HEALTHCARE IN INDIA is not a political battle field. The historical underinvestment in public health continues and is perhaps getting worse each passing year. In the mid-1980s, India had reached a peak of 1.6 percent of GDP allocated to health with support of the Minimum Needs Program which then saw a massive expansion of public health, especially in rural India. But since then under the structural adjustment impact the trend in budget allocations for health took a U-turn and began its continued descent. Post 2006 under the National Rural Health Mission (now National Health Mission) we did see a brief revival in public health investment with budgetary allocations moving from 0.9 percent of GDP to up to 1.3 percent of GDP until 2015. However,since then we see stagnation at around 1.2 percent of GDP despite the 2017 National Health Policy (‘NHP’) commitment of reaching 2.5 percent of GDP by 2025.
Since the 2017 NHP the trajectory of budget commitment to public health has shifted increasingly towards insurance based financing through programs like Aayushman Bharat Pradhan Mantri Jan Aarogya Yojana (‘PMJAY’), which directly support private hospitals for secondary and tertiary care for the bottom 40 percent of the poor families. Over three-fourths of the PMJAY resources benefit private hospitals and the public hospitals continue to be neglected. Of the remaining 60 percent population, about 10 percent is a privileged class of people who get assured healthcare through schemes like Central Government Health Scheme (‘CGHS’), Employee State Insurance and other similar social insurance schemes. Fifty of India’s citizens (the “missing middle” of current health policy debates) are left to the mercy of markets where the burden is entirely out of pocket or partly paid via insurance for those who can afford to pay insurance premiums.
It is a shame that our MPs and bureaucrats through CGHS acquire healthcare benefits of up to Rs 18,500 per capita, and that too mostly via the private sector. This is in sharp contrast to general citizens for whom Ministries of Health spend only Rs 2,500 per capita. This gross inequity to access for healthcare between the elected representatives and bureaucracy on one hand and the taxpayers and electors on the other hand is cruel. This model of healthcare needs to be dismantled and through system and structural changes we have to put in place a healthcare system that is equally accessible to all citizens irrespective of their economic, occupational or social status. We need a system which will provide the CGHS kind of health benefits to all and not just to MPs and bureaucrats.
Latest Budgetary Trends
The overall fiscal envelope of governments needs to be hugely extended to provide universal and equitable access to healthcare for all. Presently the Union and State governments together are able to rein in only 17 percent of the GDP through taxes. This is grossly inadequate. Global experience shows us that for a strong welfare state the minimum Tax:GDP ratio should be more than 25 percent. Hence countries which are able to provide universal and equitable access to healthcare have Tax:GDP ratios of 25-30 percent.
In the latest budget 2026-27 (Table 1), the total budgeted expenditure of the Union government is down to 13.4 percent of GDP from 13.8 percent in the previous year. Also the nominal GDP increase is 10 percent but the increase in budgeted expenditure is only 7.6 percent. Thus the government has failed to increase the fiscal space and as a consequence social sectors like health and education are the first to experience cuts. This reduced space impacts transfers to state governments who then have to share a larger burden on their shoulders.
Table 1: Union Budget Trends Selected Summary (Rs crores)
Source: Expenditure Budget 2026-27, Ministry of Finance, GoI, New Delhi, Feb 2026
In 2014-15, three-fourths (75.9 percent) of the Union spending on health was transferred to the States. However, within the first three years of the NDA government, this share came down to just around half (53.4 percent) and has further declined consistently to reach a dangerously low level of just 51 percent in current budget – which is completely insufficient to maintain basic health services under Centrally Sponsored Schemes.
We need to keep in mind that State governments bear the main costs of providing healthcare to people across India, and need to be adequately resourced by the Union government. In 2025-26, the burden borne by states for health, including grants from Centre was Rs 3,91,911 crores as per the RBI’s latest Finances of State Government report or 89 percent of the Total Health Budget for that year. The 16th Finance Commission proposed to devolve only 41 percent of tax resources to states. This means limited fiscal space of the states which have to bear the larger burden for health expenditures.
The 2017 NHP mandates 2.5 percent of GDP for healthcare with the Centre’s contribution of 40 percent in the total public health budget or 1 percent of GDP. However, in the 2026-27 budget the Union health budget is a mere 0.27 percent of GDP and over the last five years has remained below 0.3 percent of GDP. The Union government’s spending on health as a percentage of GDP, which increased moderately during the COVID pandemic, has decreased post-pandemic. Union government allocation on health in 2026-27 Union Budget was 1.3 percent less than what was actually spent in 2020-21, when we take into account the effect of increasing prices. This also means that as a percent of GDP, Union government allocation to health has declined drastically from 0.37 percent (2020-21 Actual Expenditure) to 0.27 percent (2026-27 Budget).
