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Government Health Spending in India

Although the government of India has set a goal of increasing government health spending to 2-3 per cent of gross domestic product over the next five years, even with optimistic assumptions, it cannot meet the stated goal. After analysing the recent trends in government health spending by the centre and states, this paper notes that sound fiscal targets for health spending should be based on goals for outcomes and the resources needed to achieve them, which are largely lacking. It suggests that large and sustainable increases in government health spending will require more focus on the states' own spending as well as improving the capacities of states and districts to use resources for health effectively.

SPECIAL ARTICLEEconomic & Political Weekly EPW june 28, 2008209Government Health Spending in IndiaPeter Berman, Rajeev AhujaOver the last several years in India there has been a dramatic change in the national government’s approach to the health sector. At the highest level – that of the prime minister and union finance minister – there have been public calls for increasing government health spending. New national schemes, under the banner of the National Rural Health Mission (NRHM), were launched in April 2005. One stated goal of these national schemes is to increase total government health spending from its previous level of about 1 per cent of gross domestic product (GDP) to a targeted “2-3 per cent of GDP” by 2012, the end of the Eleventh Five-Year Plan [GoI 2005a].Recent studies provide strong support for the notion of increas-ing government spending on health in India. The global Commis-sion on Macroeconomics and Health [World Health Organisation 2001], of which Manmohan Singh was a member, advocated for government health spending in lower income countries well above what India spends today, citing benefits for both growth and well-being. India’s own National Commission on Macroeconomics and Health (NCMH) [GoI 2005b] provided further home-grown support for increased government spending. NCMH also made a number of recommendations to improve the efficiency and effectiveness of government spending, not simply increase the total amount. While simple to understand and tempting politically, setting benchmarks for spending levels is often not a good policy. This view is also reflected in the finance minister’s call for more focus on outcomes of public spending. International comparisons for health spending and outcomes across lower income countries find rather weak links, suggesting that how well money is spent may be at least as important as how much is spent. To be sure, India is pursu-ing the matter on both fronts. The NRHM has introduced a number of new strategies to improve the impact of spending along with providing a vehicle for increased spending. Since India’s level of government health spending is quite low in absolute terms as well as in comparison to some other Asian countries, increasing government expenditure makes a sense. But India’s government health financing structure is complex, so achieving this goal is not simply a matter of greater central govern-ment allocations. This paper will examine recent trends in govern-ment health expenditure prior to and following the launch of the NRHM. We will examine the role of central government and states in government health spending. Finally, we will project trends in government spending to explore whether the goal of “2per cent” (or more) is feasible and what might be done to put in place more, and more sustainable, government health financing.1 Government Health Spending: 1999 to April 20051In nominal terms the total government health expenditure (both centre and states) has increased from Rs 20,117 crore in 1999-2000 This paper reflects the personal views and analysis of the authors and not the official views of the World Bank or its affiliates.Peter Berman (pberman@worldbank.org) and Rajeev Ahuja (Rahuja@worldbank.org) are in the Health Nutrition and Population Unit of the World Bank. Although the government of India has set a goal of increasing government health spending to 2-3 per cent of gross domestic product over the next five years, even with optimistic assumptions, it cannot meet the stated goal. After analysing the recent trends in government health spending by the centre and states, this paper notes that sound fiscal targets for health spending should be based on goals for outcomes and the resources needed to achieve them, which are largely lacking. It suggests that large and sustainable increases in government health spending will require more focus on the states’ own spending as well as improving the capacities of states and districts to use resources for health effectively.
