needed social sector expenditure on a crucial area like health, there would be no serious negative consequence. In fact, it would crowd-in private investment near those new super specialty government district hospitals.The out of pocket expenditure on health (which is incredibly high in India) would come down substantially, which would also have its multiplier effect (through rise in social wage). The human development indicators would surely improve. More doctors and nurses would be available in the country (which we badly need in the current scenario). India would look relatively much better. And this is perfectly doable without creating any problem for ‘macroeconomic stability’necessarily, if there is political will.

As Bharat Ratna Nobel laureate economist Prof. Amartya Sen says, the world experience shows that the Government can actually make a difference in the important social sectors like health and education effectively, if it wants. It is needless to mention that our human development indicators are extremely poor in India. The largest democratic republic is prepared for another Lok Sabha election today. The people of India want the political parties to clarify their agenda on health sector for the country as a whole, before the electorates take a decision and vote. It is important for all the people of this sub-continent irrespective of their age, class, caste, gender, religion, ethnicity, food habits, language, sexual preferences, political affiliation, regional identities and all other kinds of diversities.

The Author is Assistant Professor, CESP, JNU, New Delhi

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