Business | India's Centre Health Spending Plummets Post-Pandemic: 2026 Analysis

The Post-Pandemic Fiscal Shift in Central Health Allocations

Allocations by the Union government for health and family welfare have decreased significantly in the post-pandemic era, confirmed by RBI data released on January 30, 2026. This decline comes despite rising public health allocations by States and Union Territories (UTs) since the financial year 2017-18, signaling a critical divergence in fiscal priorities between federal and state governance structures regarding India’s public healthcare infrastructure.

Data from the Reserve Bank of India indicates that while central health spending saw a temporary, moderate surge between 2020 and 2022 to combat the COVID-19 crisis, this momentum was not sustained. As the immediate pandemic emergency receded, the Centre’s expenditure on health, measured as a percentage of GDP, began to shrink, placing increased fiscal burden on already strained state budgets.

Contextualizing the Decrease: NHP Targets and GDP Share

The significance of the Central government’s expenditure trend is best understood in relation to the country’s stated health goals. The National Health Policy (NHP) 2017 mandates increasing public health expenditure—combining both central and state spending—to 2.5% of GDP by 2025. Currently, the overall public expenditure remains significantly below this benchmark, with the Centre historically expected to shoulder a substantial portion of this increase.

The Role of States and UTs

In contrast to the Union government’s trajectory, combined spending on health and family welfare by all States and UTs has demonstrated a consistent upward trend since 2017-18. This increase reflects sustained commitments at the sub-national level, often driven by local public demand and the immediate necessities of primary healthcare and sanitation projects. However, the states’ capacity to bridge the national funding gap is limited without robust financial support and coordinated scheme funding from the Centre.

Analyzing the Union Budgetary Strategy

The decrease in central health allocation post-pandemic suggests a strategic reversion to pre-crisis budgetary baselines. While massive flagship initiatives like the Ayushman Bharat scheme (which includes PM-JAY and Health and Wellness Centres) remain key pillars, the overall budgetary share has not expanded sufficiently to meet NHP targets. A persistent challenge is the balance between centrally sponsored schemes (CSS) and direct transfers to states, often leading to funding bottlenecks and execution delays at the state level.

• Fiscal Pressure: The decrease in the Centre’s allocation places stress on the recommendations of the 15th Finance Commission, which emphasized the need for higher and sustained public investment in health.
• Sustained Capital Investment: Post-pandemic analysis indicates that temporary spending was largely focused on urgent consumables and vaccines, failing to translate into sustained capital expenditure necessary for long-term health infrastructure development.

The Long-Term Impact on India’s Health Outcomes

A sustained decline in central funding threatens the comprehensive goals of the NHP 2017. If the Union government’s spending continues its downward trend, India risks stagnation in crucial areas such as addressing malnutrition, strengthening tertiary care facilities, and expanding medical education infrastructure. Ultimately, failure to reach the 2.5% GDP target jeopardizes the goal of achieving Universal Health Coverage (UHC).

People Also Ask (PAA)

What is the current public health spending percentage of India’s GDP?

While the exact figure fluctuates annually, India's total public health spending (Centre and States combined) generally hovers below 1.5% of GDP. This figure remains critically short of the National Health Policy 2017 target of reaching 2.5% of GDP by the year 2025.

How does Centre health spending compare globally?

Relative to other BRICS nations and OECD countries, India’s government expenditure on health remains one of the lowest globally. Many developed economies spend upwards of 6% to 10% of their GDP on public health, making the sustained central funding deficit a significant hurdle for India’s development trajectory.

What is the primary source of health expenditure in India?

The majority of India's health expenditure comes from private, out-of-pocket expenses (OOPE) borne by citizens, rather than public funds. High OOPE is a major driver of poverty and financial distress, which is why increasing government spending, particularly by the Centre, is crucial for financial risk protection and equity.