Health breaks into the economic mainstream
The past three weeks saw three key events in India’s economic and fiscal policy calendar. The Economic Survey of India was tabled in the Parliament on the first day of the Budget Session. Budget 2021-22 was presented on February 1; and the Fifteenth Finance Commission (FFC)’s final report was then tabled in Parliament.
While these may be seen as routine events, there was something unprecedented in their content — the focus on health. Health and well-being were the first of the six pillars in the finance minister’s budget speech. The Economic Survey has two chapters on health — a first. And then FFC report dedicates a chapter to health, and a sub-chapter to local body grants for health. Never has health been a centrepiece of India’s economic policy establishment. In fact, it has been conspicuous in its absence. These events mark health’s entry into the mainstream of economic policy.
The shift is undoubtedly shaped by the Covid-19 pandemic, which demonstrated that a health shock can wreck the economy. The Gross Domestic Product (GDP) is expected to contract by 7.5% in 2020-21 due to the impact of the lockdown on jobs and businesses. Covid-19 unearthed the deep, but often invisible and unacknowledged, link between health and the economy. Though Covid-19 hastened the realisation, there was growing acknowledgement of health’s importance for the economy prior to it. FFC’s interim report highlighted the centrality of health for productivity and growth-enhancing human capital.
There are two key implications of this shift. First, increasing, policy importance will be accorded to health as it starts getting viewed as “human capital investment”, not merely social sector expenditure. The Economic Survey and FFC both highlight this point, and outline the multiplier effect of government health spending on growth. Greater resource allocation for health will follow the shift in thinking. The 2021-22 Budget underscores the point. Budgeted expenditure on health increased by 75% to over ₹1.2 lakh crore, even after excluding allocations for drinking water and sanitation.
Second, there will be greater scrutiny and thinking around how and where funds are spent, with the ministry of finance pushing for efficiency and increasing utilisation of allocated funds. Health policy and government spending have often prioritised cure, and had a disproportionate focus on secondary and tertiary care. Though the National Health Mission (NHM) is correcting the balance, an economic lens of efficiency can further push the preventive, promotive, and primary care components.
Two examples highlight the shift. One, there is a broader conception of health and well-being in Budget 2021-22 and this includes drinking water and sanitation, both key for preventive health, with far-reaching impact. Contaminated water and poor sanitation are linked to the transmission of diseases such as diarrhoea, cholera, and dysentery. They also contribute to malnutrition. The allocation for drinking water and sanitation has increased over four-and-a-half times from ₹21,000 crore in 2020-21(BE) to ₹96,000 crore in 2021-22(BE), including FFC grants. Further increases in government health spending will still be required, but with a concurrent focus on systemic efficiency.
Similarly, both FFC and the Economic Survey highlight the need to further strengthen the focus on primary care, typically under-consumed and under-provided. The former recommends primary health expenditure be two-thirds of total health expenditure by 2022. The finance ministry has accepted FFC’s recommendation for local government grants to improve primary health service provision. Prioritising efficiency and systemic focus on determinants of health will be as important as an increase in resources allocated for health.
There is a long road ahead to building a robust health system. Recognition of health in the economic mainstream is not the same as sustained policy focus and resource allocation. It is certainly no guarantee of implementation of lofty goals, which require solving tricky governance and administration challenges. However, recognising and prioritising health is an important gesture by the economic and fiscal policy community. It would serve it well to internalise this lesson.
Anurag Kumar works at NITI Aayog on health economics and financing
The views expressed are personal
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