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SPECIAL ARTICLEEconomic & Political Weekly EPW june 28, 2008211health expenditure by the centre increased only by about 38 per cent but the same increased by about 19 per cent in 2005-06 alone. Likewise, we find that for the actual state expenditure between pre-2005 and post-2005 (from the recent evidence of actual state health spending). Moreover, the upward trend is linked to greater priority being given to health as evident from several new health programmes and initiatives in this period. The upward trend in public health expenditure in post-2005 is also evident from the comparison of budget estimates between pre-2005 and post-2005 period. For example, centre’s health budget increased by only 69 per cent over the five-year period (from 1999-2000 to 2004-05) while the increase over three-year period (from 2004-05 to 2007-08) has been 88 per cent. Similarly true of states’ health budget. Furthermore, both at the centre and state level, the gap between budget estimates and actual expenditure may be declining in recent years due to the need for better fiscal planning to meet fiscal targets. Hence, there is a reasonable basis for inferring the upward trend in public health spend-ing in the post-2005 period.These increases are due to a rise in both centre and states’ health spending. There are two factors behind the increase in public spending. At central level there is the launch of NRHM by the government of India (GoI) which is in line with the GoI’s commitment to increase public health spending with focus on primary care from the present 1 per cent of GDP to 2-3 per cent of GDP over next five years [GoI 2004a]. The picture at the state level is more complex. For seven selected states, an additional central budget support has come through the action of the Twelfth Finance Commission (TFC) which provided increased general budget support to the states earmarked for health. Increased health spending in some states may also reflect their increased commitment, recovery from previous declines in state health spending and improvements in states’ fiscal situation.8 2.1 Increased Health Funding under NRHM9Against the backdrop of declining government funding effort to the health sector, theGoI launched theNRHM in April 2005. In fact, as we have shown, increased resources by the centre started flowing from 2004-05, a year before the launch ofNRHM, whereas states’ expenditure started to rise from 2005-06 onwards.The NRHM repackages many of the existing health schemes of GOI as well as finances some new activities in a flexible, decentralised manner. As with all centrally-sponsored schemes, the NRHM relies on the states to implement existing and new initiatives. For example, earlier schemes of the department of family welfare such as re-productive and child health programme (RCH), immunisation, contraception, in-formation education and communica-tion (IEC), training and research, area projects and other family welfare services are all included in the NRHM. Likewise, national disease control programmes which were earlier with the department of health have now been made part of theNRHM. The new initiatives under the NRHM are mostly financed through what is called the “mission flexible pool” which provides for activities like selection and training of a new cadre of community health workers called Accredited Social Health Activist (ASHA), upgradation of health facilities (community health centres – CHCs and public health centres – PHCs) to first referral units (FRU) and facilities meeting the new Indian public health standards (IPHS), constitution of patient welfare committees called Rogi Kalyan Samiti (RKS) and district hospital man-agement committees, mobile medical units, untied funds for sub-centres, prepa-ration of district action plans and so forth. These activities would continue up to the end of Eleventh Plan (2012). Over 60per cent of all central government health allocation is now routed throughNRHM.There have also been some changes in the centrally sponsored schemes now falling under the NRHM umbrella. The earlierRCH programme (RCH1) funded a fixed set of activities. Under the NRHM the earlier form of theGoI’s reproduc-tive and child health programme is being phased out. InRCH2, most activi-ties are funded through anRCH flexible pool which supports decentralised planning and flexible programming by the states.10 The flexible pool also incorporates “pooled” funds of external funding agencies such as the World Bank and Department of Inter-national Development (DFID). Fund flow under the NRHM reflects some important changes which also affect our ability to monitor expenditure. Most NRHM funds are routed through state health societies, which have been restructured to incorporate a number of earlier programme-specific societies. But part of NRHM funds also flow through the state treasuries and are reflected in the state health budget. Therefore, adding state spending on health to central spending may overestimate state and the total government health spend-ing. To be consistent, the part of NRHM that flows through the Table 1: Share of State Health Spending in GSDP(%)States 2000-01 2001-02 2002-03 2003-04 2004-05Andhra Pradesh 0.95 0.90 0.84 0.80 0.74Bihar 1.541.411.401.10Chhattisgarh 0.83 0.86 0.76 0.79Gujarat 0.850.600.620.540.54Haryana 0.540.530.530.490.47Jharkhand 1.181.131.011.00Karnataka 0.961.000.850.770.70Kerala 0.991.040.990.960.92Madhya Pradesh 0.81 0.96 0.81 0.87Maharashtra 0.680.690.580.590.53Orissa 1.181.071.130.921.06Punjab 0.970.870.830.750.69Rajasthan 1.141.131.080.980.98Tamil Nadu 0.84 0.85 0.80 0.75 0.62Uttar Pradesh 0.76 0.80 0.88 0.96Uttarakhand 1.111.221.211.23West Bengal 1.08 0.92 0.83 0.74 0.68All states 0.84 0.79 0.76 0.72 0.69Source:RBI Bulletin, various issues.Table 2: Share of State Health Spending in Total State Spending(in %)States 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Andhra Pradesh 5.32 4.98 4.79 4.50 4.33 4.07Bihar 5.446.125.114.544.143.71Chhattisgarh 4.314.604.253.583.73Gujarat 4.603.87 3.253.603.233.35Haryana 3.85 3.503.123.472.813.17Jharkhand 4.984.274.415.18Karnataka 5.70 5.295.26 4.683.943.46Kerala 5.745.52 6.175.154.925.13Madhya Pradesh 5.15 5.26 4.75 4.46 3.70 3.43Maharashtra 3.774.244.483.863.683.33Orissa 4.484.494.144.403.844.77Punjab 5.175.494.513.953.583.42Rajasthan 5.815.405.584.764.53 4.51Tamil Nadu 5.59 5.09 5.34 4.48 4.33 3.56Uttar Pradesh 4.09 4.18 3.88 4.23 3.93 4.45Uttarakhand 3.234.734.464.183.75West Bengal 5.99 5.92 5.42 5.46 4.76 4.63All states 5.07 4.97 4.73 4.47 4.15 4.08Source:RBI Bulletin, various Issues.
