Mumbai: The wish list for India's health sector, particularly for greater investment, has always been long. It was generally felt that as Covid-19 advanced on us, the destruction it left behind would have led to increased health spending and a greater focus on health, particularly from federal budgets. But, in the Union Budget 2022-23, that has not happened.

The wish list for the health sector is long, from a fundamental strengthening of the healthcare delivery system, primary and secondary healthcare centres, doctors, equipment, disease surveillance systems that would help you spot a pandemic and perhaps respond to it better across the country.

Has the Union Budget not responded to a need for better healthcare, even as we are in the midst of a pandemic, because the pandemic itself is now receding or, is there is a belief that the health system will take care of this on its own? Or, perhaps with greater private sector participation?

To discuss what India's healthcare system needs, budget spending, and future steps to improve healthcare, IndiaSpend spoke to K. Srinath Reddy, president of the Public Health Foundation of India, and Yamini Aiyar, the president and CEO of the Centre for Policy Research.

Edited excerpts from the interview:

What came in the budget was not in the league of what you had written pre-budget. So tell us more about that.

Srinath Reddy: Well, my pre-budget comments were more in the nature of a prayer rather than a prediction. But I did write, even after the budget, expressing a certain amount of disappointment that we did not see a much greater rise in the allocation for health. And in particular, for primary healthcare, and for investment in human resources in health. Compared to the previous year's budgetary estimates, the allocation to health appears to have gone up by 16%. But when you look at the revised estimates, the current allocation is only [about] 0.6% over the revised estimates, which is a miniscule raise. This shows that despite the capacity of the health system to absorb increased allocations, we have not actually allocated more. And as a percentage of the total budget, the health component is only 2.26%, which shows a small decline compared to the previous couple of years.

When you look at the last two years, only 69% to 73% of the funds sought by the Ministry of Health and Family Welfare were granted. I don't expect every ministry to be granted everything that they asked for. But there have been certain disappointing features. For example, the National Health Mission, which is the primary vehicle for advancing many health programmes in the country, and is principally responsible for primary healthcare, has not really been given the attention due.

Overall, I would really say at this point in time that we have had a mixed budget--stronger infrastructure and to some extent on technologies, weak on human resources and relatively inattentive to primary health.

Yamini, what are your takeaways in terms of where this is going?

Yamini Aiyar: Thanks. I think I echo a lot of what Dr Reddy said. I think this budget was a tough balancing act for the finance minister. At one level, some amount of fiscal space had opened up which was, I think, somewhat unexpected if you compare with projections. For the government, net revenues were far more buoyant this year than they had anticipated. But of course, extremely disappointing in the projections for disinvestment of Rs 1.75 lakh crore, where the better part remains unmonetised or not collected by the government. So, in that sense, the overall revenue pool available for the government was somewhat limited.

In that context, what are the kinds of expenditure choices we ought to prioritise? I think two very important things happened: There was a huge expansion in government expenditure in the first year of the pandemic, going up to about 17.78% of GDP [gross domestic product]. Last year's budget had expected some amount of expenditure contraction for this year, which was by a whopping 1.5% of GDP. The fiscal deficit comes down from 9%, to about 6.9%. So some amount of readjustment happens there. Expenditure contracts from 17.78% of GDP at the start of the pandemic, down to about 15.4%, if I'm not wrong, into the coming fiscal.

A very clear choice has been made to prioritise capital expenditure over investments and human capital, as the pathway forward to enhance recovery and get us back onto a growth path--and in some ways, the articulation of the 'Amrit Kal' for the next 25 years because that was a very central part of the budget.

If you compare with revised estimates of this year to budgeted estimates of the coming year, the National Health Mission budgets are about stagnant. A fair amount of non-Covid-related health activity had been under prioritised over these last two years, for example, in reproductive and child health investments, and you see it also in nutrition investments, in face of the pressures on the health system. And the fact that we are also not investing more broadly in disease surveillance, epidemiological aspects, preventive and promotive aspects of health, all of which are critical, as we have learned from the consequences of the pandemic. So in that sense, this budget is very much a choice of infrastructure and for growth rather than human capital and human productivity for growth.

