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Is the Trend in Health Changing?

This article examines the allocations for health in the budget in the light of the commitments made in the National Common Minimum Programme and the trend in state governments' expenditures. The focus is on the National Rural Health Mission.

Is the Trend in Health Changing?

This article examines the allocations for health in the budget in the light of the commitments made in the National Common Minimum Programme and the trend in state governments’ expenditures. The focus is on the National Rural Health Mission.


n the union budget for 2006-07 many of the United Progressive Alliance (UPA) flagship schemes like the Bharat Nirman for the augmentation of rural infrastructure, the rural employment guarantee, the Sarva Shiksha Abhiyan, the National Rural Health Mission (NRHM), the midday meal programme, the urban renewal mission, etc, have, partly at least, got the booster dose that was expected. Table 1 presents the union budget data for selected key ministries for the years 2004-05 and 2006-07, which reveals the trajectory of emphasis in the latest budget. As can be seen, there are much larger allocations for rural sectors like agriculture and rural development, and social sectors like health, education, women and child development, where the thrust is also on rural areas via the flagship programmes. While one sees large increases for the social sectors this certainly does not mean enough is being allocated to these sectors to make a radical transformation. In fact public expenditure on health and education, taken together, including state government spending, must constitute 9 per cent of gross domestic product (GDP), as per commitment in the National Common Minimum Programme (NCMP) of the UPA government.1 So we are still a phenomenal distance away from realising this goal and the government has to work much harder at raising the additional resources required. In this article we examine the allocations for health in union budget 2006-07 in the light of the commitment made in the NCMP and the trend in the state governments’ expenditures on health. The focus is on the NRHM.

Health Budget

The NCMP has committed to allocating 3 per cent of GDP as public expenditure on health, a target to be reached before the current UPA government’s term ends. Thus by 2008-09, assuming the current growth rate, GDP at current prices is likely to be Rs 52,000 billion and 3 per cent of this would be Rs 1,50,000 crore. The latter is nearly five times of what the state and central governments currently spend on health, and hence a very daunting target to achieve.

Health, like most social sectors, is a state subject and the contribution of the state governments to health spending is between 80 and 85 per cent of the total public expenditure on health.2 While in recent years the union government has substantially hiked its contribution to the health budget, increasing at 30 per cent per annum,3 in itself, this makes a very small impact on the overall health budget. Presently the health budget of state and central governments combined is less than 1 per cent of GDP (Table 2). To reach 3 per cent of GDP both the central and state governments have to more than triple their budgets. As things stand today, the central government has shown that its capacity is limited to increasing its contribution by about one-third each year, which is only 11 per cent of the targeted increase. The state governments’ capacity seems to be restricted to an annual increase of about one-sixth, which is a mere 5 per cent of the target expected (Table 2). Such tardy progress in allocations for health makes the target of achieving an allocation of 3 per cent of GDP by 2008-09 seems like wishful thinking. To add to this miserable scenario, at a recent NRHM meeting, the union health secretary told us that “we don’t have the capacity to absorb even the current level of funding so what is the point in increasing the budgets further”. If the health secretary of the country thinks like this, then the progress in the health budgets of the states does not sound that pathetic. It is true that even the little that is allocated is not fully utilised in a number of health programmes, but this does not reflect lack of absorption capacity. It is more reflective of the incapacity of the health administration at the central and state levels to implement the programmes, as well as lack of faith in not providing autonomy to local level administration and local governments in planning the programmes and utilising the allocated funds.

Tables 2 and 3 indicate recent trends in public health spending. Table 2 reveals that the central government’s own expenditure is increasing rapidly, whereas its grants to the states have shrunk; the state governments’ health spending is stagnating and, as a consequence, the overall public health expenditure remains below 1 per cent of GDP.