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SPECIAL ARTICLEEconomic & Political Weekly EPW june 28, 2008213(which are made on the basis of population, public health infra-structure and disease epidemiology) modestly contribute towards greater equity in financing for the other focus states which include most of the larger, poorer states. As the other focus states inNRHM are larger states, increased funding in per capita terms to these states is much lower than to theNE focus states, although still somewhat higher than the non-focus states. In the first two years of NRHM (2005-07), annual per capitaNRHM allocations have been Rs 160, Rs 59 and Rs 46 toNE focus, other focus and non-focus states while states’ per capita health allocations have been Rs 352, Rs 202 and Rs 253, respectively. The share of NE focus, other focus and non-focus states in states’ own total allocation has been around 6 per cent, 41 per cent and 53 per cent, respectively while their respective share in total population has been 4 per cent, 47 per cent and 49 per cent. NRHM allocates 11 per cent, 49 per cent and 40 per cent of total NRHM allocation, respectively toNE focus, other focus and non-focus states and thereby tends to make public health spend-ing more equitable in per capita terms.However, lower utilisation of NRHM allocations inNE focus and other focus states tends to take away the equity advantage built in the programme for the focus states. Comparing NRHM allocations withactual spending for the year 2006-07 for which data is avail-able suggests that non-focus states have better uptake of funds than focus states, and within focus states, resource uptake is betteramong other focus states than the NE focus states. This is evidentfrom the per capita gap betweenNRHM allocations and actual spending; the gap is Rs 49, Rs 16 and Rs 9 among NE focus, other focus and non-focus states. Likewise, the gap between allocations and actual spending as percentage of allocations is 24, 23 and 16, respectively (Figure 7, p 216). These institution-related differences across states vitiate somewhat the effort to allocate more to the poorer states.3 Projecting Public Health Spending Data are now available for the first two years of NRHM (2005-06 and 2006-07) and the mission is expected to run for another five years, through 2012, concurrent with the Eleventh Five-Year Plan. The GoI has made available estimates of the budget for NRHM during the plan period, incorporating a 40 per cent increase each year going forward. Using this and other estimates we ask the question – can India achieve a government expenditure level of 2 per cent of GDP by 2012? Centre’s health expenditure can broadly be grouped into NRHM expenditure and non-NRHM expenditure with the latter including expenditure on secretariat, health, international cooperation, provision for NE states andAYUSH. The centre proposes to increase NRHM expenditure by 40 per cent every year from 2008-09 to 2011-12.12 During the same period we assume that non-NRHM expenditure to increase by 10 per cent every year. Depending onthe assumptions made on the rate of growth of states’ expenditure, we get different estimates of share of government health expenditure inGDP.Using three different annual growth rate of states’ health expenditure, viz, 10 per cent, 15 per cent and 20 per cent, the share Table 3: Centre's and States' Health Allocations(Rupees in crore)Centre's 2004-05 2005-06 2006-07I Health 2687.9 4458.8 4260.8II Family welfare (FW) / NRHM* 5524.7 