States Outpace Centre in Healthcare Spending Growth

India's federal structure places the responsibility of healthcare primarily on States and Union Territories, with health designated as a State subject under the Constitution.

States are significantly increasing their healthcare expenditures, outpacing the growth rate of the Central government, as revealed in a recent report.

According to data from the Reserve Bank of India's study of State Budgets and the Union Budget, the combined healthcare allocation by all States and Union Territories surged from INR 2.3 lakh Cr in 2019-20 to INR 5 lakh Cr in 2024-25, reflecting a compound annual growth rate (CAGR) of 16.8%.

In contrast, the Central government’s healthcare allocation grew from INR 62,397 Cr in 2019-20 to INR 87,656 Cr in 2024-25, recording a CAGR of just 7%.

According to a data analyzed by Businessline, this robust growth by States has shifted their contribution to total healthcare expenditure from 79% in 2019-20 to 85.2% in 2024-25, showcasing their increasing role in funding healthcare across the country.

State-Wise Allocation Trends

Healthcare spending among States varies based on individual policies, priorities, and infrastructure.

Southern and Central Indian States, which already boast relatively strong healthcare frameworks, have seen newer regions such as Odisha, Rajasthan, and Uttar Pradesh stepping up investments in health infrastructure.

In 2023-24, Bihar (3.4%), Odisha (3%), and Chhattisgarh (3%) led in healthcare spending as a percentage of their Gross State Domestic Product (GSDP).

On the other hand, Tamil Nadu, Karnataka, and Punjab ranked at the bottom, allocating only 0.9% of their GSDPs to healthcare.

States such as Odisha, Karnataka, and Rajasthan demonstrated notable growth in healthcare expenditure for 2024-25, increasing their budgets by 26%, 19.3%, and 17.3%, respectively.

However, some States have reduced their healthcare allocations. Bihar, Maharashtra, and Uttarakhand slashed their healthcare budgets by 37.4%, 26.2%, and 15.3%, respectively, for FY25.

Experts point to populist schemes and spending on freebies as contributing factors that have overshadowed essential health expenditure in these regions.

Despite the increase in healthcare investments by States, India's overall health security remains inadequate.

A report in the Global Health Journal (June 2024) highlighted persistent issues such as low public health spending, high healthcare costs, and elevated out-of-pocket expenses, which continue to burden citizens.

The report emphasized that India's public healthcare expenditure—just 24.66% of total healthcare spending—is significantly lower than that of many countries with similar per capita GDPs.

The federal structure of governance and the varying priorities of State governments result in uneven spending on health across the country.

"Administrative structures and political dynamics in India strongly influence health spending. As health is recognized as a State subject, the responsibility rests heavily on State governments. This results in wide disparities in public health expenditure across regions depending on the political will and priorities of State administrations," the report stated.

With rising healthcare costs and the threat of future health crises, greater collaboration between the Centre and States is essential to ensure accessible and affordable healthcare for all citizens.

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