An economy like India leans heavily on capital expenditure, infrastructure in this case, which obviously creates jobs, which creates economic activity, which also acts as a spur to other activity, let's say private investment, which has slowed down. Can all of that, in some ways, help support the investments that we need for health--because people are able to afford better care? Is there a link in some ways?

Yamini Aiyar: Well, I think you don't have to look very far. But to map out the last 30 years of India's economic growth story after liberalisation, and in particular, that phase of 2004 till the global financial crisis, when capital expenditure was relatively high, we were on a growth phase. Some amount of investment through the National Health Mission had led to an expansion of the health system. But all in all, our overall investment in strengthening human capital, specifically health and education, has been limited. We haven't learned lessons of where we needed to invest based on our own rich experience of growth. We haven't learned lessons of where we need to invest based on our experience of the hardships we've had to suffer as a consequence of Covid.

Just one data point: We know that growth resulted in an overall lifting of a large number of people out of poverty. But 50% of those who are lifted out of poverty in that phase, particularly in the 2000s, are what the World Bank describes as 'vulnerable' populations. So one income shock pushes you back into poverty. And we also know that the greatest income shock that most households are vulnerable to are health shocks. So without investing in primary health, you are essentially not creating enabling conditions for all Indians to be equal participants in the growth story. I don't think we should be working towards an unequal India. We should be working towards an equal India of equal opportunity and equal growth.

How does it work between the central and the state governments in terms of budget allocations?

Yamini Aiyar: This is where it starts getting complicated. At one level, it is true that health is a state subject and for very good reason. If one were to just look at the first principles of public finance, I will say that a significant proportion of healthcare services are to actually be completely decentralised to the local government level.

Our constitutional schema has what many economists have called the sort of 1/3-2/3 problem where the bulk of fiscal monetary powers rests with the Centre, while the bulk of the expenditure powers rests with the state. And while there is a very clear public finance and accountability logic for why health should be a state subject--the best kind of accountability is when the government is close to citizens, given the dynamics of our fiscal architecture. But the question of where should the money come from remains a central one. And in this context, the Finance Commission, through a process of tax devolution, ensures both vertical as well as horizontal equity across the states of India.

Now, over time, for a host of reasons, the instrument of centrally sponsored schemes, which is essentially a 'one-size-fits-all' model, designed and financed by the central government, has become a critical mechanism through which elements of government functioning, like health are financed by the Centre. One of the consequences of this is that while state governments--through their own resources (primarily tax devolution and their own tax revenues)--spend, the bulk of that is tied to wages. These [centrally sponsored] schemes have now become the primary source of non-wage finances, for infrastructure provision, for purchase of equipment, and so on and so forth. In fact, we saw over time a fair amount of substitution too, as states substituted for wages through these national schemes in order to maintain their fiscal responsibilities .

One of the consequences of this is that the Centre has used the centrally sponsored schemes as an interesting vehicle to sort of control almost line-by-line expenditure at the state level. The National Health Mission began with five flexi pools of broad money that states could use based on plans that made sense for them. All very logical. This has today gone from five line items to 2,000 line items and constraints of accountability have ensured that it's very difficult to move monies according to needs and priorities across the line items as given by the Centre.

My colleague Avani Kapoor at the Accountability Initiative has traced just the movement of a single file across the different desks in districts in Uttar Pradesh for the National Health Mission and found that a single file goes to 32 different desks before it gets cleared for the treasury to release money for expenditure at the ground level. So all of this creates a context where states argue rightly that they are losing flexibility to align expenditure to their own needs and priorities. But at the same time, they're deeply dependent on central funding. So when the Centre says 'Well, okay, health is a state subject, go find funds on your own,' the states complain and they want that centrally sponsored scheme because now they've got used to it. That is how the federal balance has been maintained thus far. And it also results in a lot of 'blame gaming'. It opens the window for the Centre to tighten control over expenditure, undermining the ability of states to effectively spend according to needs and priorities, creating a blurring of lines of accountability.

