Public health needs Rs 3.56 lakh crore more annually, 16th Finance Commission flags gap in government spending

India requires an additional Rs 3.56 lakh crore every year to adequately fund public health, the 16th Finance Commission has said, pointing to a persistent shortfall in government spending on healthcare across the country.

In its assessment of health sector financing, the Commission noted that public expenditure on health remains well below the level required to meet population needs, manage disease burden, and strengthen health systems. The gap, it said, affects the capacity of states and the Centre to deliver essential health services, invest in preventive care, and respond to public health emergencies.

The Commission observed that while government health spending has increased in recent years, it has not kept pace with rising costs, demographic pressures, and the growing demand for quality healthcare. It underlined that inadequate funding continues to strain primary healthcare, public hospitals, and health workforce availability, particularly in rural and underserved regions.

Highlighting inter-state disparities, the panel pointed out that poorer and high-burden states face a sharper resource crunch, limiting their ability to improve health outcomes. It stressed the need for higher and more predictable fiscal transfers for health, along with better utilisation of funds, outcome-based spending, and stronger accountability mechanisms.

The Commission also flagged the importance of aligning health financing with long-term goals such as disease prevention, nutrition, sanitation, and health infrastructure development. Without sustained increases in public investment, it warned, India risks falling short of its health targets and widening inequalities in access to care.

The findings are expected to feed into the Commission’s broader recommendations on tax devolution and grants to states, as the government prepares its future fiscal roadmap for the health sector.