Table 3 looks at some of the key programmatic allocations in the union health budget. Here we see that traditional sectors like hospitals and medical education and family planning services are now receiving

Table 1: Key Ministry Allocations 2004-05 and 2006-07

(Rs crore)

Ministry/Dept 2004-05 Actual 2006-07 Budget Per Cent Change
Agriculture 5953.25 9213.65 55
Fertiliser 15944.91 17385.81 9
Food and PDS 26132.59 24595.80 -6
Rural development 13873.26 24047.56 73
Health and FW 8086.46 12993.77 61
Education 13097.99 24114.99 84
Women and child 2447.94 4852.94 98
Drinking water 3283.52 6001.70 83
Social justice and empowerment 1404.53 1817.60 29
Urban 4036.69 3637.43 -10
Energy 9354.05 12106.92 29
Industry and minerals 17654.01 20376.77 15
Road transport and highways 7248.15 13741.31 90
Home 14342.11 18018.41 26
Space 2533.21 3610.00 42
Atomic energy 4256.96 5505.08 29
Defence 89714.01 104123.84 16
Pensions 24085.45 26820.30 11
Interest payments 130958.22 145822.60 11

Source: Annual Financial Statement 2006-07, Ministry of Finance, Government of India, New Delhi, 2006.

Economic and Political Weekly April 8, 2006

1334 Economic and Political Weekly April 8, 2006

a smaller chunk of the health budget in comparison to the “new” sectors like reproductive and child health (RCH), HIV/AIDS, immunisation (especially pulse polio). From union budget 2005-06 onwards the NRHM has hijacked the RCH and family planning budgets, giving a boost to rural health allocations. But the question here is: Will the enhanced rural health budgets via the NRHM address the demand side issues of rural health provision, which is primarily access to reasonable medical care? The NRHM document and the NRHM budget data in Table 4 do not provide any indication that this will happen. The focus of NRHM will continue to be the old family welfare and disease control programmes, that is, family planning services, immunisation, antenatal services, and selected disease surveillance and epidemic control. The NRHM, along with RCH 2, adds a new focus on universalising institutional deliveries and strengthening reproductive health services. The latter was also the goal under RCH 1 but was not realised.

National Rural Health Mission

NRHM is the health flagship programme of the UPA government. The preamble of the NRHM document states, “Recognising the importance of health in the process of economic and social development and improving the quality of life of our citizens, the government of India has resolved to launch the National Rural Health Mission to carry out necessary architectural correction in the basic health care delivery system… The goal of the mission is to improve the availability of and access to quality health care by people, especially for those residing in rural areas, the poor, women and chil-dren.”4This goal will be achieved by strengthening the three levels of rural healthcare

– the sub-centre, primary health centre (PHC) and community health centre (CHC). At the village/hamlet level, a health worker called Asha (accredited social health activist) will be appointed who will be the link worker for rest of the rural public health system. Additional resource allocation and upgradation of the facilities at each level have been planned under the Mission. Table 4 indicates the major programme heads under which resources for the NRHM have been allocated. This is where the problem lies. The budget heads for the NRHM do not address the missing link in rural healthcare – medical care. In that sense, the integration into comprehensive healthcare that the Mission document talks about is at least not reflected in the budget. Linked to this is the fact that allocations to rural health would be restricted to the NRHM; any other source of funds for rural health may get blocked. This is the usual consequence of ‘verticalisation’ of any programme. The danger is that the NRHM may become an amalgamated vertical health programme for rural areas!

Thus the key issue in access to healthcare that even the NRHM fails to address is the mechanism for allocating resources. Resources are presently distributed on the basis of what is available, what can be procured and where they can be parked in terms of infrastructure, human resources, etc. This is often done on an ad hoc basis. Thus if the PHC is mandated to provide a package of services for which the requirements are defined and the funds needed for that are determined, the actual allocation of resources does not happen in terms of those requirements. What happens in reality is that the state, for instance, has existing a certain number of PHCs for which it starts procuring the human resources and other inputs needed and these have to be worked out on the basis of the available budget and rationing of resources across the board rather than in terms of what the PHC as a unit requires to function optimally. The consequence of such a mechanism is allocation inefficiency because the PHC may have a doctor but no nurse or inadequate allocation for drugs and/or other inputs and this leads to the poor performance of the public health facility.