And most importantly, I think from the long-term perspective of our health system, we know that in India, regional inequality is significant. The health needs and pressures on Bihar are very different to the health needs and pressures of Tamil Nadu. So we do have to move towards much greater flexibility and creating a context where states can plan to spend according to their needs. That means investing in planning capacity. Unfortunately, in the Centre-state tussle, rather than investing in planning capacity, the Centre has chosen to invest in its own capability to tightly monitor line item expenditure, which ultimately undermines implementation and accountability at the grassroots. Until we don't get out of this very fundamental administrative conundrum and the larger federal context in which this conundrum has unfolded, we will always see a world in which allocations don't always get spent in the way that they ought to get spent.

Dr Reddy, tell us about how you are seeing priorities going for the next couple of years? And where could we or might we find the funds to support them?

Srinath Reddy: Firstly, let's prepare the frame under which we ought to decide the priorities. We have made a commitment to universal health coverage, which means that you need capacity at all levels of care, but particularly at primary healthcare. You also need good connectivity between the different levels of care. Even in the National Health Policy, we say that about 67% of the health budget will go to primary care; the same thing was recommended by the 15th Finance Commission. Now, we have not seen that happening. And the principal vehicle for primary care, which is the National Health Mission, has still received only about 42% of the whole overall health budget, down from 48%. So unless the National Health Mission is strengthened, we are not likely to see strong primary healthcare. Urban primary healthcare has not even been addressed in any meaningful manner. We do need a lot more emphasis than has been given.

District hospital strengthening becomes very important for connecting it well in a bi-directional manner to primary care. Perhaps some of the district hospital strengthening will come by way of infrastructure through the health infrastructure mission, the PMA BHIM [Prime Minister's Ayushman Bharat Health Infrastructure Mission], but we'll have to wait and see. Also the connectivity will possibly come from the Digital Health Mission. These are the two missions that came up in September and October.

But mere infrastructure, and digital technologies are not going to provide the human resources that are needed to make them operational. Without adequate investment in the human resources for health, with a multi-layered, multi-skilled health workforce, all the investment in infrastructure, and digital technologies will only provide a chariot without wheels. And we have not seen much of that. There is a very minimal increase in the National Health Mission component of human resources. But we need an extensive increase in human resources both at the primary level, and even at other levels. There is a 63% shortage of specialists in community health centres.

Since you have been talking about the economy, it's not mere capital expenditure and infrastructure that's going to push up the economy. You need jobs. And the healthcare sector, which is very short of human resources, is one area which can absorb a large number of jobs with good effect, both on the health outcomes as well as on the economy. So we ought to have been talking about how to strengthen district hospitals, make them into training centres for doctors, nurses and allied health professionals, by way of introducing new training institutions around upgraded district hospitals in states and districts which are underserved at the moment. So there are many things that ought to have been done.

Of course, we have seen some welcome things like an emphasis on mental health, but that, again is tele-health. But without primary healthcare services being strengthened, they're only to reach one part of the population, not everybody. We need a much more cohesive framework for universal health coverage. To give you an example, the Pradhan Mantri Jan Arogya Yojna, which is supposed to provide secondary and tertiary care in hospital settings and provide financial coverage for 40% of the population from the care they get there, could only spend half of what they were allocated last year and the same allocation continues. They could not spend the money partly because the pandemic prevented some of the services being rendered, but also because the presence in smaller towns and villages is much less. You are overdependent on the private sector, which failed to deliver even vaccines in tier II and tier III towns and cities. So, you have to expand your public sector capacity, particularly the district hospitals. We need a very cohesive connected healthcare system between all three levels. But while we have bits and pieces coming up, we do not see the connection very clearly.

One of the other points that you've talked about is the frontline workers. Tell us whether we need more investment or better organisation for these workers.

Srinath Reddy: We need both. Let's remember that the ASHAs [Accredited Social Health Activists] were introduced when the agenda for primary care was much more restricted to maternal and child health, [and] to some extent for infectious diseases and nutrition. That was a very limited agenda fashioned after the Millennium Development Goals. But now, we are talking about comprehensive primary healthcare. It has been said that previously primary healthcare was only addressing 15% of the health needs, even at that level. Now, we are talking about adjusting almost all of it, but with one single ASHA, one or two auxiliary nurse midwives [ANMs]. You need a far larger number, if you want to address non communicable diseases, mental health, all of these. And of course, better skilling as well. But at the same time, we definitely need them to be part of the health system. You can't always treat them as unpaid or underpaid volunteers and expect them to work, especially during public health emergencies. I think we ought to pay them more. We ought to organise them more, we ought to skill them more. But definitely our primary healthcare services ought to be better organised. Rural primary health owes a lot to the ASHAs.

