Decoding the Health Budget of India

Author: Dr. Malini Nagulapalli,
(Coordinator, Public Health)

Health care system acts as a measure of efficiency and success of the governments across the globe. Therefore, it does not come as a surprise that healthcare plan is the predominant topic of discussion in the ongoing presidential campaigns in the USA. In the current fragile situation, where countries are facing potential threat of fatal epidemics, India should focus on providing accessible, affordable and equitable healthcare services. Faced with the twin burden of communicable and non-communicable diseases, the government of India should enhance efforts towards strengthening Primary Healthcare Centers (PHCs) with a robust referral system to the tertiary care. In addition, consistent processes and policies should be churned out to reduce out of pocket (OOP) expenditure that potentially pushes middle-income families into poverty. To this end, the government of India should plan the health budget to meet all planned and unplanned health care requirements. In this article, we attempted to elucidate the allocations and expenditures in the Health sector. We hope that this effort will initiate dialogue to enhance fiscal discipline and formulate coherent policies.

General Outlay of Health Budget for FY 2015-16

  • Health budget in 2015-16 was chalked out for the Department of Health and Family Welfare (DoHFW), Department of Health Research (DoHR) and Department of AIDS Control (DoAC) (Fig. 1a). In contrast, allocations to DoAC are included within the grants to DoHFW in the budget for FY 2016-17 (Fig. 1b)
  • Fig. 1a: Schematic of the Health budget outlay for the FY 2015-16.
  • digram-1


  • In comparison to the previous year, the allocation to DoHR was increased by 11.2% and 13.1% in 2015-16 and 2016-17 respectively (Fig 2). On the other hand, the allocation to DoAC increased from 1400 crores in 2015-16 to 1700 crores in 2016-17.

Fig 2: Allocations to DoHR (in crores)

  • The DoHFW governs a number of schemes within Health and National Health Mission (NHM). In general, Health sector schemes comprise of
    1. Central Sector Schemes (CSS),
    2. Central Sector-Family Welfare-Schemes of NHM and
    3. CSS for HR, Medical Education and Training.
    4. National AIDS and STD Control Programs have been added recently to the umbrella of Health in 2016-17. The operational costs of all central government institutions for health, medical colleges, hospitals, dispensaries, social marketing, IEC/BCC viz., fall in this category. Health sector funds provide for both Revenue and Capital expenditures of all the CSS programs.

  • National Health Mission on the other hand, comprises of health schemes aimed at system strengthening in rural (NRHM) and urban (NUHM) areas. NHM schemes were initiated with a view to achieve the Millennium Development Goals (MDGs) by improving health indicators like MMR, IMR, U5MR and TFR. Some of the vital schemes in NHM are Mission Indradhanush for immunization of children with a goal of 80% coverage, Janani Suraksha Yojana (JSY), Janani-Shishu Suraksha Karyakram (JSSK), Rashtriya bal Swasthya Karyakram (RBSK), Rashtriya Kishor Swasthya Karyakram (RKSK) for Reproductive Mother Child Neonatal Healthcare with recent addition of Adolescent healthcare (RMNCH+A) to the umbrella. In addition, communicable diseases, non-communicable diseases, mental health programs, care for the elderly and various other secondary and tertiary care facilities have been initiated under the overarching umbrella of NHM.

Major Heads and Allocations in Revenue and Capital Sections for DoHFW in 2015-16 and 2016-17

NHM was given the highest priority in 2015-16 with 77.4% (18,295 crores) of the total Revenue-Plan budget or 56.52% of total budget. Of this, 67.13% of NHM was allocated to states to carry out the underlying schemes (Table 1). Medical and Public Health on the other hand was allocated 32.52% (10525.42 crores) of the total budget (32,368.67 crores). The rest was divided between North-Eastern (NE) areas, family welfare, discretionary grants, secretariat viz., (Table 1).

The allocations to Health sector were increased by 14.42% in 2016-17 relative to the previous year. Funds to medical and Public Health sector and Family Welfare sector were increased by about 24% and 42% in FY 2016-17 compared to 2015-16. The capital outlay for family welfare and housing was reduced by 28% and 49%. The capital budget for Medical and Public Health, however, has been increased by 82% (Table 1).

Table 1: Allocations under major heads for FY 2015-16 and FY 2016-17


The Non-Plan part of the Revenue budget constituted about 24.16% of the total budget in 2015-16 and 23.1% in 2016-17. Interestingly, approximately 39% and 30% of non-plan component is allocated to salaries and supplies and materials respectively in 2015-16 (Fig. 2). About 12.6% is allocated to medical treatment and Central Government Health Scheme (CGHS) in 2015-16. In 2016-17, CGHS has been granted 11.6% of the non-plan component.

Fig. 2 : Break-up of the Non-Plan component of Revenue section of Health Budget(2015-16)


Savings or Unspent Funds in Previous Years

In India, the Public expenditure on healthcare as percent of GDP has increased from approximately 1.2% in 2015-16 to 1.3% in 2016-17, which is far below the OECD averge od 6.5%. Even with meager allocations, the healthcare system is not equipped to completely absorb the funds. For instance, huge amounts of funds to the tune of 3192.32 crores, 2715.67 crores and 3596.02 crores have been recovered at the end of 2013-14, 2014-15 and 2015-16 financial years, respectively (Table 3). In general, Medical and Public Health and Family Welfare sections of the Health department have been observed to perform poorly in fiscal terms. In addition, approximately 1000 crores in RCH flexible pool and 50 crores in Mission flexible pool were not spent in the financial year 2014-15.

Table 3: Savings or unspent funds in last two financial years


*BE- Budget Estimates

Concerns and Challenges in Health Care System Due to Poor Fiscal Discipline

A number of issues have to be addressed to improve the financial allocation efficiency and absorption capacity of the health care system in India.

  1. The most prominent concern is the lack of real time knowledge of the flow of funds.
  2. Delay in furnishing utilization certificates by the concerned departments needed to track the expenditures, leads to poor fiscal planning.
  3. A lag in transferring funds from the state treasury to health societies by 5-6 months deprives the societies of the much needed and allocated funds.
  4. Lack of trained work force at PHCs to implement high priority schemes like geriatric care, mental health programs, mass disease screening and diagnostics.
  5. Lack of cGMP compliant PSUs to manufacture sera/vaccines which are otherwise purchased from pr ivate sector.
  6. Unanticipated cost-escalation in flagship schemes.
  7. In view of the fatal epidemics and natural calamities occurring across the world, healthcare disaster management has to be strengthened through appropriate allocations.
  8. Essential activities like free drugs and diagnostics, strengthening district hospitals, and sub-centres, Tribal sub-plans should be insulated from budget cuts.
  9. Disease burden of communicable and non-communicable diseases has to be addressed in a timely fashion through drugs, therapies etc., Otherwise, the entailing costs may disrupt planned interventions.
  10. Surveillance programs and intelligentsia in relevant institutes have to be strengthened to avoid internal leakage and draining of funds.


A bulk of the budget is allocated to states to carry out crucial schemes under NHM. However, approximately 10% of the funds are unspent at the end of each financial year. Also, approximately 20% of funds allocated to Capital section have been surrendered previously (Table 3). It is evident that these funds could be channeled to more vital schemes to provide maximal health coverage and to strengthen trained work force at grass root level. Finally, there is an urgent need to improve the fiscal discipline of states through concurrent monitoring and evidence based policies.  

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