In light of India’s recent events, we thought about looking at our healthcare system and expenditure. There’s a shortage of hospital beds, and people are reaching out to whoever they know to get a bed for a family member. Because of a sudden rise in cases, there was a sudden surge in demand for oxygen cylinders which could not be met by the supply. This has led to a rise in prices of oxygen cylinders as well black marketing.
Hospitals are overburdened, the staff is over-worked, there is a shortage of PPE’s and oxygen cylinders, people don’t have access to facilities even if they have the money. It’s a miserable situation…
It’s evident that India was not prepared for such a situation. But they couldn’t have prepared a lot in a short term. The healthcare system couldn’t handle the load because of years of lack of planning and funding.
India has a “multi-payer” healthcare model, which essentially means that both, public and private healthcare is available to the citizens. If you have money, you can easily afford the private healthcare. But what if you don’t? You approach public healthcare, which is almost entirely tax-funded by the government. Sounds perfect, except the government doesn’t spend as much money as it should on healthcare. In 2020, India merely spent 1.8% of their GDP on healthcare. And that’s during a pandemic year.
India’s Spend on healthcare as a % of their GDP
India’s expenditure on healthcare has been consistently low in the past. But these numbers don’t make much sense unless we compare them to other large economies. Let’s look at the expenditure of other countries as a percentage of their GDP.
Expenditure of various countries as a % of GDP
We can see that India spends lower than most countries on healthcare. Developed countries like USA, Germany, France, Japan etc. spend far more on healthcare than India. Among developing countries, especially in Asia, it can be observed that the spend on healthcare is on the lower side. However, India’s is even lower than other Asian countries like Bangladesh, Sri Lanka, Bhutan.
Spending money on healthcare isn’t just helping cure people’s illness. It’s an investment in the assets of a country. After all, human resource is of utmost importance to any country for development, performing services etc. It’s crucial especially for developing countries like India, because having a healthy population will strengthen human capital and increase the overall productivity. And all of this is directly linked to economic growth.
In any country, there are rich people and poor people. The rich people can afford private healthcare so they have adequate resources and access to proper healthcare. But it’s not affordable for the poor people. They have no choice, but to use public healthcare. Since public expenditure on healthcare falls short in countries like India, they don’t have adequate resources to cater to the poorer sections of the society. Consequently, expenditure on the health sector has higher returns in developing countries as compared to developed countries. And yet we spend much lesser than them.
Even in Healthcare, India needs to review how they spend their budget. The public spending on healthcare by both, the central and state government, is primarily towards revenue expenditure. This means that most of the money is being spent on paying the salaries and operating expenses rather than creating assets like hospital beds, ICU’s, testing facilities etc. only a small portion i.e. on an average 13% (for state) of the healthcare spending has been towards capital asset creation and development.
The capital expenditure by the central government on healthcare in FY22 is proposed to be a measely 3.39% of the total healthcare expenditure. This indicates that the budget for healthcare should be a lot more than it currently is as most of the money is used in meeting the operating expenses.
Where will we get this money from?
The budget reserved for defence ministry in FY22 is 6.5 times the budget for Ministry of Health. While expenditure on defence is strategic and crucial, India can’t divert all its resources towards it. In the long run, spend on healthcare and education will aid in the real development of the country.
According to a report published by WHO, a 10% increase in public health expenditure as a proportion of GDP would be associated with a 7% decrease in mortality rate, and a 4.14% decrease in underweight children under five years of age.
As of 2018, the average health expenditure per capita of the world was $1110.841. India’s, on the other hand was $72.83. This hasn’t got much to do with the fact that it’s a developing country because Brazil’s per capita expense was $848.39, Sri Lanka’s $157.47, Indonesia’s $111.68. And there are a lot of countries that have also spent a lot more than the world average. This is also reflected in their economic growth rate.
There is one doctor for every 1.455 Indians, assuming the current population of Indian to be 135 crore. This is much lower than WHO’s prescribed norm of one doctor for every 1000 citizens. This WHO norm allows the health sector to function effectively without too much stress. India is now facing the consequences of having such a low doctor to population ratio, especially in its rural areas.
There also exists a lot of disparity within the states of India. On the national level there are 0.55 beds per 1000 population. However, there are 12 states, which account for most of India’s population, who have an average much lower than this. These states include- Bihar, Gujarat, UP, Madhya Pradesh, Odisha, Maharashtra, Haryana etc. Bihar is on the lower end with just 0.11 beds per 1000 people. But it’s neighbouring state, West Bengal, has a much better average of 2.25 beds per 1000 population. When the pandemic began, India only had 19,398 ventilators. The government encouraged domestic manufacturing to prepare for the pandemic. The current number is not officially known, but considering the shortage we’re facing, it’s definitely not enough.
A direct impact of this can be seen in our fight against COVID. India is only able to test 5.5 persons per 1000 people as compared to 124.1 in Russia, 85.4 in Italy, 66.8 in UK, 17.9 in Iran etc. Everyone thought India had somehow avoided things getting too bad because of herd immunity. Schools had reopened, offices were functioning at almost full capacity, things seemed to be going back to normal. The second wave came unexpectedly and there was a sudden spike in the cases. India’s health sector was not prepared for this. Public healthcare didn’t have adequate infrastructure to take care of critical cases as they lacked ICU’s and professional staff. The number of people who require hospitalisation is more than the availability. The private sector which is out of reach for most Indians, is heavily burdened too. This has contributed to the healthcare system collapsing.
This was coupled with shortages. Shortage of ICU beds, ventilators, hospital beds, drugs (e.g.- remdesivir), oxygen cylinders etc. Many hospitals have become solely covid hospitals due to shortage of facilities. This is impacting non-Covid emergencies too. People who are fighting the disease at home are finding it hard to arrange oxygen. Scarcity is driving the prices high, pushing access to oxygen away from majority of population as they can’t afford it. Most of our healthcare facilities are dependent on bottled oxygen, which is facing shortage and supply chain issues.
The Modi government has aimed to raise the expenditure on public health sector to 2.5% of the country’s GDP by 2025. It’s still not quite there, but it’s a step forward. India cannot have an high-growth economic strategy without securing a sound health plan. As we battle Covid-19 crisis, the government needs to simultaneously focus on long term funding and development of healthcare infra. Because if anything, this was a wake up call…
The Echo-nomist 
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