By Dr Saswat Kishore Mishra Covid-19 has thoroughly exposed our shambolic state of healthcare infrastructure and human capital. After the brutal onslaught of the Delta variant, India showed terrific resilience and it seemed that our economy was limping back to normalcy. But suddenly we find ourselves amid the third wave, once again plunging us into […]
By Dr Saswat Kishore Mishra
Covid-19 has thoroughly exposed our shambolic state of healthcare infrastructure and human capital. After the brutal onslaught of the Delta variant, India showed terrific resilience and it seemed that our economy was limping back to normalcy. But suddenly we find ourselves amid the third wave, once again plunging us into a state of fear and uncertainty.
While our economy is projected to grow at 8.7% in 2022-23 by the World Bank, the union Budget 2022-23 presents a glimmer of hope that can redefine healthcare priorities and strengthen health systems across the continuum of India’s rural-urban setting. The impending question, however, is how can the union Budget for the next fiscal year move the needle in the healthcare sector?
Stronger Workforce
In 2021-22, Rs 71,269 crore was allocated for the Ministry of Health and Family Welfare (MoHFW). An additional amount of Rs 35,000 crore was separately assigned for Covid vaccination. In the first supplementary demand for grants, another Rs 17,000 crore was allotted to MoHFW, taking the total allocation to Rs 88,269 crore. However, until November 2021, just Rs 44,899 crore was utilised, ie, about 63% of the Budget estimate of 2021-22. This brings into question the absorption capacity of States as far as the healthcare ecosystem is concerned. The utilisation rate depends on the capacity that exists within the health systems to utilise it efficiently. Indian healthcare systems have been crippled not only with inadequacies in capital infrastructure but also the unavailability of a multi-layered, multi-skilled health workforce at different levels.
Of late India has been spending more on infrastructure. However, infrastructure will remain underutilised if not met with complementary human resources. Hence, the government should invest in building up the health workforce and strengthening district hospitals. The healthcare sector emerged as the fourth largest employer in 2021. The government should seize this unique opportunity presented by an expected rapid growth of the healthcare market to leverage its direct impact, multiplier effects and distributional benefits.
PMJAY Allocation, Innovation
In 2021-22, the government allocated Rs 6,400 crore to Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY). A study by the 15th Finance Commission estimated that the total costs (Centre and States) of PMJAY could range between Rs 66,000 crore and Rs 1,60,089 crore in 2023, accounting for inflation and considering all targeted beneficiaries are covered. The government must up the ante on PMJAY allocation considerably given its bearing on out-of-pocket health expenditure made by consumers and assuming that the demand for non-Covid care is likely to increase in future.
It is ironic that India currently holds a global market share of only 1.5% by value (14th rank in the world) despite accounting for nearly 10% of the global pharmaceutical production (3rd rank in the world). Pharmaceutical exports from India stood at $24.4 billion in FY21. They flourished at a compound annual growth rate (CAGR) of 6.2% during 2015-16 and 2020-21. But this was largely driven by exports of generic drugs.
To capture a greater market share of the global pharma by value, India needs to move on from generics and invest more in drug innovation through R&D. But the Gross Expenditure on R&D (GERD) in India has almost stagnated between 0.6% and 0.7% of GDP between 1995-96 and 2019-20. Moreover, in advanced countries, the private sector carries out the bulk of the R&D contributing nearly 70% to GERD. In India, however, the government is both the primary source of funding and so also its primary user with the private sector contributing less than 40% to GERD. The government needs to adequately incentivise the private sector to invest in R&D.
Private Participation
As part of their CSR, the government recently allowed corporates to invest in technology business incubators or contribute to research efforts carried out by institutions and national research laboratories. But this may not be enough. If India were to ramp up GERD to a level proportionate to the size of its (a $3-trillion) economy, the private sector expenditure on R&D must rise to prominence. The government should consider reversing the current weighted tax deduction from 100% to 200% to boost the R&D ecosystem. In addition, the government should consider offering the benefit of 15% corporate tax rate to those companies which spend more than 10% of their revenue on R&D.
In terms of allocation for Covid vaccination, the government should allow the industry to meet the demand for additional vaccines, after delivering on its current commitments on universal vaccination for the target groups. Since the vaccine supply has clearly outpaced the demand in India, the vaccine budget is likely to come down considerably. Therefore, the focus should be more on the development of novel vaccines and the export market which would also enhance India’s global image.
The overall public health expenditure in the country merely increased from 0.9% of GDP in 2015-16 to 1.17% of GDP in 2020-21. Further, the Economic Survey 2020-21 points out that India ranks 179th among 189 countries in prioritising healthcare in the government budget. However, the National Health Policy, 2017, draws a bead on increasing public health expenditure to 2.5% of the GDP by 2025. The Finance Minister’s presentation of the union Budget 2022-23 will, in fact, typify whether the targets are merely figurative or India is actually prepared to move the needle in the healthcare sector.