Has Health Spending by the Centre Increased? The Numbers Tell a Troubling Story
The 2017 National Health Policy had committed to “increase health expenditure by Government as a percentage of GDP from the existing 1.15% to 2.5% by 2025.” While 2025 is now over, this basic goal is nowhere near realisation, since the Union government has not upscaled its health budget as required over the last decade.
The NHP also proposed that the Union government’s share should be 40% of total public spending. This essentially means that spending by the Centre should increase from the current level of 0.29% to 1% of GDP—which requires increasing allocations by at least three times. The gap between promise and performance could not be starker.
Low Spending on Public Health
Public spending on health in India continues to be abysmally low compared to many countries. For instance, Bhutan’s per capita spending on health was 2.5 times more than that of India’s, while Sri Lanka’s was three times in 2021. All the other BRICS nations spent 14-15 times more on health per person than India did. Similarly, Thailand and Malaysia also spend at least 10 times more per capita on health than India.
These are not abstract comparisons. They reflect real differences in healthcare outcomes, in financial protection against medical expenses, in the quality and accessibility of services. When a country spends less on health, its citizens pay the price—in poorer health, in financial ruin from medical bills, in preventable deaths.
The COVID Bump That Faded
During the COVID years, public spending on health as a percentage of GDP had increased somewhat, with much of the rise attributed to the States rather than the Union government. The States have sustained such increase post-COVID as well.
As per data from the Reserve Bank of India, allocations for health and family welfare by all States and Union Territories have increased from 0.67% in 2017-18 to 1.1% of GDP as per 2025-26 Budget Expenditure. Similarly, the share for health spending in overall State budgets has increased from 5% to 5.6% during this period.
In contrast, the Union government’s spending on health as a percentage of GDP, which increased moderately during the pandemic, has decreased post-pandemic. The Union government’s allocation on health in the 2025-26 Budget was 4.7% less than what was actually spent in 2020-21, when one takes into account the effect of increasing prices.
This means that the care that could be provided in 2020-21 cannot be ensured now, given that allocations have declined while prices have skyrocketed. As a percentage of GDP, the Union government’s allocation for health has declined drastically from 0.37% (2020-21 Actual Expenditure) to 0.29% (2025-26 BE). It seems that even the modest higher priority accorded to the health sector during COVID has been slashed after the immediate emergency passed.
If we adjust for inflation, the picture becomes even starker. Adjusting for inflation, we note that the Union Budget’s allocation for health has declined by 22.5% in real terms between 2020-21 and 2023-24. This is not a plateau; it is a steep decline.
Cutting Schemes, Shifting Burdens
In 2014-15, three-fourths (75.9%) of Union spending on health was transferred to the States for various Centrally Sponsored Schemes like the National Health Mission. Over time, this has declined consistently to reach just 43% in 2024-25 (Budget Estimates), which is completely insufficient to maintain basic health services.
It should be noted that the State governments bear the main costs of providing healthcare to people across India, and they need to be adequately resourced by the Union government. The trend reflects hyper-centralisation of financial resources on health, although health services largely fall within the domain of States.
By trying to identify which schemes and programs have received cuts and which have seen considerable increase, one can understand the real health sector priorities of the Union Government. Schemes which strengthen the public health system and protect the health of the most vulnerable sections of society, like the National Health Mission, the Pradhan Mantri Swasthya Suraksha Yojana, and schemes on nutrition and health receive cuts despite doing good work in hard times.
The Cess Question
In 2018-2019, Health and Education Cess was introduced as a 4% levy on one’s total tax liability. The HEC has been used to supplement tax revenues. For instance, the FY2023-24 collection of HEC was ₹71,180 crore, of which one fourth went to health, which came to around ₹17,795 crore.
If we keep aside this cess amount, the picture for core health spending is even worse. The government is essentially using a dedicated health cess to fund what should be core budgetary allocations, while simultaneously cutting direct spending.
The Consequences
Low public health spending has real consequences. It means overburdened public hospitals, long waiting times, and shortages of essential medicines. It means that when people fall ill, they must turn to private healthcare, often at ruinous cost. It means that medical expenses push millions into poverty each year.
The COVID pandemic exposed the fragility of India’s health system. Yet instead of learning the lesson and investing in resilience, the government has cut back. This is short-sighted in the extreme.
Conclusion: A Broken Promise
The 2017 National Health Policy promised to increase public health spending to 2.5% of GDP by 2025. That deadline has passed, and we are nowhere close. The Union government’s health spending has actually declined in real terms since the pandemic. States are doing what they can, but they cannot compensate for the Centre’s retreat.
Health is not just another expenditure; it is an investment in human capital, in productivity, in the well-being of citizens. By underinvesting in health, India is mortgaging its future. The numbers are clear. The question is whether policymakers will heed them.
Q&A: Unpacking India’s Health Spending
Q1: What was the 2017 National Health Policy’s spending target?
The NHP committed to increasing government health expenditure to 2.5% of GDP by 2025, with the Union government’s share at 40% of total public spending. This would require tripling current central allocations from 0.29% to about 1% of GDP. The 2025 deadline has passed, and the target remains unmet.
Q2: How does India’s health spending compare internationally?
India’s public health spending is abysmally low. Bhutan spends 2.5 times more per capita; Sri Lanka spends three times more. Other BRICS nations spend 14-15 times more per person. Thailand and Malaysia spend at least 10 times more. These gaps reflect real differences in healthcare outcomes and financial protection.
Q3: How has Union health spending changed since COVID?
Union health spending as a percentage of GDP increased modestly during COVID (to 0.37% in 2020-21) but has since declined to 0.29% in 2025-26. In real terms (adjusted for inflation), allocations dropped 22.5% between 2020-21 and 2023-24. The temporary pandemic bump has been erased, and then some.
Q4: What has happened to Centrally Sponsored Schemes like the National Health Mission?
In 2014-15, 75.9% of Union health spending was transferred to States for such schemes. This has declined to just 43% in 2024-25, leaving States—which bear primary responsibility for healthcare—inadequately resourced. The trend reflects hyper-centralisation of health finances despite healthcare being a State subject.
Q5: What role does the Health and Education Cess play?
The HEC, introduced in 2018-19, levies 4% on tax liability. In 2023-24, it collected ₹71,180 crore, with about one-fourth (₹17,795 crore) allocated to health. The government is using dedicated cess revenue to fund what should be core budgetary allocations, while simultaneously cutting direct health spending. This masks the true decline in health priority.
