Greater equity and stability in the global health systems is still based on public financing. In India, health spending by the government has grown steadily in the last ten years but it still stands below 2 percent of Gross Domestic Product (GDP) (National Health Accounts, 2026). According to the recent budget estimates, the allocation to health has been increasing in the absolute terms but the proportion of the GDP spending on public health is not yet at 2.5 percent of the National Health Policy, 2017. (NDTV, 2026)
This deficiency is not the case of the neglect of policy. Instead, it highlights the complexity of structure in fiscal prioritization in a large, federal, and developmentally diverse economy. There is limited fiscal space when it comes to infrastructure development, education, defence and social welfare (Financial Express, 2025). With India experiencing demographic transition and increasing burden of non-communicable diseases (NCDs), as well as growing demands of citizens on quality care, there is a need to invest in health on a long-term basis as a social requirement, and as an economic developmental strategy. (World Health Organization [WHO])
Trend in the Health Spending in India
The public health spending in India has taken a slow growth trend. Since it was about 1.3 percent of GDP in 2012-13, it has risen to about 1.6 percent in 2018-19 and has been in the range of almost 1.8-2.0 percent in the recent years (National Health Accounts, 2026). Such wins are indicative of steady, but quantitatively determined, fiscal investment in reinforcing the health sector.
However, it is still incremental and not transformative growth. The aim of 2.5 percent is not met and inflation, population growth and rising healthcare demands moderate the gains of the real spending (Financial Express, 2026). With increasing life expectancy and the focus of service delivery on chronic disease management, it is probable that fiscal pressures will increase.
The issue with policy, however, is not only the need to increase allocations on a nominal basis but an increase on the health component of GDP via medium-term fiscal planning. The association of the rise in expenditure with quantifiable health outcomes like a decrease in out-of-pocket spending and service cover can help make sure that fiscal growth is reflected in a practical fortification of the system. (India Spend, 2024)
Public Spending and Out-of-Pocket Burden
The total amount spent by India on health is around 3.8 per cent of GDP and the amount spent by the government is less than half of that (National Health Accounts, 2026). A large percentage of the expenditure is still transferred to the households in terms of out-of-pocket payments. Even though the out-of-pocket spending has decreased over the past years, it was high in comparison with international standards. (National Health Accounts, 2026)
The Ayushman Bharat-PM-JAY has increased covers of financial risks among the economically deprived groups of people (India Spend, 2024). Access to hospital services has also increased because of the availability of insurance that has minimized catastrophic spending by households. (India Spend, 2024)
Nevertheless, the financing based on insurance has to be supplemented by infrastructure and human resource investments. The payment of reimbursements is not enough to cover the poor quality of district hospitals, lack of well-equipped health centres on primary level, and the deficit of specialists. Policy arguments are consequently being changed as to the size of allocation to one of allocation effectiveness (Express Healthcare, 2026). Empowering primary and secondary care has remained to be the main focus of the translation of financial coverage to service access.
Rural-Urban Inequality in Healthcare Access
Geographical imbalance is one of the characteristics of the Indian healthcare system. The shortages of specialists, low diagnostic capacity, and ineffective supply chain systems are present in rural and semi-urban areas (BMC Health Services Research, 2019). The literature on Community Health Centres (CHCs) specifically in such states as Uttar Pradesh indicates the general shortage of specialists, as well as significant maldistribution. (BMC Health Services Research, 2019)
A significant number of CHCs do not have the required number of surgeons, physicians, paediatricians, and obstetrician-gynaecologists (BMC Health Services Research, 2019). The Gini coefficient is one of the inequality measures that proves that there are important inter-district inequality in the number of specialists deployed (BMC Health Services Research, 2019). This maldistribution undermines the referral chain, forces rural patients to travel long distances, and creates overdependence on the tertiary hospitals in the cities.
The difference between general scarcity and inequitable distribution is significant. The inequality in posting increases spatial inequality, even in areas where specialists are present (BMC Health Services Research, 2019). The balance needs to be enhanced with corrective measures such as rational transfer policy, incentive programs on rural services, and open workforce planning.
Although urban centres are resourceful, they get congested and strained by tertiary institutions. Neither the country rural deprivation nor the city congestion can be eradicated without the reinforcement of the secondary infrastructures at district level. Balanced regional investment should therefore be one of the main fiscal priorities. (Financial Express, 2026)
The Role of Technology in Enhancing Health Governance
The digital revolution in the healthcare sector in India is one of the most important structural changes in the recent times. The Ayushman Bharat Digital Mission (ABDM) and eSanjeevani telemedicine services are just some of the initiatives that point to the shift to integrated digital governance. (Ministry of Health and Family Welfare [MoHFW], 2023)
Telemedicine has increased the accessibility of specialists to underserved districts and eSanjeevani has enabled more than 100 million consultations (MoHFW, 2023). Teleconsultations have minimized travel time and costs, which indirectly result in out-of-pocket costs, and enhanced the continuity of care in remote areas. (MoHFW, 2023)
Biased tuberculosis screening tools based on AI were shown to be highly diagnostic in resource-limited settings, assisting in the lack of radiologists and enhancing the timely detection (The Lancet Digital Health, 2020). The purpose of the electronic health record integration under ABDM is to provide the ability to interoperate among the facilities, curb multiple tests, and enhance patient tracking.
Digital transformation should however be considered as an efficiency multiplier and not a replacement to the public financing. Technology is an improvement of service coordination, referral management, and data-driven decision-making, but it requires a well-functioning infrastructure, trained staff, and well-funded facilities.
