Has health spending by the Centre increased?

The Union government's health spending has decreased post-pandemic, falling short of National Health Policy targets and global standards.

The 2017 National Health Policy (NHP) had committed to “increase health expenditure by Government as a percentage of GDP [Gross Domestic Product] 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.

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.

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 (RBI), 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 (BE) (Chart 1). 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) (Chart 1). It seems that even the modest higher priority accorded to the health sector during COVID has been slashed after the immediate emergency passed. The share of health in the total Union Government budget has declined from 2.26% to 2.05% in this period.

In 2018-2019, Health and Education Cess (HEC) was introduced as 4% of one’s total taxable income. The cess was supposed to top up and expand existing government spending on health and to take care of the health of poor and rural families. However, the thousands of crores collected yearly as HEC has not been used to expand the health budget but instead is being used to supplement tax resources. 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, we note that the Union Budget’s allocation for health has declined by 22.5% in real terms between 2020-21 and 2023-24 (Chart 2).

In 2014-15, three-fourth (75.9%) of Union spending on health was transferred to the States for various Centrally Sponsored Schemes like the National Health Mission. Overtime, 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.