6519.2 8285.6III AYUSH 225.73 405.98 447.89Centre's total (I+II+III) 8438.3 11384.0 12994.3States' total** 20980.3 24669.7 29137.3Centre's and states' total 29418.6 36053.7 42131.6Population 107.9109.6111.2Per capita public health allocation (nominal) 272.6 329.0 378.8Per capita public health allocation (real) 228.1 263.6 289.8GDP (current prices at factor cost) 2843897 3200611 3717500Share of health allocations in GDP 1.03 1.13 1.13* NRHM programme includes National Disease Control Programmes too which was earlier (till 2004-05) included in Health. To make Health figures comparable over this period, amounts budgeted for National Disease Control Programmes under NRHM have instead been included in Health.** Figures for 2004-05 may be overestimated by maximum of 5 per cent on account of centre's grant for infrastructure maintenance.Source: Expenditure Budget, government of India;RBI Bulletin; Statistical Abstract; Economic Survey of India. Table 4: Statewise Total (States' Own and NRHM) Allocations to Health(Rs in crore)States State NRHM Total Percentage of Allocations*Allocations**Allocations NRHMAllocations in the Total 2005-06 2006-07 2005-06 2006-07 2005-06 2006-072005-062006-07NE focus Arunachal Pradesh 54.7 73.1 28.0 31.9 82.7 105.0 33.8 30.4Assam 546.3 929.9 255.8 513.2 802.0 1443.2 31.9 35.6Manipur 67.9 89.3 38.8 53.8 106.7 143.0 36.4 37.6Meghalaya 106.3 117.8 33.8 52.9 140.1 170.7 24.1 31.0Mizoram 62.4 71.0 32.8 28.5 95.2 99.4 34.4 28.6Nagaland 111.1 118.7 33.0 49.1 144.0 167.8 22.9 29.3Sikkim 51.9 52.7 9.2 14.5 61.1 67.2 15.0 21.6Tripura 199.3 206.4 52.5 66.4 251.7 272.8 20.8 24.3Sub-total 1199.9 1658.9 483.7 810.2 1683.6 2469.1 28.7 32.8Other focus states Bihar 1022.8 1094.1 418.5 599.2 1441.3 1693.3 29.0 35.4Chhattisgarh 373.6 530.7 126.8 174.6 500.4 705.3 25.3 24.8Jharkhand 844.1 920.6 167.7 229.2 1011.8 1149.8 16.6 19.9MadhyaPradesh 929.8 1054.5 302.3 413.1 1232.2 1467.6 24.5 28.1Rajasthan 1198.7 1234.5 290.8 407.9 1489.5 1642.4 19.5 24.8Orissa 665.6 630.8 205.0 284.7 870.5 915.5 23.5 31.1Uttar Pradesh 2638.8 4306.7 797.3 1142.7 3436.0 5449.4 23.2 21.0Uttarakhand 360.9 536.7 54.2 71.9 415.0 608.6 13.0 11.8J and K 580.1 638.2 59.5 65.8 639.6 704.0 9.3 9.4Himachal Pradesh 328.9 362.6 51.4 59.4 380.3 421.9 13.5 14.1Sub-total 8943.3 11309.3 2473.3 3448.5 11416.6 14757.8 21.7 23.4Non-focus states Andhra Pradesh 1628.8 1923.9 302.7 420.1 1931.5 2344.0 15.7 17.9Goa 132.2 146.7 6.7 9.5 138.9 156.2 4.8 6.1Gujarat 937.5 1059.1 333.8 318.5 1271.3 1377.6 26.3 23.1Haryana 432.3 530.2 79.6 117.7 511.9 647.9 15.5 18.2Karnataka 1190.0 1355.4 213.6 298.3 1403.6 1653.7 15.2 18.0Kerala 1110.6 1332.6 127.2 177.2 1237.8 1509.8 10.3 11.7Maharashtra 2037.7 2238.7 356.6 513.0 2394.3 2751.6 14.9 18.6Punjab 725.9 905.0 83.7 128.4 809.6 1033.5 10.3 12.4Tamil Nadu 1721.1 1895.4 239.3 338.6 1960.4 2234.0 12.2 15.2West Bengal 1701.0 1816.6 298.8 433.3 1999.8 2249.8 14.9 19.3NCT Delhi 1002.8 1116.6 31.4 57.2 1034.2 1173.9 3.0 4.9Sub-total 12619.8 14320.2 2073.3 2811.7 14693.2 17131.9 14.1 16.4All states 22763.02 27288.43 5030.35 7070.32 27793.37 34358.75 18.10 20.58* Excludes infrastructure maintenance grants (now a part of NRHM) given by the centre to the states. These grants appear in state budget since these are routed through the treasury route.** Total NRHM allocations reported here are lower than given in Table 3 because some NRHM amount is to be spent at the central level.Source:RBI Bulletin; Statewise NRHM allocations obtained from ministry of health and family welfare.