Table 2: Demand for Grants of Ministry of Health and Family Welfare

(Rs crore)

Category BE Actual BE RE BE 2004-05 2004-05 2005-06 2005-06 2006-07

1 Central health, FW and Ayush

2 Of which grants to states and UTs, including NE component

3 Net health central govt (1 – 2)

4 State/UT govt health and FW (including 2)

5 Total health (3+4) as per cent GDP

8438.12 8086.46 10733.54 10086.26 13081.82 4487.77 3775.09 4969.12 3780.15 5078.98 (748.10) (968.20) (880.00) (1168.80) [0.94] [0.75] [0.97] [0.74] [0.90] 3950.35 4311.37 5764.42 6306.11 8002.84

[0.83] [0.86] [1.12] [1.24] [1.41] 20982.24 21465.19 24336.63 23500* 28500*

[4.36] [4.32]RE [4.57]

0.81 0.83 0.86 0.85 0.91

Notes: Figures in parentheses indicate the NE (Northeast Region) component and in square brackets the percentage of the respective total expenditure. BE = Budget Estimate, RE= Revised Estimate; * Estimated by author

Source: Expenditure Budget Volume 1 2006-07, (Demand Nos 46 and 47) pp 66-84 Ministry of Finance, GOI, New Delhi, 2006. For 2004-05 BE from Expenditure Budget Volume 1 2005-06 and actual 2004-05 from Annual Financial Statement 2006-07. For State/UT governments from RBI – State Finances 2005-06, RBI, Mumbai, 2006

Table 3: Allocations for Selected Key Programmes in the Union Health Budget

(Rs crore)

Programme BE 2004-05 BE 2005-06 BE 2006-07

Hospitals and dispensaries. 240.75 268.70 263.25 Medical education and research 912.82 1397.33 1436.64 Ayush 225.73 405.98 447.89 NACO – HIV/AIDS 232.00 476.50 636.67 RCH 710.51 881.73 1765.83 Pulse polio 832.00 1004.00 Routine immunisation 1186.40 472.60 326.50 FW services and contraception 1948.71 2412.41 1942.61 Area projects 123.01 501.26 205.57 NRH mission flexible funds 1530.88

Source: Demand for Grants, respective budget years, Ministry of Finance, GOI, New Delhi.

Table 4: National Rural Health Mission Component of the Union Health Budget

(Rs crore)

NRHM Component of Major Heads RE 2005-06 BE 2006-07

Disease programmes 648.59 755.64 Ayush 45.00 65.00 Family Welfare, including RCH 5426.58 7386.26 NE region special scheme 668.04 891.53 NRHM Total 6788.21 9098.43 of which Grants to states, UTs and NE 3410.75 4496.20

Source: Demand for Grants Budget 2006-07, Ministry of Finance, GOI, New Delhi, 2006.

Economic and Political Weekly April 8, 2006

Therefore, to address this deficiency the mechanism of resource allocation has to change to a system that meets the objective of the specific healthcare facility. One mechanism to address this issue is to allocate resources as block funds to the concerned facility, which is based on the principle of ‘what resources are needed to run the facility optimally’. Thus, for instance, if the CHC, which is a 30-bed facility, requires Rs 3,00,000 per bed per annum to run it in an efficient and fulfilling manner, then it should be allocated Rs 9 million and the local health authority, in consultation with the CHC, must be given the autonomy to use these resources in the best way they deem fit locally.5 There should be no compromise on this. Unless this kind of a radical change is put in place, all efforts, even enhanced budgets, would stop at mere tinkering with what exists. Thus the NRHM must be used as an opportunity to take this leap to make the architectural correction the NRHM preamble talks about.