The experience of other countries, including the Universal Coverage Scheme of Thailand, demonstrates that the digital referral systems can best be used when combined with long-term investment in district hospitals and primary care. (World Bank, 2019)
In the case of India, the productivity of the public spending can be enhanced through the institutionalization of digital tools as governance tools, such as referral tracking, workforce mapping, expenditure monitoring, and performance-based financing.
Digital health systems when integrated into hardened district infrastructure can enhance transparency, decrease inefficiencies and increase equity- so every added percentage point of GDP spent on health will have a quantifiable system wide effect.
Local Innovation: The Case of Khan Sir Hospital
Khan Sir hospital in Patna, Bihar, has gained publicity in providing diagnostic services at very low costs- blood tests at INR 7/- and ECG tests at INR 25/- (Times of India, 2026). It has OPD and emergency services and is further expanding to dialysis and blood banking. (News Gram, 2026)
This initiative is an indicator of the changing expectations of people regarding healthcare affordability and transparency in healthcare pricing. It shows how the institutional patterns of communities-oriented intervention can disrupt the norms of cost and increase access. (Awaz The Voice, 2026)
However, the sustainability and scalability are issues to keep in mind. The models of ultra-low pricing demand financial support and integration into the regulations. Although, these types of programs demonstrate the innovation at the local level, they do not substitute the systemic funding of the population. They, instead, emphasize on the need to empower regulatory systems that promote innovation and protect standards of quality.
The Way Forward: Strengthening Public Health Financing
Increase in public spending on health should include institutional adjustment and not an episodic budgetary increments. In the first place, India will need to have a medium-term financing plan, which will help it to achieve the 2.5 percent target of GDP over time, with expenditure tied to quantifiable outcomes such as the reduction in out-of-pocket spending and an increase in services at the district level. Second, specific capital inflow should be directed towards district hospitals and secondary care units in order to eliminate the distortions in referrals and decrease the congestion at the tertiary level. Third, PM-JAY expansion of insurance has to be in line with the infrastructure capacity and quality standards. Accountability can be improved via performance-related financing. Fourth, fiscal planning should be incorporated with digital governance systems to enhance transparency and resource use. Lastly, preventive and community-based services (especially of NCDs and maternal health) should be given the priority to lower the pressure of expenditure in the long term. Collectively, these actions change the policy debate of incremental spending to one of systemic reform.
Conclusion
The public health spending of India is less than 2 percent of GDP, although there are gradual improvements (National Health Accounts, 2026). Although, budgets and conflicting priorities influence allocations, financing of health is at the heart of inclusive development and sustainable economic growth.
The growth of insurance, the process of digital modernization, and the local innovation are meaningful improvements. Nonetheless, the results of the international standards, as well as the domestic health demand, suggest that continuous growth of public investment in conjunction with the reform of governance is required to make it reach a fair access. (OECD, 2025)
The gradual yet systematic growth to 2.5 percent of the GDP, pegged in quantifiable outcomes and institutional fortification, provides a practical and realistic way forward. Health spending cannot be perceived as an expenditure but as a human capital and national productivity investment.
Going beyond the 2 percent mark is thus a fiscal goal not just in name only, but also in refocusing the priorities of development in India at a time in which economic resilience is built on health resilience.
References:
- Business Standard. (2026, January 19). Budget 2026: With under 2% of GDP, India’s health spending lags global norms.
https://www.business-standard.com/health/budget-2026-india-health-spending-under-2-per-cent-gdp-lags-global-norms-126011900402_1.html - NDTV. (2026, January 19). Union Budget 2026–27: Indian health leaders urge government to boost public spending.
https://www.ndtv.com/health/union-budget-2026-27-indian-health-leaders-urge-government-to-boost-public-spending-10786069 - Times of India. (2026, January 16). Blood test at Rs 7, ECG at Rs 25: Inside Khan Sir’s low-cost hospital in Patna inspired by his mother.
https://timesofindia.indiatimes.com/etimes/trending/blood-test-at-rs-7-ecg-at-rs-25-inside-khan-sirs-low-cost-hospital-in-patna-inspired-by-his-mother/articleshow/126560797.cms - NewsGram. (2026, February 7). Khan Sir’s hospital brings low-cost medical services to underprivileged families in Patna.
https://www.newsgram.com/bihar/2026/02/07/khan-sir-low-cost-hospital-bihar - Financial Express. (2026, January 20). Union Budget 2026–27: Healthcare leaders urge govt to raise spending, fix rural gaps.
https://www.financialexpress.com/business/news/union-budget-202627-healthcare-leaders-urge-govt-to-raise-spending-fix-rural-gaps/4112870/ - Express Healthcare. (2026). Union Budget 2026: Healthcare leaders call for prevention, innovation & reform.
https://www.expresshealthcare.in/news/union-budget-2026-puts-healthcare-innovation-and-access-in-focus/452589/ - Ministry of Health and Family Welfare. (2023). eSanjeevani: National telemedicine
service report. Government of India. https://esanjeevani.in/ - Business Standard. (2026). Budget 2026: With under 2% of GDP … (includes data from National Health Accounts and Economic Survey).
https://www.business-standard.com/health/budget-2026-india-health-spending-under-2-per-cent-gdp-lags-global-norms-126011900402_1.html
* The information and opinions shared in this article are solely those of the author. Our website does not take responsibility for the accuracy, completeness, or suitability of the information, images, or statistics mentioned. Readers are encouraged to verify any claims independently.
