Allocations for Health in Union Budget 2021–22

Last month, Union Finance Minister Nirmala Sitharaman made a statement that the 2021–22 budget would be historic, which we had “never before”—one that would pitch India into becoming the engine of global growth. The Economic Survey 2020–21, presented in Volume 1, devoted an entire chapter, “Healthcare Takes Centre Stage, Finally!” to health, underlining the importance of public healthcare and health expenditure in improving life expectancy, reducing maternal and child mortality, and the impact of the government spending on decreasing out-of-pocket expenditure (OOPE). The high OOPE spins a vicious circle of poverty, which results in poor health outcomes. Seemingly, the Government of India acknowledged the significance of healthcare and has shown a commitment to strengthen the health system (health financing, health infrastructure and human resource, and health management information) at least in documents, that is, the National Health Policy (NHP) 2017 and the estimate of the 15th Finance Commission 2020–21.

From the market viewpoint, Kenneth J Arrow (1963), through his path-breaking work “Uncertainty and the Welfare Economics of Medical Care,” established, and the Economic Survey 2020–21 accepted that medical care market cannot work optimally on the basis of the principles of competitive market because of inherent characteristics of demand, such as uncertainty of demand, information asymmetry, and hyperbolic tendencies and that of supply, for example, cost of medical education and licensing of medical care services in the market. Knowing these instinctive features and a high degree of externality, the government must play a vital role, which, hitherto, remains unobserved in India, in provisioning health and healthcare services.