ECONOMICS TERM PAPER

Theme: Health expenditure by Government in India

Title: Health care and expenditure: an analysis of Indian Government’s Welfarism

Name: Prakhil Mishra
Semester : IV
Roll no.: 13BAL027

Table of contents Sr.No. | Content | Page number | 1 | Abstract | 03 | 2 | Introduction | 04 | 3 | Why health expenditure is important | 04 | 4 | Trends in public spending | 05 | 5 | Core areas of spending | 10 | 6 | Conclusion and critical comments | 11 | 7 | Learning outcomes | 12 | 8 | Bibliography | 12 |

Abstract
Healthcare is a prime indicator of the development in a country. It is the basic function of a state to look after the needs of its citizens pertaining to health and nutrition. In India, there are high numbers of malnourished and undernourished people, and most of them are children under the age of fourteen. Health expenditure in India is a holistic approach of the government as a welfare state to ensure proper distribution at highly subsidized rates for the resource less people.
The paper deliberates upon the government spending on health (Where it spends and how much it spends) and tracing of the changing trends in entailment of expenditure.
Key matter of contention includes: * Introduction to public spending on health * Why spending on health is important * Changing trends in public spending on health and family welfare * Core areas where spending is done: analysis with the help of laws * Conclusion and critical analysis
Key words: health expenditure, crop distribution, subsidies, changing trends

Introduction
From the time immemorial, the public spending on health has been a highly discussed issue in the Indian democratic political environment. The government has made several policies with regard to proper spending and supervision. Although because of inefficient adjudication, nothing has turned into an optimistic manner. The core area of discussion unfolds the planning of Indian government with regard to spending on health. There is always a debate over the issue that how much significance of GDP in terms of percentage is ideal in terms of spending for health. Policy papers like the Approach Paper to the Twelfth Five Year Plan (2012 to 2017), the High Level Expert Group for Universal Health Coverage (HLEG) and the Programme Implementation Framework of the National Rural Health Mission (NRHM) have all endorsed the necessity to enhance the level of public spending on health in India from around one per cent to 2 to 3 per cent of GDP. This clearly shows the importance of public spending. Further, why is it necessary to bring changes in the planning pattern for the health expenditure?
It was given in the studies of the latest economic survey that the public spending done in year 2010-11 was amounted to 1.35 percent share of the GDP and a little progress has been made to escalate it to 1.41 percent in the year 2011-2012. Government is spending a significant amount on the health and it is imperative to note that the plight of the people is improving with the time. In very recent times, government has created the National Food Security Act, 2013. According to this the families belonging to below poverty line, above poverty line and Antodaya families are receiving grains on highly subsidized rates. This is a scheme, which is a boon for the landless labourers and small-scale farmers.
The definition of public expenditure on health in India is not clear. Never has it been specified whether the health includes proper water, sanitation and nutrition. There are quite a few documents showing the figures of public expenditure of Indian government. One is National Health Accounts (NHA), which is maintained by the Ministry of Health and Family Welfare. Nevertheless, the very recent trends are not available due to ineffective supervision. Various methodical issues also affect the estimate under the NHA. “It overstates the States’ contribution and understates the Centre’s contribution”.
Indian Public Finance Statistics (IPFS) shows the expending between centre-state according to the contribution both have made.
Likewise, there are many parameters to know the status of public spending on health. Why health expenditure is important
Health care expenditure is very necessary social expenditure for any country. Like any other social expenditure, health expenditure also requires a noteworthy contribution from the government. Health is a very cardinal factor, which cannot be ignored in any circumstances by the government if it has to flourish in terms of human development index. This covers some minimal functions of the government, which are necessary to undertake by a welfare state. At present globalization is spreading through the advent of liberalization, privatization and industrialization, which is again making problems for the government to think about the protection of basic rights of its citizens, which also include right to food.
Certain measures have been undertaken such as National Food Security Act, 2013. Governments have to spend over health to ensure better life expectancy rates in terms of maintaining longevity. The most alarming thought is that only 17 per cent of all health expenditure in India is borne by the government, the rest being borne privately by the people, making it one of the most highly privatised healthcare systems of the world. The most important thing is that government did not take this seriously and because of which, private actors are carrying mostly this expenditure. However, as a welfare state it is very important for India to increase the public spending on health because there is more number of people who are devoid of the resources and who are not having access to proper food and medical services. Trends in public spending and how they are changing

Indian constitution has provided the framework for the "the raising of the level of nutrition and the standard of living of its people and the improvement of public health". It has provided us with the yardstick according to which government has to spend in consonance with the measures of Ministry of Health and family welfare.
Figure one, shows the public health expenditure in India and it is noticeable from the recent NHA accounts that only 26.7% is there under the public expenditure and rest 71.6% is under the private expenditure, which give the fair idea of bleak condition of public spending in the country on health and family care.