SPECIAL ARTICLEjune 28, 2008 EPW Economic & Political Weekly214of total government health expenditure in GDP is estimated to be 1.16 per cent, 1.38 per cent and 1.67 per cent, respectively (Table 9, p 215). Thus, even with the most optimistic assumptions of 12 per cent growth of GDP and 40 per cent growth of NRHM spending, public health spending would not meet the stated goal of increasing the spending from the current level of 1 per cent of GDP to 2 per cent in the next five years, i e, by the end of Eleventh Plan (2012).Assumptions and Methodology– For projecting states’ health spending we use actual expendi-ture figure for 2004-05 as the base figure. This is the latest year for which actual expenditure figures are available; – For projecting centre’s health spending we use budget estimates of 2007-08 since actual expenditure figures for the year 2006-07 especially theNRHM figures are not appropriate as these figures are constrained by the spending capacity of states and districts;– We assume nominalGDP to grow at the rate of 12 per cent per annum (7 per cent growth in real terms and 5 per cent annual inflation rate). This is the most conservative growth estimate in the Eleventh Five-Year Plan document;– NRHM funds are partly routed through the treasury and partly through the state health societies. The part, notably infrastruc-ture maintenance, which is routed through the treasury, is already reflected in the budget of health departments at state level, and accordingly already captured in the states’ estimates. To avoid double counting, an estimate was made of the share of infrastructure maintenance in total NRHM allocations which was 31 per cent during 2005-08. Assuming the share of infrastructure maintenance inNRHM allocations to remain at this level, 31 per cent of projected NRHM spending was subtracted from projected states’ spending to arrive at adjusted spending by the states.These projections show that the government’s stated goal to increase spending to 2 per cent-3 per cent of GDP may not be based on realistic estimates. Achieving a year on year increase of 40 per cent in central government allocations to NRHM alone is ambitious. In India’s federal financing structure for health, states account for a much larger share of total government spending than the centre. As a result, even such large increased central allocations would still be insufficient to achieve the target of 2 per cent of GDP using conservative estimates of GDP growth. Large sustainable increases in government healthcare financing will require much greater participation by the states or a significant restructuring of the centre and states responsibilities in the sector. It is also worth asking whether it is desirable to build a rapid, large increase of government health spending primarily on centrally-sponsored scheme mechanisms. Ultimately, the states must bear the burden of sustaining service delivery. Indeed, much of the additional NRHM budget is providing support for recurrent costs which in principle must be picked up by the states eventually. 4 ConclusionsWe have examined carefully recent trends in government spend-ing on health in India, in light of theGoI’s calls for increasing that spending to “2-3 per cent” of GDP in the coming years. The available information on government health spending shows clearly that spending was declining prior to 2004. The National Commission on Macroeconomics and Health reported this as a longer-term trend extending over decades [Rao et al 2005]. More recent data suggests that a significant part of this decline is due to reductions in states’ spending on social services overall and, within that, health spending. A decline in central spending relative toGDP also occurred, although in total terms this was smaller.Table 5: Twelfth Finance Commission Health Grants to Selected States(Rs in crore) Pop 2004 2005-06 2006-07 2007-08 2008-09 2009-10 2005-10 Per Capita Aid InMillion INRAssam 27.9 158.6 171.2 190.9 212.9 237.4 971.0 348.3Bihar 87.7 289.3 322.6 359.7 401.0 447.1 1819.7 207.4Jharkhand 28.4 57.4 64.0 71.4 79.6 88.7 361.0 127.2MadhyaPradesh 64.0 28.9 32.2 35.9 40.0 44.6 181.6 28.4Orissa 38.1 31.2 34.8 38.8 43.3 48.3 196.4 51.6Uttar Pradesh 176.4 367.6 409.9 457.0 509.6 568.2 2312.4 131.1Uttarakhand 8.9 10.0 10.0 10.0 10.0 10.0 50.0 56.0Total 431.4 943.0 1044.7 1163.7 1296.4 1444.3 5892.1 136.6Source: Report of the Twelfth Finance Commission of