| What the Health Budget Signals, and What It Still Avoids? | | | Dr Manorama Bakshi
Public policy scholar Thomas Dye defined public policy as what governments choose to do and choose not to do. Annual budgets make this definition tangible. They are not merely fiscal documents. They are political and economic statements that reveal priorities, constraints, and institutional intent. Equally important, they reveal what remains deferred. In health financing, omissions often matter as much as allocations.
The Union Budget 2026, 27 must therefore be assessed not only through headline increases, but through the lenses of adequacy, composition, and alignment with India’s demographic and epidemiological realities.
Headline Allocations and Policy Direction
For 2026, 27, the Ministry of Health and Family Welfare has been allocated Rs 1,06,530.42 crore, representing an increase of about 10 percent over the revised estimates of the previous year. Crossing the Rs 1 lakh crore threshold is a notable fiscal milestone. It signals that health has acquired greater visibility within national spending priorities, though visibility alone does not guarantee sufficiency.
Beyond aggregate numbers, the Budget introduces several notable policy measures. The Biopharma SHAKTI initiative, with an outlay of ₹10,000 crore over five years, seeks to position India as a global hub for biologics and biosimilars. This reflects a strategic recognition that diseases such as cancer, diabetes, and autoimmune disorders are no longer peripheral concerns, but central to India’s disease burden and long term healthcare costs.
The proposal to establish five Regional Medical Value Tourism Hubs marks an explicit attempt to align health policy with employment generation, exports, and India’s global healthcare footprint. By integrating medical services with education, research, AYUSH, diagnostics, and rehabilitation, the Budget links health expenditure to economic activity beyond domestic service delivery.
The Budget also places visible emphasis on the health workforce, particularly allied health professionals. Plans to upgrade existing institutions and expand training across ten disciplines, with a target of adding 100,000 professionals over five years, address long standing skill gaps that constrain service delivery at secondary and tertiary levels.
Equally significant is the introduction of a structured care ecosystem for ageing, including NSQF aligned training for multi skilled caregivers and a target of training 1.5 lakh caregivers in the coming year. This is an overdue acknowledgement that population ageing is no longer a future concern, but a present economic and social reality.
Continued investments in AYUSH and traditional medicine, expansion of mental health infrastructure, and customs duty relief on select cancer and rare disease drugs further indicate policy responsiveness to emerging needs and affordability pressures.
Taken together, these measures demonstrate intent, breadth, and a willingness to respond to workforce gaps, ageing, strategic manufacturing, and selected cost burdens.
What These Measures Mean in Real Terms
Having acknowledged these positive provisions, it is equally important to examine what they imply in real fiscal and system terms.
First, real growth remains limited. While nominal allocations have increased by about 10 percent, medical inflation driven by medicines, diagnostics, technology, and workforce costs remains in the range of 6 to 8 percent. Population growth and ageing add further pressure of roughly 1 to 1.2 percent annually. Once these factors are accounted for, the effective fiscal space for new capacity creation is narrow. In practical terms, the Budget largely sustains the existing system rather than enabling a decisive expansion.
Second, the balance between service delivery and research remains skewed. Nearly 95.5 percent of health spending flows to the Department of Health and Family Welfare, while only about 4.5 percent is allocated to health research. This remains modest in the context of India’s epidemiological transition, where non communicable diseases account for more than 60 percent of mortality, and where preparedness for pandemics, antimicrobial resistance, and climate related health risks is increasingly critical.
Third, treatment and hospital based care continue to dominate spending. Investments in hospitals and infrastructure are necessary, but primary prevention, public health surveillance, and community level interventions have not seen proportionate scaling, despite strong evidence that these deliver the highest long term economic returns.
This is where the role of Ayushman Bharat Arogya Mandir becomes central. If India is serious about containing costs, protecting productivity, and reducing household financial distress, primary health care must move from being a programme to becoming the backbone of health financing. Strong Arogya Mandirs that provide diagnostics, medicines, screening, and continuity of care are essential to managing hypertension, diabetes, mental health conditions, and early stage cancers before they escalate into costly hospital episodes.
Fourth, while initiatives such as Biopharma SHAKTI and medical value tourism hubs send strong strategic signals aligned with industrial policy and exports, their population health impact will depend on execution, particularly on public procurement, pricing, affordability, and integration with public health planning rather than parallel systems.
Fifth, the Budget rightly recognises workforce gaps through allied health and caregiver training. However, budget documents remain unclear on absorption into public systems, wage protection, career progression, and deployment in underserved regions. Training without assured deployment risks creating skilled but underutilised human capital.
Health Financing in Perspective
When central and state expenditures are combined, India’s public health spending remains at approximately 1.9 to 2.1 percent of GDP, well below the 2.5 percent target set in the National Health Policy and significantly lower than most middle income countries. In per capita terms, the Union health budget translates to roughly ₹700 to ₹750 per person per year, or about ₹2 per person per day. This amount must finance hospitals, medicines, diagnostics, public health programmes, workforce salaries, surveillance systems, and increasingly digital health and artificial intelligence.
Despite insurance expansion, out of pocket expenditure still constitutes approximately 45 to 50 percent of total health spending in India. Most household health expenses arise from outpatient care, medicines, and diagnostics, areas that remain largely outside insurance coverage. Duty waivers on select drugs offer relief, but they do not substitute for systematic public investment in primary care and outpatient services.
Conclusion, Stability without Reframing
Budget 2026, 27 reflects fiscal stability, selective ambition, and incremental reform. It addresses several emerging priorities, particularly workforce development, strategic manufacturing, mental health, ageing, and selected affordability concerns. At the same time, it stops short of a deeper reframing of health as economic infrastructure rather than social expenditure.
Until productivity loss, unpaid care burdens, ageing, and chronic disease management are explicitly financed at scale, India will continue to bear the economic costs of ill health outside formal budget accounting. Health expenditure, in this sense, remains reactive rather than strategic.
Health is not merely an outcome of development.
Health is a precondition for sustainable economic growth.
Dr. Manorama Bakshi is Director & Head of Healthcare & Advocacy at Consocia Advisory, Founder & Director of the Triloki Raj Foundation, and a Senior Visiting Fellow at IMPRI |
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