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Priorities in Budgetary Allocations for Health during the Fourteenth Finance Commission: Evidence from Five States

Indrani Gupta (), Samik Chowdhury, Avantika Ranjan and Diwas Singh Saun ()
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Diwas Singh Saun: Institute of Economic Growth, Delhi

No 419, IEG Working Papers from Institute of Economic Growth

Abstract: The aggregate government health spending in India is one of the lowest in the world in terms of its share in GDP. Since most of the functions of the health system are undertaken by the states, it is important for states to mobilize enough funds to sustain existing activities and undertake new ones in the health sector. A major departure from the past in the fiscal architecture took place following the acceptance by the government of the 14th Finance Commission (FFC) recommendations. A key question in this context is whether these significant changes created a disruption in the state health finances and consequently, impacted on state spending patterns across key components. This is examined for 5 selected states in the country – Bihar, Himachal Pradesh, Tamil Nadu, West Bengal and Uttar Pradesh. A brief review of the health systems indicates wide variations in inputs and outcomes, with Tamil Nadu quite far ahead in terms of health outcomes, and Bihar and Uttar Pradesh requiring significant catch up. While health spending did increase somewhat for all the states in the FFC period in real terms - most noticeably for Bihar - states seem to have little maneuvering space for new investment due to high shares of salaries and emoluments. Among other results, states have been investing reasonably on primary care, but the public health component continues to get low priority even during the FFC period for these states. The share of prevention and control of diseases in total health spending has declined for all states in these four years. Overall, while these five states have maintained their total health spending, there has been no re-prioritization within the health budget and no significant departures – transformative or detrimental - from the usual patterns of allocation during the FFC period.

Pages: 27 pages
Date: 2021-02
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Published as Institute of Economic Growth, Delhi, February 2021, pages 1-27

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