Health expenditure in India
C. P. Chandrasekhar
Jayati Ghosh There are perceptions that government spending on health in India, which is low by international standards, has been further undermined during the period of economic liberalisation since the early 1990s. In the first of a two-article Macroscan on this subject, C. P. Chandrasekhar and Jayati Ghosh examine the relative significance of public and private expenditure on health and the trends in Central Government expenditure. The next edition will analyse health expenditure by State governments in the recent past. |

In the past decade, Central Government expenditure on woman and child development has remained relatively constant as a share of GDP - Mahesh Harilal
It is well known that health expenditure in India is dominated by private spending. To a large extent this is a reflection of the inadequate public spending that has been a constant if unfortunate feature of Indian development in the past half century.
This is particularly unfortunate because of the large positive externalities associated with health spending, which make health spending a clear merit good.
The greater reliance on private delivery of health infrastructure and health services therefore means that overall these will be socially underprovided by private agents, and also deny adequate access to the poor. This in turn has adverse outcomes not only for the affected population but for society as a whole. It adversely affects current social welfare and labour productivity, and of course harms future growth and development prospects.
The two main characteristics of healthcare which lead to market failure and thus necessitate state intervention are the presence of externalities and information asymmetries.
An externality results when an action of an agent has an effect not only upon the agent but also upon others. If a good or