Covid-19: Public health expenditure to increase up to 2.5% of GDP by 2025

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Updated: Jul 14, 2020 8:40 AM

In its representation to the FFC, the health ministry also suggested criteria for state specific grants and performance based incentives.

The latter will help states that have significant funding needs and health lag.The latter will help states that have significant funding needs and health lag.

In a meeting with Fifteenth Finance Commission (FFC), health ministry on Monday said Rs 6.04 lakh crore will be required to fund healthcare during the FFC’s five-year award period FY22-FY26 as new areas including post-Covid health sector reforms need support. The new estimate is higher by Rs 1 lakh crore or 21% than the ministry’s previous estimate of Rs 4.99 lakh crore for the period.

In its representation to the FFC, the health ministry also suggested criteria for state specific grants and performance based incentives. For untied funds, it proposed earmarking minimum 10% of fund for the health sector with at least 2/3rd being reserved for the primary health and gaps in funding for primary healthcare in states to be used as a criteria to get more funds and prioritise spending on health. The latter will help states that have significant funding needs and health lag.

For performance based incentives, the ministry suggested a Composite Health Index to encourage states to demonstrate performance on year-on-year basis, which will have a weightage of 20% in the performance linked pool, according to a statement issued by the government.

The Commission, which has submitted its award for FY21, is scheduled to submit its report in October on vertical and horizontal distribution of central taxes and grants for five years through FY26.

The FFC held meeting with health minister Harsh Vardhan and senior officials on the specific issues of revising the state specific proposals of the ministry in light of the Covid-19 experience, exploring the possibility of back loading of funding in the light of fiscal strain and consideration of the suggestions of the High Level Group of the Commission on health.

Looking at the peculiar state of the pandemic, the Commission has decided to have a separate Chapter on Health in its final report to the government, Finance Commission chairman NK Singh said.

The ministry, in a detailed presentation to the Commission, highlighted the National Health Policy (NHP) 2017 targets which aim to increase public health expenditure to 2.5% of GDP (from about 1.3% now), in a progressive manner, by 2025. Presently, 35% of the public health expenditure is done by the Centre and and65% by the state governments. The pandemic has established the importance of the need to strengthen the public health sector, surveillance and public health management, preventive and promotive healthcare with special focus on urban health.

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