| 2001-2002 | 2002-2003 | 2003-2004 | 2004-2005 | 2005-2006 | 2006-2007 | 2007-2008 | 2008-2009 | 2009-2010 | Expenditure on health and family welfare budgets of all the states( in crores) | 16048 | 16451 | 17529 | 18771 | 22031 | 25375 | 31567 | 38579 | 43849 | Expenditure on health and family welfare as a proportion of total expenditure from budgets of all states (in%) | 4.4 | 4.0 | 3.4 | 3.4 | 3.9 | 3.9 | 3.8 | 4.1 | 4.2 |
Table 1 source: http://www.theindiaeconomyreview.org/Article.aspx?aid=63&mid=4
The table 1 shows how much is being spent by all the state governments on public health and family welfare. If we trace the pattern then it is evident that the public spending is increasing year by year. Although, in the total proportion it is being reflected that the spending is done in a very fluctuating manner. This has been a point of debate over the years.

| Centre’s expenditure on health and family welfare (in crores) | Expenditure on health and family welfare as % of total expenditure from union budget | Centre’s expenditure on health and family welfare as % in Gross Domestic Product | 2004-2005 | 8086 | 1.6 | 0.26 | 2005-2006 | 9650 | 1.9 | 0.27 | 2006-2007 | 10948 | 1.9 | 0.26 | 2007-2008 | 14410 | 2.0 | 0.29 | 2008-2009 | 177661 | 2.0 | 0.32 | 2009-2010 | 21680 | 2.1 | 0.35 | 2010-2011 | 25154 | 2.3 | 0.36 |
Table 2, source: http://www.theindiaeconomyreview.org/Article.aspx?aid=63&mid=4

In table 2, it is shown that how much Indian government spends on health and family welfare. Earlier because of lack of planning in this sector, there was less spending and due which Indian government has confronted with lot of criticisms. However, it is being considered that the union budget outlay for the health expenditure is inadequate in relation to the standards, which are needed. The problem vests in the planning structure and the mechanism. The mannerism, in which budget making usually happens, is that the government set certain committees for the identification of the areas where more spending is needed. This provides us with the framework about the spending. In addition to it, grants of revenues have to be made between centre and states.
The new planning for the twelfth five year plan envisages the increase of share of spending in the GDP. It is being said by the previous Prime Minister, Manmohan Singh, “An increase in public expenditure on health from an estimated 1.4 per cent of GDP to 2.5 per cent by the end of the Twelfth Plan can, if it is used wisely, bring about a revolution in health care”. The main aim is to boost the planning for the public health and welfare. India has a dream for universal health coverage and that is only possible when the tax-funded schemes are efficient enough to generate the required revenue for this purpose to head towards for accomplishing this. In addition, Indian government has expended less on health as compare to other Asian countries. There are certain consequences attached to it. There are two models.

Source: Bhat, 2004
The first model is of unproductive investment in health and how this makes an economy sloppy. The above graph shows what happens if there is inequitable, inefficient and poor quality of health services. This gives the harsh aspects about an inefficient state. If the spending on health services are less and inadequate, then it lead to cost escalation, inequality in opportunities and inadequate health status. The distribution is not fair and concentration of resources goes in some hands. This gives rise to unfairness as poverty also is alleviated and there is sub-optimal development of human capital, which further lead to less productivity and competivity. The whole process ends in endorsing low economic growth for the country, which is also a prime reason why the country would not become a developed country.
Indian government should take health expenditure very seriously as this is one of the most important element of a developing and flourishing economy.

