As defined by the WHO, health financing refers to the “function of a health system concerned with the mobilisation, accumulation and allocation of money to cover the health needs of the people, individually and collectively, in the health system”.

TABLE 1. Health expenditures in Indian healthcare


The population of India in Billions

Total Health expenditure in millions

Public expenditure % of THE

Out of Pocket Expenditures (OOPE%) as per cent of THE











Source: Reddy, K. N., & Selvaraju, V, 1994; World Bank, 2017

The global evidence on health spending shows that – unless a country spends 5% - 6% of its GDP on health through government spending on health care, its primary health care need is challenging to meet. The total health spending of India is 4.7% of GDP, whereas the government only spends 1.3% of the total health spending GDP (National Health Policy, 2017). According to the latest National Accounts Report, The healthcare expenditure has increased since 2005 (Table 1.) above. The government health expenditure reached 29%, the out of pocket expenditures has reduced to 62.6% in 2016 (National health accounts, 2018). Hence, the Indian government needs around 1.32% of the added health budget to invest in health.


India, a country with a medical and public health budget of 1094.5 billion a population stands at 1.34 billion, highlights that the government spends around Rs 930 per person annually and, around Rs 78 a month and less than 2.6 Rs a day (Reserve Bank of India, budgets of 2018). In a country that relies mainly on individual out-of-pocket payments, about 17.3% (23.18 crore) of people in India spend higher than 10%, and 3.9% of people spend more than 25% of their income on health (World health statistics, 2018). It means if a person earns less than Rs 10,000 a month, have to spend at least 800 Rs of his income on healthcare, and some could have spent 2,000 or more a month on healthcare. The problem of growing catastrophic expenditure is the high healthcare cost, which is estimated to be one of the major contributors to poverty. (National health policy, 2017)

Money can be spent on equitable, efficient, and effective health care only when appropriate financing in all segments is used and healthcare services are affordable and human resources are in place. It is a fact that health is a state subject; it is essential to examine interstate differences in spending patterns.

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