Budget 2021 expectations | Healthcare sector allocation likely to go up by 40%

Source: Reuters

With the global pandemic significantly affecting the country, the need to have an adequate healthcare infrastructure has come to the forefront. India currently has seven beds per 10,000 population, against the global average of 27 beds per 10,000. Further, India spends 3 percent of its GDP on healthcare, against the global average of 8 percent and the spend is below many developing countries.

In the forthcoming budget, the government also has to provide allocation for expenditure to be incurred on vaccination, at least for the frontline healthcare workers and the vulnerable population, such as the elderly. The budgetary outlay for the Rashtriya Swasthya Bima Yojna (RSBY), the flagship health insurance scheme of the Central Government remains low (Rs. 6020 crore in BE 2020-21) vis-a-vis its funding requirement

ICRA expects a sharp jump in the allocation towards the Healthcare sector in the forthcoming budget, to provide for the cost of COVID-19 vaccination. At a negotiated price of Rs 200 per dose for the vaccine, the total vaccination cost per person will be Rs 400 for the required two doses and even if 50 percent of the population is to be provided vaccination by the government, the cost will be Rs 27,000 crore. The total allocation towards the last budget was Rs 67,484 crore (BE 2020-21), so the above-estimated vaccination cost in itself will lead to 40 percent jump in allocation.

Additionally, given the paucity of beds and gaps in healthcare infrastructure in the country, the quantum jump in allocation towards the sector is required. The same is necessitated, also to enable the government to achieve its target spend of 2.5 percent of GDP on healthcare by 2025, from the current 1.3 percent.

The government had, in the last budget, increased the healthcare allocation by a mere 5.7 percent (to Rs 67,484 crore) and has also introduced the viability gap funding (VGF) and Public-Private Partnership (PPP) model of funding for healthcare infrastructure in the country. To boost investments in the sector, in addition to the VGF already announced, tax incentives for private sector investments in modernising medical facilities and developing greenfield hospitals will be a welcome step.

This will boost the much-needed investments in the sector and the infrastructure developed can also be utilised for catering to the growing medical tourism in the country, generating employment and export revenues.

The current enrolment under the RSBY stands at 13.15 crore citizens, well below the targeted population of 50 crore, even after more than three years of its launch. A rise in budgetary support to the RSBY scheme will help expand the network and the coverage, while providing affordable healthcare facilities to beneficiaries. The same is also expected to support the hospitals in Tier II and III cities and smaller towns, particularly for those which have low occupancies and/or those that are positioned for affordable care.

In the absence of a significant increase in allocation towards the RSBY and for the healthcare infrastructure in the forthcoming budget, India is likely to continue to lag in the delivery of quality and adequate healthcare services.