India;Statistical Abstract of India.Table 6: Share of Twelfth Finance Commission Health Grants in Total State Health Allocations(Rs in crore)States Receiving State State TFC TFC Grant State TFC TFC Grant Allocation Allocation Grants as % of State Allocation Grants as % of State 2004-052005-062005-06Allocation2006-072006-07AllocationAssam 681.9 627.9 158.6 25.3975.9 171.2 17.5Bihar 709.311,146.2 289.3 25.21,228.3 322.6 26.3Jharkhand 400.25901.5 57.46.4 977.1 64.06.6Madhya Pradesh 966.99 1051.0 28.9 2.7 1,165.6 32.2 2.8Orissa 709.97736.231.24.2705.034.84.9Uttar Pradesh 2,384.36 2,877.2 367.6 12.8 4,561.2 409.9 9.0Uttarakhand 319.74378.410.02.6556.510.01.8Source: Report of the Twelfth Finance Commission of India;RBI Bulletin.Table 7: NRHM Budget Allocation and Expenditure: 2006-07(Rs in crore)NRHM Sub-heads Budget Total Gap between TE and Allocation (BA) Expenditure (TE) BA as Percentage of BANational disease control programme 829.47 698.39 -15.80Direction and administration 254.56 153.63 -39.65Rural FW services 1,556.68 974.75 -37.38Urban FW services 125 73.6 -41.12Basic training for ANM/LHVs 66.8 37.34 -44.10Maintenance and strengthening of HFWTCs 13.3 7.34 -44.81Basic training for MPWs 8 4.36 -45.50Strengthening of basic training schools 2.15 1.97 -8.37Contraception 351.52377.947.52Area projects 216.27 120.96 -44.07RCH programme 268.88 10.84 -95.97Routine immunisation 345 228.82 -33.68Pulse polio immunisation 1,049 1,064.61 1.49RCH flexible pool of state PIPs 1,705.72 1,427.03 -16.34Mission flexible pools 1,943.18 2,069.36 6.49IEC 132.7394.97 -28.45Training institute under the centre 35.68 28.38 -20.46Research 51.761.2418.45Other FW services 75.15 17.28 -77.01Other schemes 2.64 2.39 -9.47Total 9,033.437,455.2-17.47FW: family welfare; ANM: auxiliary nurse midwife; LHV: lady health worker; HFWTCs: health and family welfare training centres; MPWs: multipurpose health workers; PIPs: projected implementation planning.Source: NRHM Expenditure Statement provided by the Ministry of Health and Family Welfare.
SPECIAL ARTICLEEconomic & Political Weekly EPW june 28, 2008215 The overall trend has been clearly reversed in the last several years, prima-rily through increased allocations by the centralgovernment under the NRHM. Further increases are anticipated over the period of the Eleventh Five-Year Plan. However, our analysis suggests that, even with very optimistic assump-tions, these increases will not be suffi-cient to attain the stated goal of even 2 per cent ofGDP by 2012. There are two significant factors which explain this conclusion. First, in India’s federal financing structure for government health services, states are the principals. Even with increasing central financing, states still account for 70 per cent or more of total government health spending. Simple arithmetic indicates that to achieve a doubling or tripling of spending primarily through increasing the amount contributed by a minority funder (the centre) would be tough going. For example, a 10 per cent increase in states’ expenditure is equivalent to, other things being equal, a more than 30 per cent increase in the centre’s. Therefore, any overall strategy to achieve sizeable increases in total government health expenditure should logically include a strategy to increase state’s spending. To date, this strategy is not very apparent, except for the recent finance commission increases which, as we have shown, are not sizeable enough to have a major impact on the totals. The second factor is related to ability to spend. Most of the state-ments to date about increased government spending relate to budgets, not expenditures, whereas the historical review measures actual spend-ing. There is already evidence accumulat-ing that both centre and states may not be fully able to disburse increased alloca-tions in a timely way and that the lagging states may suffer more from this short-coming, reducing the pro-poor state level allocational equity of increased NRHM budgets. A significant share of the large central budget increase for health in 2006-07 was returned to the treasury unused and an additional amount, unknown to us, may still be lying unspent in the states and districts. This suggests that government departments need to strengthen the ability to spend alongside increased allocations. To be sure, this is being done, but will it keep pace with the sizeable budget increases projected for the Eleventh