The health effect

Written by Bibek Debroy | Updated: Nov 17 2008, 08:26am hrs
The points about a young population, declining dependency ratios and demographic transition are obvious enough and are referred to as Indias demographic dividend. The argument is expressed both in relative and in absolute terms, though this is not a neat and watertight division.

In relative terms, one brings in the ageing populations from the rest of the world; meaning not just the developed countries, but also countries like Russia and China. The share of working-age populations will decline in those countries, but increase in a country like India. This enables India to tap its labour cost advantage, through emigration, temporary exports of skilled personnel (with increased remittance inflows) and off-shored relocation of production to India. Stated in absolute terms, one doesnt necessarily bring in the rest of the world, but focuses on changes internal to the country. For instance, per capita GDP growth is positively correlated with the relative size of the working population and there are several complicated forces at work.

First, there is the direct impact of a larger quantity of labour input. Second, when dependency ratios decline, savings rates increase, leading to increases in investment rates and higher rates of GDP growth. Third, if the decline in dependency ratios is at the lower end of the age spectrum as a result of fertility declines, female work participation rates increase. That too, increases GDP growth. For East Asia, several studies suggest that between 25 to 40% of the East Asian miracle was due to the demographic dividend.

Consequently, the contribution of the demographic dividend to future Indian GDP growth has been discussed quite a bit. That the demographic dividend argument works, is known. Other than East Asia, it has worked in Japan in the 1950s, China in the 1980s and Ireland in the 1980s and 1990s. The problem is that it is virtually impossible to quantify the contribution of this demographic dividend to GDP growth, because that increment to growth requires several preconditions. Having said this, some back of the envelope calculations exist on what this demographic dividend may mean to India. These suggest that since the 1980s, the increment to GDP growth because of this has been of the order of 0.7% and that by 2020, this increment could increase to around 1.5%.

Most of Indias success in moving towards MDGs is growth-related, such as reduction in hunger or drop in the percentage of population below the poverty line. But, in addition, education indicators have also tended to improve. Why hasnt this success in education been replicated in the case of health

For instance, the MDG target requires an under-five mortality rate of 41 (per thousand) by 2015, but present trends suggest an actual figure of around 64 by then. The infant mortality rate (per thousand) will be around 47 by 2015, as against a target of 28. A diagnosis of what causes health problems is necessary before arriving at policy conclusions. For example, nutrition and anemia account for more than 50% of under-five deaths. High infant mortality is primarily due to pre-mature births, low birth weights, absence of post-partum care, diarrhea, lack of immunization and respiratory infections, not to speak of social problems like female infanticide. More than three-fourths of maternal deaths are due to hemorrhage, sepsis, obstructed labour, abortions, toxemia and abortions, all indicating lack of access to antenatal health services. The remaining one-fourth of maternal deaths is due to anemia, TB/malaria and viral hepatitis. The 1998-99 National Family and Health Survey reported that only 65% of mothers received antenatal checkups. Improvements in health indicators are thus more complicated outcome improvements than improvements in education indicators.

In discussing Indian health outcomes, one mustnt lose sight of the fact that there are considerable inter-state and inter-regional differences. All health indicators vary enormously from state to state, and one should not forget that under the Seventh Schedule to the Constitution, health is a state subject. Today, the infant mortality rate is 14 in Kerala and 96 in Orissa. The measles immunization coverage (for children between 12 and 23 months) varies between 16% in Bihar and 90% in Tamil Nadu. There are also variations within states.

Against the background of these inter-state and inter-regional differences, there are six points that need to be made. First, even among the poor, and especially in urban areas, there is a de facto privatization of health services that is going on. Because it is de facto rather than de jure, it functions in the absence of any satisfactory and comprehensive regulation. Second, in rural areas, public sector delivery is often the main recourse even now. Third, it is no longer the case, unlike in the 1950s, that physical access is the problem. For example, primary health centres ostensibly exist. Fourth, efficiency of public sector health expenditure is the key constraint and this is particularly acute in the backward states and regions mentioned earlier, highlighting a general governance problem. Fifth, there is the associated problem of corruption in public service health delivery.

Contrary to what one might a priori assume, a recent study found that 27% of petty and retail corruption is due to the health sector, more than the police, taxation and land administration. Sixth, the demographic dividend, in terms of additions to the labour force and declines in dependency ratios, is going to occur in these backward regions and states.

There is no automaticity about changes in age-structures of the population, of which a manifestation is the demographic dividend, resulting in increments to real growth rates. Since India doesnt perform that well on the health indicators, the demographic dividend can very easily turn into a demographic deficit. And the policy question remains. What can possibly be done to prevent this from happening There is a large health infrastructure and there are several government programmes, with or without the involvement of the voluntary and private sectors. The National Health Policy (1983), the Drug Policy (1986), the National Nutrition Policy (1993), the National Population Policy (2000), the Revised National Health Policy (2002), the Policy on Indian Systems of Medicine (2002), the Pharmaceutical Policy (2002) and universal health insurance schemes for the poor (2003), all have something to do with health, directly or indirectly.

Having diagnosed the nature of the problem, how does one resolve it If one uses the National Health Policy (2002) to track what the policy intentions are, one arrives at something like the following agenda: (1) Increase public expenditure on health from 0.9% to 2% by 2010; (2) Allocate public health investment in the ratio of 55% for the primary health sector, 35% for the secondary sector and 10% for the tertiary sector; (3) Barring TB, malaria and HIV/AIDS, converge all health programmes under a single administration; (4) For those who can afford to pay, levy user charges for some secondary and tertiary public health services; (4) Impose a mandatory two-year rural posting before awarding graduate medical degrees; (5) Implement health programmes through institutions of local self-government; (6) Set up a Medical Grants Commission to fund new government medical and dental colleges; (7) Increase post-graduate seats in public health and family medicine; (8) Establish a two-tier urban health-care system through a Primary Health Centre (PHC) for population sizes of 100,000 and a public general hospital for larger populations; (9) Increase government-funded health research to 2% of total health expenditure; (10) Allow private sector entry, with legislation to regulate private clinical establishments; (11) Formulate procedures for accreditation of public and private health facilities; (12) Co-opt NGOs in national disease control programmes; (13) Promote tele-medicine; (14) Operationalise a National Disease Surveillance Network; (15) Notify a code of medical ethics through the Medical Council of India; (16) Promote medical services for overseas users; (17) Encourage and promote Indian systems of medicine; and (18) Encourage private sector entry in medical insurance.

Per se , there is little that is objectionable in this agenda. However, a core question remains. Where is the role of choice and competition in all this If one focuses on government documents, one doesnt get the sense that the possibility of choice is yet accepted.

The author is a noted economist