The Finance Minister of India presented her seventh consecutive Budget for the fiscal year 2024-25 on July 23, 2024. The Budget deserves credit for aggressive fiscal consolidation to create fiscal space for the future shocks. The government has lowered its fiscal deficit target for the fiscal year 2024-25 to 4.9% of gross domestic product (GDP), down from the 5.1% target set in the Interim Budget and sharp reduction from 5.9% last year (2023-24). The fiscal deficit will be reduced further to 4.5% by fiscal year 2025-26. This is crucial for maintaining fiscal discipline, ensuring macro-economic stability and attracting foreign investment. The allocation of resources between growth-enhancing capital expenditure and welfare-enhancing revenue expenditure appears fair and just, in the context of current political economy.

Another positive takeaway from the Budget is the government’s thrust towards skilling and employment generation for the youth. The government has come out with several employment and skill development schemes that will address the problem of jobs. For instance, it is proposed to target 4.1 crore youths with a central outlay of Rs. 2 trillion over five years. This includes various schemes like Employment Linked Schemes, support to first-time employees, incentives for manufacturing for job creation, and support to employers. In addition, a new-centrally sponsored programme for skilling, in collaboration with the states and other stakeholders, is expected to benefit 20 lakh youths over five years. This is a huge opportunity to leverage India’s demographic dividend. However, the success of these schemes will depend on three factors. First, the private sector must step up investment and create jobs. This is not happening in spite of huge corporate profits post-Covid, as the private sector does not see more demand visibility to invest. Second, the schemes should be effectively and efficiently implemented and monitored, including the sustainability of the job creation. Finally, making labour more attractive factor of production will require more spending on health, education and skilling.

However, there are three disappointments. First, this budget is big letdown in terms of structural reforms, which will hamper long-term growth. The current budget is about incremental changes to existing policies. Second, providing disproportionate resources to Bihar and Andhra Pradesh is injustice against several deserving states and may weaken cooperative federalism. Third, allocation of funds for the social sector (education, health and nutrition) is disappointing.

Let me now focus on the implications of budget for the health sector. Allocation to health sector in central government budget in 2024-25 is Rs. 90,958 crores. This amounts to a nominal increase of 12.9% from 2023-24 Revised Estimate (RE) to 2024-25 Budget Estimate (BE). Further, allocation to health sector in central government budget in 2024-25 is just 0.28% of GDP as compared to 0.27% of GDP in 2023-24. The allocation to health sector is far below health needs. One would have liked to see the allocation to health sector to reach 0.5% of GDP and gradually rise to 1% of GDP. Since high out-of-pocket expenditure and a shortage of human resources for health continue to be major issues, it was essential to enhance health budget.

The past trends suggest that the actual spending in the health sector is invariably less than what was allocated in the budget. For instance, if we compare 2023-24 (BE) with 2023-24 (RE) for central sector schemes/projects, only 55% of the funds for PMSSY (Pradhan Mantri Swasthya Suraksha Yojana) was utilised, and 78.6% of the funds for National AIDS and STD control programme was utilised. Non-utilisation of funds for PMSSY will adversely affect the objectives of correcting regional imbalances in healthcare services, augmenting medical education facilities and upgrading existing medical institutions. Similarly, non-utilisation of funds for National AIDS and STD control programme will adversely affect the objectives of prevention and control of HIV/AIDS and sexually transmitted diseases.

Similarly, if we compare 2023-24 (BE) with 2023-24 (RE) for centrally sponsored schemes, only 25.4% of the funds for HRH and ME (Human Resources for Health and Medical Education) was utilised, and 50% of the funds for PM-ABHIM (Pradhan Mantri Ayushman Bharat Health Infrastructure Mission) was utilised. Since India needs more trained and skilled HRH and medical education, non-utilisation of funds will restrict achievements of these objectives. Since PM-ABHIM is dedicated to developing heath systems capacities to respond effectively to future pandemic and disaster, non-utilisation of funds will prohibit health systems to respond effectively to future public health emergencies. The inability to utilise funds could be due to several factors, including administrative inefficiencies and health systems’ weaknesses in absorptive capacity. Funds utilisation was much better for AB-PMJAY (Ayushman Bharat Pradhan Mantri Jan Arogya Yojana) (94.4%) and all funds have been utilized for NHM (National Health Mission) (in fact, 8.5% increase). Thus, both NHM and AB-PMJAY deserve credit for the stellar performance in fund utilisation.

If we compare 2023-24 (RE) with 2024-25 (BE) for central sector schemes/projects, there has been 15.8% and 19.5% increase in the allocation to PMSSY and National AIDS and STD control programme, respectively. Allocations to various centrally sponsored schemes in 2024-25 are as follows: NHM (Rs. 36,000 crore), AB-PMJAY (Rs. 7300 crore), PM-ABHIM (Rs. 3200 crore) and HRH and ME (Rs. 1274 crore). If we compare 2023-24 (RE) with 2024-25 (BE) for centrally sponsored schemes, there has been 52.4%, 14.1% and 7.4% increase in the allocation to PM-ABHIM, NHM and AB-PMJAY respectively. One would hope that the government will pay special attention to greater utilisation of allocated funds for various schemes. Surprisingly, there has been a 16.1% decline in allocation to HRH and ME during this period.

There are relatively fewer announcements in this year’s budget specifically targeting healthcare. Three major announcements in the current budget that will help the health sector are presented below:

(a) Three cancer treatment drugs are exempted from basic customs duty completely (from 10% to nil) to help patients with cancer. Cancer treatment involves a huge financial burden. By exempting these drugs from customs duty, the government has taken a concrete step towards alleviating this burden making essential medicines more affordable and accessible for those in need across the country. This decision also underscores the government’s commitments to addressing the growing cancer burden in India, emphasizing the government’s dedication to improving public health.

(b) The budget has proposed changes in basic customs duty for X-ray tubes and Flat Panel detectors for use in X-ray machines under the phased manufacturing programme to synchronise them to domestic capacity addition. This will significantly benefit OEM manufacturers by reducing costs, encouraging local sourcing, and enhancing competitiveness. This will also incentivise health startups to foster innovation and self-reliance.

(c) Another announcement that may benefit the healthcare startups is the abolition of angel tax. Abolition of angel tax and tax simplification are expected to enhance financial health for healthcare startups.

To conclude, (a) there is a need for effective and efficient utilisation of resources as well as implementation of schemes as outlined in the budget to ensure equitable access to quality healthcare across India, (b) it is crucial to bridge the rural-urban healthcare divide through better public-private partnerships and imparting training and skill development of healthcare professionals, (c) there is a need to develop and use of digital health infrastructure for last mile service delivery, (d) as mentioned in the Economic Survey, the focus should be on Artificial Intelligence (AI) and deep-tech startups in healthcare sector to foster innovation and entrepreneurial growth, and finally, (e) it is important to allocate more resources to health sector to enhance primary healthcare infrastructure, human resources for health and expand healthcare coverage to poor, disadvantaged and hard-to-reach people.

Prof. Pradeep Kumar Panda

Dean – Public Health and Health Management

AIPH University, Bhubaneswar