Plan? This paper examined some fairly narrow questions concerning what government isspending, what has been the impact on spend-ing of recent increases, and what are the prospects for achieving stated expenditure goals? But in concluding, there are two larger questions we would like to raise for future consideration. Is the goal of 2-3 per cent of GDP for government spending on health a sensible goal? A recent review of the question “what should a country spend on healthcare?” [Savedoff 2007] finds that usually quantified goals for spending are not based on much solid analysis. While one could comfortably argue, based on international comparisons and immense unmet needs, that government could spend more on health than it has in the past, setting a specific goal for government spending should really be based on an analysis of what the government wants to achieve with its spending and what it would cost to achieve it (including the relative effectiveness of government spending). The National Commission on Macroeconomics and Health made an important contribution to that discussion but left many questions unanswered. India has already set out on the road of increased spending. More work should be done to make explicit what increased government spending should buy in terms of better health and for whom it should buy it. An important related question is whether government is using the right institutional mechanisms to achieve its goals for increased allocations for health? International experience certainly shows that as most countries Table 8: Average Per Capita State Health Spending 2002-05NRHM Non-Focus States INR NRHM Focus States INR NEFocus West Bengal 174.10 Assam 140.40Haryana 174.34Manipur 283.61Gujarat 179.28Tripura 306.60Andhra Pradesh 192.12 Meghalaya 421.41Karnataka 192.40Nagaland 526.29Maharashtra 195.05ArunachalPradesh712.18Tamil Nadu 207.00 Sikkim 881.91Punjab 251.13Mizoram898.56Kerala 270.21Other Focus NCT Delhi 530.35 Bihar 84.76Goa 806.10 Uttar Pradesh 115.04 Madhya Pradesh 136.73 Chhattisgarh 141.02 Orissa 147.86 Jharkhand 154.51 Rajasthan 178.53 Uttarakhand 252.04 J and K 491.07 Himachal Pradesh 557.11Source: State Finances of India,RBI Bulletin; 2001 Census of India.Table 9: Projections of Total Public Health Spending(Rs in Crore)Rate of Growth Year on Year (YoY) of NRHM and non-NRHM Expenditure is 40% and 10% Respectively 2007-08 2008-09 2009-102010-11 2011-12(i) NRHM 9,839 13,775 19,284 26,998 37,798(ii)Non-NRHM 6,017 6,6197,281 8,009 8,809(includes expenditure on secretariat, health, international cooperation, provision for NE states and AYUSH) centre ((i) + (ii)) 15,856 20,393 26,565 35,007 46,607Scenario 1: Compound Rate of Growth of States’ Expenditure Is 10% (iii a) States 26,110 28,721 31,593 34,752 38,228(iii b) States' adjusted 23,060 24,451 25,615 26,383 26,510(Part of NRHM that flows through treasury is included instate budget; to avoid double-counting we must deduct this part from projected states' spending; since 31 per cent of NRHM allocations during 2005-08 were to flow through treasury, the same is subtracted from projected states' spending to arrive at states' adjusted figure in all the three scenarios.)Total public health spending in scenario 1 [(i) + (ii) + (iii b)] 38,916 44,844 52,180 61,390 73,117Scenario 2: Rate of Growth (yoy) of States Expenditure is 15% (iv a) States 29,835 34,310 39,456 45,375 52,181(iv b) States' adjusted 26,785 30,040 33,478 37,005 40,464Total public health spending in scenario 2 [(i) + (ii) + (iv b)] 42,641 50,433 60,043 72,012 87,071Scenario 3: Rate of Growth (yoy) of States Expenditure is 20 %(v a) States 33,898 40,677 48,813 58,576 70,291(v b) States' adjusted 30,848 36,407 42,835 50,206 58,573Total public health spending in scenario 3 [(i) + (ii) + (v b)] 46,704 56,801 69,400 85,213 1,05,180GDP 39,95,471 44,74,927 50,11,918 56,13,348 62,86,950(assuming nominal rate of growth of GDP to be 12 % per annum) Health spending to GDP ratio in scenario 1 0.97 1.00 1.04 1.09 1.16Health spending to GDP ratio in scenario 2 1.07 1.13 1.20 1.28 1.38Health spending to GDP ratio in scenario 3 1.17 1.27 1.38 1.52 1.67
0 100 200 300 400 NE Focus Other Focus Non-focus States NRHM
0 5 10 15 20 25 0 10 20 30 40 50 NE Focus Other Focus Non-focus Per capita difference between allocations and actuals Difference between allocations and actuals as % of allocations

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