Comparing India’s Healthcare Spending with OECD Countries

We often talk about the latest medical technologies or a famous doctor’s advice, but we rarely stop to ask a more fundamental question. How much money are we, as a country, actually putting into our healthcare system? The answer, when compared to other nations is a little unsettling.

Countries in the OECD, a group of mostly developed economies typically spend about 8 to 9 percent of their GDP on keeping their citizens healthy. Some like Italy, spend around 9 percent, while others like Singapore, manage efficiency at 5 percent. Now, look at India. Our combined public and private spending adds up to roughly 3.5 percent of our GDP, less than half the global average. What is more striking is that our own National Health Policy of 2017 set a goal of 2.5 percent for public spending alone, which we are still working towards. This gap in investment is not just a number on paper; it has real consequences for millions of Indians.

Effect of underfunding:

When a country of over a billion people does not invest enough in healthcare, the effects appear in two very clear ways.

First, the direct hit to your wallet. When the government’s share of healthcare spending is low, the burden shifts to individuals. In India, an alarming 47 percent of all health expenses are paid directly out of pocket by patients and their families. This is why a single hospitalization can wipe out a family’s savings. Reports suggest that massive medical bills push nearly ten crore Indians into poverty each year. It is a painful reality where financial stability is sacrificed for physical health.

Second, the system itself gets stretched thin. The World Health Organization recommends a doctor to population ratio of 1:1,000. In India, we have one government doctor for every 1,511 people. This shortage means doctors and nurses are overworked and patients face long waits. The problem deepens when we consider geography. Over 70 percent of our hospitals and clinics are in cities, leaving vast rural populations with limited access to care. This forces villagers to travel long distances or depend on costly private facilities, furthering the financial strain.

 

Why the gap?

Understanding why this gap exists is essential. It is not a simple story.

A major factor is India’s limited tax base. Our tax to GDP ratio is around 11.7 percent, while the OECD average is a much higher 34 percent. In simple terms, the government has a smaller pool of money to distribute. Healthcare must compete with other critical sectors like education, infrastructure and defense, which alone received 13 percent of the 2023 budget. It is a continuous game of tough choices.

Then comes the challenge of execution. Even when funds are allocated, ensuring they are effectively used is complex. Bureaucratic delays often slow projects. The ambitious Ayushman Bharat Digital Mission, for example; has faced gradual implementation due to infrastructure and adoption challenges. There have also been instances of fraud and mismanagement in some schemes, where funds fail to reach the intended beneficiaries.

 

Closing the distance:

The picture is not entirely bleak. Conscious efforts are being made to bridge this gap. The government’s flagship program, Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), offers health insurance coverage of up to ₹5 lakh per family per year for vulnerable sections, benefiting crores of citizens. Alongside, the Ayushman Bharat Health Infrastructure Mission (AB-HIM) is strengthening healthcare infrastructure, particularly in districts to prepare for future health emergencies.

The road ahead requires a multi layered approach:

1. Increase public health spending steadily to achieve and surpass the 2.5 percent of GDP target.
2. Strengthen primary and preventive care, especially in rural areas to avoid minor issues escalating into major emergencies.
3. Explore creative funding models such as public private partnerships and targeted taxes on products like tobacco.
4. Address the “missing middle”; those not poor enough for government schemes but unable to afford private insurance.

 

The bottom line:

A nation’s health budget reflects its priorities. The gap between India’s healthcare spending and that of developed nations is significant, but it also presents a tremendous opportunity. By investing wisely, implementing schemes effectively and shifting our focus from treating illness to promoting wellness, India can change its healthcare narrative.

This conversation concerns all of us, because behind every percentage point and every statistic is a person waiting for care, a family hoping for well-being and a nation striving for a healthier future.

 

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