India spends least on healthcare among BRICS nations

Ramaprasad R./BL Research Bureau

April 15, 2012:  

http://www.thehindubusinessline.com/industry-and-economy/article3317902.ece

India may be growing as fast as the other BRICS economies, but its spending on healthcare is much lower.

Data from World Bank confirm that among the comparable BRICS nations, which have similar socio, political and economic influence in the globe, India spends the least on public healthcare.

As the accompanying graph shows (Graph 1), the Government's expenditure on healthcare as a percentage of GDP between 2004 and 2009 was well below that of other BRICS nations.

It is another matter that BRICS as a whole spend much less than the developed nations. While healthcare spends of BRICS were at less than 3 per cent of their overall expenditure, corresponding values for US and the UK were 15 per cent and 8.5 per cent, respectively.

Among all the BRICS nations, India's share of public expenditure in the total health expenditure is the lowest in each of the years between 2004 and 2009 (Graph 2). Both the Indian and Chinese governments appear to be allocating less to health, compared to other BRICS nations.

But public spending on healthcare is higher in China – that is, on average, public healthcare spending in China has accounted for 43 per cent of its total healthcare expenditure. In India, the corresponding value is 28 per cent.

But in the US, average public share of health expenditure was 46.8 per cent, during the period.

But there is hope. India's share of public expenditure in total health outlay has been increasing steadily. This trend is very encouraging and needs to continue because greater reliance on private spending on healthcare infrastructure and service may lead to inadequate provision of healthcare.

This can have many consequences, one of which, in economics, is called “externalities”.

In healthcare: when a mother gets weaker because of poor access to public healthcare and thus is unable to take care of her children, not only does the mother suffer but her children also do.

What also makes public spending in health crucial is that healthcare is prone to ‘informational asymmetry' – one party having more information than the other about the transaction. In healthcare, typically the doctor knows both about the patient's medical condition and the cure for the disease, than the patient. He can only feel the symptoms of a medical condition.

Such mismatch in information can potentially lead the doctor to take advantage of the situation. To overcome or mitigate such anomalies, significant and effective participation from the Government in healthcare services is imperative.

For a country like India, where socio-economic inequalities are rampant, comprehensive public provision of healthcare goods and service by the Government is essential.

Despite the popular belief (true, to an extent) that Government operations are inefficient, in India, where access to publicly provided goods and services are constrained, the Government must ideally take the lead over the private sector.

To do that, India has miles to go to catch up with the rest of the BRICS nations on public healthcare expenditure (as percentage of GDP, Graph 3).

While the yearly average between 2004 and 2009 for BRICS nations as a whole is 2.4 per cent, in India it was a meagre 1.3 per cent. This difference in spending is even more daunting against the background of growth rate of population during the period which was 1.36 per cent for India, but only 0.7 per cent for the BRICS group as a whole.

India's National Commission for Macroeconomics and Health (NCMH – GOI 2005b) called for an increase in Government spending on health, both quantitatively (about 2.5-3 per cent of GDP) and qualitatively.

True, the country is currently under surveillance from all sides for the disturbing fiscal deficit situation. But such sentiments should not deter the Government from allocating more resources to this key area, which can potentially have a significant positive spinoff on the country's medium and long-run growth prospects.