The share of the health budget in the total Union Government budget has also declined from 2.26 percent to 2.07 percent in this period. So if the government were to honour the 2017 NHP mandate of 2.5% of GDP then the total health budget for the country should be in the range of Rs 9,80,000 crores (Rs 6,500 per capita) and the Centre’s share of that Rs. 3,93,000 crores. This means that the state governments together, as per the 2.5 percent of GDP mandate, face a health budget deficit of Rs 1,95,089 crores and the Union government a huge deficit of Rs 3,38,000 crores.
This is the budget gap to be bridged as per the government's own health policy norms and this budget gap is the main reason why we see huge deficits in the public health system – huge unfilled vacant positions, of doctors, specialists, nurses and other paramedics, inadequate medicine and other consumable supplies, poor maintenance of infrastructure and of course not enough healthcare facilities as per the government’s own norms of Indian public healthcare standards.
Health Budgets
A deep-dive into the health budget shows that the core program – National Health Mission - continues to face gross neglect. In 2026-27, NHM allocations, which support primary healthcare, as a proportion of the health budget, declined sharply to 38.7 percent share as compared to 2024-25 when it was 44.5 percent of the total health budget.
In sharp contrast the PMJAY budget for the same period increased from 7.9 percent share in 2024-25 to 9.34 percent in 2026-27 and over 75 percent of this program's expenditure is diverted to private hospitals. PMJAY continues to get substantial amount of budget each year, even when the large body of evidence shows the inefficacy of such insurance-based models across the globe. Evidence from the ground continues to show that benefits from the scheme are limited, and with huge number of irregularities, the CAG’s audit shows. Consequently public hospitals are asphyxiated and suffering from huge deficiencies in human resources, supplies and maintenance.
On one hand there is a consistent decline in funds for NHM, a programme that prioritizes primary health and health of women and children. On the other hand, there are paltry increases for the other specific schemes meant for this population, which effectively means a decline in real terms. The Saksham Anganwadi and POSHAN 2.0 scheme under the Ministry of Women and Child Development, which is the umbrella Integrated Child Development Services scheme, has seen a meagre 5 percent increase over last year’s budget.
The two schemes under Mission Shakti – first, SAMBAL (which includes Beti Bacaho Beti Padhao, One Stop Centre, Nari Adalat, Mahila Police Volunteer, Women's Helpline etc.) sees a marginal decline and the second SAMARTHYA (which includes Ujjawala, Palna (National Creche Scheme), Pradhan Mantri Matru Vandana Yojana etc.) has seen miniscule increase in allocations. This neglect of women and children is highly problematic in the context of increasing anemia and malnourishment among them as revealed by NFHS reports.
The latest budget also talks about developing medical tourism hubs, where public-private partnerships are being proposed to cater to medical tourists. This is another attempt to use public resources to privatise healthcare, this time to serve the rich from other countries and allow the private sector to make huge profits. Instead of this, the Union government should strengthen the public system with increased budgetary commitments so that the credibility of the public health system is restored.
Further, health insurance has been given a further boost by removing the GST on health insurance policies. This revenue loss from a rapidly expanding health insurance sector will further boost the private health sector at the cost of the public health sector. According to Insurance Regulatory and Development Authority of India’s latest Annual Report for 2024-25 health insurance premiums have jumped to Rs 1,17,505 crores from Rs 1,07,681 crores in the previous year, an increase of over 9 percent with the insured population increasing from 57.29 crores to 58.06 crores (24.54 crores being government funded insurance beneficiaries). With GST removed, the health insurance business is likely to see a much more rapid growth and in the absence of a robust public health system more and more people are going to get pushed towards private healthcare, thus increasing the out of pocket burden on households further.
To conclude, if access to healthcare in an equitable manner has to reach all citizens and without discrimination and stratification of healthcare access due to privileged positions, we need structural reforms similar to what Thailand has achieved in the past two decades. We need to dismantle the present privileged structure of access to healthcare and create a single universal access system like the UK NHS and for this we would need resources beyond the 2.5 percent of GDP, a legislative mandate recognizing the right to health, putting in place an organized and structured healthcare system and the necessary political will to accomplish this.
Already, some states in the country like Mizoram, Sikkim, Jammu and Kashmir, Himachal Pradesh, Goa, Puducherry are spending over Rs 5,000 per capita and have developed reasonably robust primary healthcare systems with good health outcomes. There is no reason why other states cannot follow their path.