Figure, Source: Bhat, 2004 The second model is of productive investment in health: a virtuous cycle, which every government ought to aspire. If there is equitable, efficient and high quality of health services then there is a better health status. A better health status is always followed by a better human capital and there is a great equality of opportunity. In this scenario, we have great productivity in terms of agro-based products, which will ultimately lead to less poverty. Less poverty is an indicator of good economic developing nation. Therefore, a country should adopt the productive health spending in order to get better returns in terms of development. For instance, if such kind of model is made yardstick for the further prospects in India then the day is not so far, when the Indian economy would be leading in the world in terms of public spending in health and family care. World health organization said that India need to spend more for the health expenditure as life expectancy is decreasing. It was 65 years in the year 2009 and it lowered down to 61 years in 2010. This is a great drawback in terms of development in the global political world. India is a country facing tough competition worldwide and because of this, our government is mainly focusing upon ameliorating the economy. However, this approach has backfired and we are lagging behind in maintaining the proper health in the country. With the changing of trends in public spending on health and family care it is imperative for India government, according to Amartya Sen, to legislate over healthcare as it is an essential segment of any country. Amartya Sen Says that just after the end of second world war many European countries have given right to health care to many residents and even in Asia this has been carried forward. Japan has a well established healthcare system. He further elaborated that good health not only ensures that the life expectancy would be enhanced but also it acknowledges the rise of good education. As with good health comes the conceiving of healthy minds, which are very necessary for the growth of the young minds of the country. Therefore, it is very important to augment the public spending on health care and with the help of this; it would be legible to expect harmonious growth in the future. Core areas where health care is necessary Healthcare in India has been instrumental in bringing change in the pattern of development. The Ministry of Health and Family Welfare envisages an effective growth in the area of health care in order to bring prosperity for the country. Malnutrition It is a major threat against the developmental process. In year 2005, there were 45% of children under the age of thirteen, who were suffering from severe malnutrition and this is an alarming data. Indian government spends on terminating this malnutrition by providing mid-day meal schemes and also by creating the subsidies for the farmers so that they can afford food for their families. There is a need to configure upon the major underpinnings related to this. For this, a perfect methodology has to be devised. There are certain measures, which have been already taken by the government but the agility that is required for such work is not being employed. Certain schemes are: 1. National Rural Health Mission (NRHM) 2. Mid Day Meal Scheme Safe drinking water Government also has to spend on safe drinking water, as it is the duty of a welfare state to provide safe water to its subjects. There is a scheme like National Rural Water Scheme, which provides guarantee for the clean and healthy water in every rural area. Infant Mortality Rate At an approx rate, 1.72 billion children die every year below the age of one. This rate is very high with respect to other countries of the world. Indian government also spends over the better medical services at the very low costs and for ensuring that this rate is coming down considerably. Women health Health of the women is a very sensitive matter because at the time of giving birth most of the rural women are not sustaining in the healthy conditions and even their deliveries happen in a casual manner. This is a core area where government spends through providing schemes like free drugs for the pregnant women (aanganbadi schemes). In addition, maternal deaths, breast cancer, maternal mortality are the few chief areas regarding the female health issues. Diseases There are certain diseases, which have taken a role of epidemic in India such as HIV/AIDS. India is the third largest country with the HIV positive cases. Government of India, however, has made certain efforts such as commissioning of the National AIDS control organisation is saving people’s lives from this death-taking disease. In addition, Indian government has also taken the course of polio free India, which in many senses have been achieved due to tedious efforts of the government by mass communication and media. Rural Health This is a major sector of people, in India 68% of people live in rural areas, which is a huge number in terms of population of the country. Government has to spend for uplifting the standards of living of the rural people and by improving the sanitation of the rural areas. In addition, people are less employed, as not everybody is having sufficient lands to sustain. Government has provided with the Mahatma Gandhi National Rural Employment scheme. These are some core areas where government needs to spend judiciously for the upliftment of the people. Although, there are many schemes, which are being introduced for the same but they are not adequate enough to eliminate the problem from the root cause of it. State governments spend over these issues related to healthcare in India. These are many cardinal issues, which are always considered as priority in terms of development. Conclusion and critical analysis Health expenditure is one of the core aspects of the planning of the country. Indian constitution provides framework for the spending on the health and family care for the states as the health is wealth. No compromise could be done in this regard with anything. Good health always keeps the mind healthy. Indian government has taken this point into consideration and because of this only has increased the considerable amount in the spending for the health care and family care. Sanitation, diseases, cleans water, rural health planning are some core areas where the government like to spend in order to mark efficient growth. Some suggestions related to this: * Health expenditure is the cardinal part of developmental planning then there should be creation of some legislation addressing this issue. * Proper supervision is always needed in order to have effective implementation of certain schemes. The problem with food security act is this only, people are being cheated by the ration shop dealers as they do not have proper mechanism to send complains. * There is a change in spending of the government due to pressure exerted by World Health Organization and many others international conventions. * There should be a commissioning of proper committee to extract the problems being faced by the people relating to the public spending of health care. * Government of India could distribute more revenue among centre and states for the sole purpose of health care. * All the states planning commissions should come in collaboration with the each other and devise a common phenomenon to deal with the harsh problems related to lack of healthcare in India. * Foreign institutions could help in developing an approach related to different projects of healthcare. This paper basically touched upon certain areas related to public spending. The core aim was to configure upon the amount, which is being spent every year on this aspect and to know about certain sensitive portions, which need to be taken care of in terms of healthcare. Learning Outcomes * Got to know about the health budget that how it is being decided by the government and why is it important to have it. * This area of economics is a cardinal aspect of growth in any country. Therefore, it was imperative to trace the changing trends in public spending of health and family care * This research also helped me to come up with the general ideas as to how the spending could be done more efficiently and what are the loopholes popping up while undertaking this method. * How healthcare is a significant factor for any country. * There are multiple aspects of the same thing as health expenditure is important for the country there are several things, which are important and attached to it. Bibliography 1. KUMAR ET. AL. 2011, GoI 2005a, GoI 2005b, HLEG 2011, Rao and Choudhury (2012)