State Health Budgets

As mentioned earlier, state budgets are the more critical component in public health financing as they account for about fourfifths of the total public health budget. During the last decade, there has been a slowing down of investment in public health in most states6 and this is reflected in the declining proportion of resources that are being allocated to health in the states’ budgets (Table 5). With some renewed interest in health under the UPA government and the NRHM initiative, there appears to be an upward trajectory in state health budgets too. However, it must be noted that the data in Table 5 for the years 2005 and 2006 are budget estimates and often this may be significantly different from actual expenditures. For instance, Table 2 shows that actual and revised estimates are likely to be lower than the budget estimates.

In recent years two things have happened in many states. First, most states have faced a severe fiscal crisis that has put pressure on their social sector budgets, which have seen a downward trajectory. Second, in many states, the public health system has been subject to (what is loosely referred to as) health sector reforms. International funding agencies like the World Bank, the European Commission, and bilateral funding institutions like USAID and DIFID have invariably directed these reforms. These “reform” projects have only focused on a small part of the public health system and often have advocated strategies that favour commercialisation of healthcare, like the adoption of user fees in public hospitals, privatisation or outsourcing of a range of services within the health sector, promotion of public-private partnerships via franchising, social marketing, contracting out services, etc.7

The synergistic impact of the fiscal crises and health sector reforms has adversely affected public health systems in most states. The reduction in own resources and injection of external funds have created a scenario wherein the state governments are losing control over their public health systems. This is not healthy for the vast majority of citizens who are poor or live at the subsistence level, as they are dependent on the public health system, especially for hospital care. A case in point is the impact of user fees in Maharashtra. In an ongoing review of user fees in public hospitals it is revealed that on an average each district hospital in Maharashtra has accumulated over Rs 60 lakh as user fees and rural hospitals over Rs 15 lakh each,8 because they have been unable to use these funds, both due to administrative constraints as well as the fear (expressed by chief medical officers and medical superintendents) of being accused of misappropriation. Thus the collection of user fees has not contributed to the claimed efficiency of such a strategy. On the contrary, it has caused impoverishment of those who have accessed and paid for services at public hospitals. The latter still suffer from inadequate resources and allocation inefficiencies leading to an increasing number of poor patients turning away from the public health system.9

To address this collapse of the public health system the state governments have to not only invest more resources in public health but also need to restructure how the health system is organised, how resources are used, and, above all, muster the political will to do it. For the latter, civil society groups and people’s movements have to exert the pressure and push governments. This space has emerged via the NRHM wherein the Jan Swasthya Abhiyan, the Indian chapter of the People’s Health Movement, has taken the onerous task of monitoring the

Table 5: Health Expenditure of State Governments, 1981-2006

(Per cent of total government expenditure)

