India's Health Budget Still Trails the World

The question that comes up again every year in India's healthcare debate is one of discomfort: what proportion of the nation's economic output is absorbed by its hospitals, clinics and public health workers?

A Persistent Shortfall

The public health budgets are estimated to have remained in the range of 1.8 to 2.0 per cent of GDP in recent years, compared with the 1.3 per cent that was spent 10 years ago. The target of 2.5 per cent of GDP, which remains unachieved, was included in the National Health Policy of 2017 with no clear timeframe on which to expect it to be met.

India's outlay on public health is below the 5 per cent of GDP mark that the World Health Organization has recommended for the countries striving for universal health coverage.

How India Compares

When comparing with the regional area, the gap is even wider. For comparison, middle-income countries such as Vietnam, with an annual GDP of about $130 billion, spend about 3 per cent of GDP publicly on health, while the Philippines ($80 billion) and Indonesia ($122 billion) spend in between 2.5 and 3 per cent of their GDP per capita on health, compared with India at 1.7 per cent of GDP.

Thailand, which has a slightly higher per capita income than India, spends 4.5-5 per cent of GDP and has close to universal health coverage.

The Indian Medical Association (IMA) president Dr Dilip Bhanushali has termed the level of funding in India "alarmingly low," and said that "Inadequate public financing directly impacts access, quality and affordability of care, especially outside major cities".

Households Absorb the Difference

The results of reduced public funding are starkly reflected in family budgets. The proportion of health spending from out-of-pocket (OOP) funding continues to be high at about 43–48 per cent of total health spending in India, though this figure has come down from 62.6 per cent in 2014-15, compared to other parts of the world.

However, the figures in the 2022-23 accounts was the first time that government health spending exceeded household out-of-pocket spending (43.72 per cent compared to 43.41 per cent), although nearly half of all health spending remains with families.

Budget 2026 and What It Signals

The Union Budget for 2026-27 had the health ministry's allocation at ₹1,06,530 crore, just above a nominal 10 per cent rise. It's "policy intent rather than systemic transformation, analysts have said, with the rise focused less on simply scaling up public provisioning and more on cancer care, mental health and medical tourism.

Once population growth and general inflation in the health sector, which is always greater than the headline consumer inflation, is calculated for, "the extra allocation is used primarily to maintain existing programmes rather than to expand capacity," says one policy analysis.