In urban areas, we do not have a similar mechanism functioning. So unless the National Urban Health Commission is activated strongly, we are going to see deficiencies. And we saw that even during the Covid period. The initial case detection by symptom-based surveillance of households, early referral for testing, contact tracing--all of these required the primary healthcare workforce. We left the contact tracing to policemen. That's not the way public health should be organised. So we do need to invest much more in the frontline health workers. And when technology-enabled, they can do an excellent job. So upgrade their skills as well.

If we were to now look ahead, whether or not there's another Covid-19 wave, how do you see the states, Centre and citizens really adapting to the current healthcare system with all its existing or lack of resources?

Srinath Reddy: Well, I think, over the next few years, we ought to see, definitely the Centre and the states trying to enhance their investments in building up a much more capable healthcare system. That's my hope. Whether it will happen, particularly if Covid fades away with Omicron, or even the next variant is relatively mild, and we start focusing on other things, and health slips back again, onto the backburner, I cannot really say.

I believe if the lessons have been learned, then we ought to continue our investment in health. I am really hoping that there would be a much greater interest in expanding our human resources for health, particularly by training a large number of people who are non-physician healthcare providers, but are technology-enabled for primary care. Given that we also have declared that we are going to have an Atmanirbhar philosophy, we do need to invest in having a large capacity, building initiatives for drugs, vaccines and equipment, and much greater amount of [capacity and investment] in public health--not just disease surveillance, but also in terms of ensuring that there are competent health information systems that we can depend upon. And there are enough well trained public health personnel who can deliver a large number of disease control programs, as well as health promotion.

A lot of the healthcare expenditure by people is in the private space. People spend out of pocket. And as you pointed out, Yamini, some of the biggest shocks that happen are health shocks and people slip back into poverty. Given this, is it right to argue that in going forward, the onus of taking care of people's health lies more on the private sector, and therefore, we should really be focusing our energy and attention on that?

Yamini Aiyar: Well, let me put it this way. If you just look back at the pandemic, from March 2020, before the number of cases actually hit a large number in India, there was a very clear consensus, particularly amongst the elites, that our health system, both public and private, was far too weak to respond to the enormous demands that Covid would place upon us. And when we looked westwards to what was happening in relatively better off countries, we immediately said, we need to lock down and look at the costs of that.

We locked down in March 2020, and saw the greatest contraction in our economy ever, and the costs of that on the poor are still being paid. The fact of the matter is that our starting point has been a relatively weak health system, both public and private. Both need to be invested in and expanded. But no country has effectively managed to provide equitable and inclusive healthcare to all following the goal of universal health coverage--which India has recognised as its own goal--without investing in the public health system. You simply cannot rely entirely on a private system to provide health, given the fact that the private system without effective regulation can be quite pernicious. And in fact, even with an effective health regulatory system, as we see in the US, it can be very pernicious. So we do need to ensure that we have effective investments in foundations, which can only be done through a strong public health system, and that we live up to the goal of universal health coverage. And we ensure that this is equitable and inclusive for all Indians. It's not going to work any other way.

As we look ahead, who is going to bell the cat as it were?

Srinath Reddy: The people will have to do it. I completely agree with Yamini that unless you have a strong public sector which can bring in the private sector as per need and opportunity, but with a well regulated framework of universal health coverage, we are not going to see good health being delivered to everybody. But, I believe if we actually bring the local bodies--the panchayats and the municipal corporations--in healthcare very strongly, then people-partnered public health will generate the momentum for reform. That will ensure that not only more money is allocated to health but there are also utilisation efficiencies with the right kind of priorities set, with a lot more accountability.

If you are asking who will bell the cat, I believe it will be the people who will have to exert pressure both on the state government and the central government by demanding services. The more we engage with the communities through the local bodies, and engage the community in designing and delivering health programmes, with adequate monitoring, then we are going to see a greater demand for a more competent and compassionate healthcare system.

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