2. H.K. AMAR NATH AND MITA CHAUDHARY, “AN ESTIMATE OF PUBLIC EXPENDITURE IN INDIA, National Institute of Public Finance and Policy (NIPFP)

3. Public Health expenditure in India, world report 2013

4. RAMESH BHAT AND NISHANT JAIN, “ANALYSIS OF PUBLIC EXPENDITURE ON HEALTH USING STATE LEVEL DATA”, IIM- Ahmedabad (2011) 5. Public Health expenditure in India, world report 2013

6. RAMESH BHAT AND NISHANT JAIN, “ANALYSIS OF PUBLIC EXPENDITURE ON HEALTH USING STATE LEVEL DATA”, IIM- Ahmedabad (2011)

7. Rama Pal, Measuring incidence of catastrophic out-of pocket health expenditure: with the application to India, International Journal of Health Care Finance and Economics, Vol. 12, No. 1 (March 2012), pp. 63-85

8. Sakthivel Selvaraj, Anup Karan, Deepening health security in India: Evidence from National Sample surveys since 1980s, Economic and Political Weekly, Vol. 44, No. 40 (OCTOBER 3-9, 2009), pp. 55-60

9. Definition: Public Health Expenditure (PHE) is the sum of outlays on health paid for by taxes, social security contributions and external resources (without double-counting the government transfers to social security and extra-budgetary funds).

10. Ravi Duggal, Sunil Nandraj and Asha Vadair; Health Expenditure Across States Part-I; Economic & Political Weekly, Vol. XXX, No.15, April 15, 1995, pp.834-844 11. WHO (2009). World Health Statistics, 2009. World Health Organization,Geneva

Proposed research:

In the health, expenditure is important for the growth of the country. So future researches would emphasize upon the laws made in consonance of it.

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[ 2 ]. KUMAR ET. AL. 2011, GoI 2005a, GoI 2005b, HLEG 2011, Rao and Choudhury (2012)
[ 3 ]. H.K. AMAR NATH AND MITA CHAUDHARY, “AN ESTIMATE OF PUBLIC EXPENDITURE IN INDIA, National Institute of Public Finance and Policy (NIPFP)
[ 4 ]. Id.
[ 5 ]. Id.
[ 6 ]. Public Health expenditure in India, world report 2013
[ 7 ]. RAMESH BHAT AND NISHANT JAIN, “ANALYSIS OF PUBLIC EXPENDITURE ON HEALTH USING STATE LEVEL DATA”, IIM- Ahmedabad (2011)
[ 8 ]. Id.
[ 9 ]. SHAKTI GOLDER, “DELIVERING PROMISES”, PUBLIC EXPEDNDITURE IN HEALTHCARE, available at http://www.theindiaeconomyreview.org/Article.aspx?aid=63&mid=4
[ 10 ]. Spending for healthy India, The Hindu, available at http://www.thehindu.com/opinion/editorial/spending-for-a-healthy-india/article2974535.ece
[ 11 ]. Supra note 5
[ 12 ]. Id.
[ 13 ]. India needs to increase spending on health care: WHO, ECONOMIC TIMES, May 17, 2011 available at http://articles.economictimes.indiatimes.com/2011-05-17/news/29552018_1_infectious-diseases-life-expectancy-child-mortality
[ 14 ]. Raghuvir Srinivasan, Time for a right to healthcare, THE HINDU, December 18,2013 available at http://www.thehindu.com/opinion/interview/time-for-a-right-to-healthcare/article5470806.ece
[ 15 ]. Rama Pal, Measuring incidence of catastrophic out-of pocket health expenditure: with the application to India, International Journal of Health Care Finance and Economics, Vol. 12, No. 1 (March 2012), pp. 63-85
[ 16 ]. Sakthivel Selvaraj, Anup Karan, Deepening health security in India: Evidence from National Sample surveys since 1980s, Economic and Political Weekly, Vol. 44, No. 40 (OCTOBER 3-9, 2009), pp. 55-60
Journal
[ 17 ]. Id.