State/Year 1981 1987 1991 1996 1998 2001 2003 2005 2006
Andhra Pradesh 5.80 7.88 5.53 4.65 5.44 4.74 3.96 3.53 3.57
Arunachal Pradesh 5.91 9.77 4.89 4.66 5.04 NA 4.68 4.45 3.19
Assam 3.96 10.21 NA 5.84 5.87 4.66 3.69 3.06 3.67
Bihar 3.78 8.49 5.10 5.79 5.24 4.01 3.17 3.24 3.47
Chhattisgarh Delhi -- -- -- -- -- 4.13 7.16 3.99 6.34 3.74 6.65 3.89 8.72
Goa, Daman and Diu 7.19 13.45 8.70 5.39 4.89 3.90 4.02 3.27 3.87
Gujarat Haryana 4.38 4.33 9.58 8.25 5.03 4.11 4.70 2.95 4.57 3.27 3.38 3.26 3.21 2.88 3.05 2.59 2.98 3.11
Himachal Pradesh 6.63 13.50 3.32 6.16 7.04 5.64 4.50 5.08 4.90
Jammu and Kashmir 3.79 12.50 5.56 5.50 4.97 4.89 5.30 4.78 4.79
Jharkhand - - - - - NA 4.18 3.65 7.25
Karnataka 3.79 8.23 5.40 5.28 5.85 5.11 4.17 3.49 3.73
Kerala 6.56 9.85 7.21 6.53 5.68 5.25 4.74 4.71 5.08
Madhya Pradesh 4.94 10.11 5.16 4.81 4.57 5.09 4.11 3.39 3.84
Maharashtra 4.85 9.38 5.13 4.56 4.29 3.87 3.71 3.51 3.55
Manipur Meghalaya 2.60 6.25 12.61 13.25 4.38 6.26 4.83 6.19 4.48 6.86 4.82 5.65 2.89 5.88 3.72 5.23 3.36 5.24
Mizoram 7.89 11.85 3.50 4.18 NA 4.96 5.01 3.96 4.25
Nagaland Orissa 5.39 5.17 10.88 8.50 5.96 5.13 5.95 5.16 5.68 4.82 4.87 4.15 4.65 3.75 4.68 3.90 4.64 4.34
Pondicherry 9.05 10.01 7.82 0.03 0.04 NA NA NA NA
Punjab Rajasthan 3.67 4.85 10.52 14.48 6.73 6.50 4.62 5.70 4.93 7.97 4.54 5.16 3.54 4.24 3.10 3.94 3.31 4.65
Sikkim 4.49 6.44 7.89 2.72 1.92 3.67 2.03 2.56 2.50
Tamil Nadu 6.18 10.04 6.91 6.29 6.28 4.86 4.10 4.20 4.76
Tripura 2.51 7.37 5.18 14.74 4.79 4.04 3.79 3.79 5.76
Union Government 0.22 0.29 0.56 0.46 0.52 0.77 0.76 0.83 1.12
Uttar Pradesh 4.69 9.08 6.31 6.03 1.74 3.98 3.75 4.49 4.94
Uttaranchal - - - - - 3.08 3.77 4.34 4.49
West Bengal 6.30 9.73 8.37 6.43 NA 5.63 4.95 3.94 4.78
All-India 1.52 3.95 2.93 2.01 1.75 2.77 2.41 2.42 2.77

Note: The figures for 2005 and 2006 are budget estimates.

Sources: Up to 1987 – Combined Finance and Revenue Accounts, Comptroller and Auditor General of India, Government of India, respective years; For year 2001 – State Finance: A Study of Budget, RBI, 2003; for 2003-2006 – Public Finance, CMIE, 2005 and State Finances, RBI, 2006.

Economic and Political Weekly April 8, 2006 implementation of the Mission in many states. So will NRHM provide the link to the change we would like to see in the public health system for the benefit of the toiling masses?




1 National Common Minimum Programme,, document accessed on May 16, 2005.

2 Ravi Duggal, ‘Public Health Expenditures, Investment and Financing under the Shadow of a Growing Private Sector’ in Leena Gangolli, Ravi Duggal, Abhay Shukla (eds), Review of Healthcare in India, CEHAT, Mumbai, 2005.

3 Ministry of Finance, Annual Financial Statement 2006-07, Government of India, New Delhi, 2006,, accessed March 1, 2006.

4 Ministry of Health and Family Welfare, National Rural Health Mission, Government of India, New Delhi, 2005.

5 Ravi Duggal, ‘Resource Generation without Planned Allocation’, EPW, January 5, 2002.

6 Ravi Duggal, 2005, op cit.

7 Sunil Nandraj, V R Muraleedharan, Rama Baru, Imrana Qadeer and Ritu Priya, Private Health Sector in India, CEHAT Mumbai/IIT Madras/ CSMCH-JNU Delhi, 2001

8 Calculated from records made available by the Public Health Department, Government of Maharashtra, for the period 2000-04.

9 The National Sample Survey, 42nd and 52nd Rounds provided the first evidence of declining access to the public health system (NSSO, Report No 441, 52nd Round, Government of India, New Delhi, 1998).

Economic and Political Weekly April 8, 2006

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