• News
  • Columns
  • Interviews
  • BW Communities
  • BW TV
  • Subscribe to Print
BW Businessworld

Union Budget 2022-23 | Increase Budget Allocation for Health

Covid-19 has exhibited that a country is only as strong as its health system. As we all eagerly await the Union Budget 2022-23, the healthcare sector holds the hope for significant announcements and a substantial allocation for health

Photo Credit :


The world has been at war with the Covid-19 pandemic for two years now. Covid-19 has exposed the harsh realities of fragile health systems, not only in developing countries like ours, but also in developed nations. The Covid induced global economic recession is the deepest since the end of World War II. Our efforts in social development have been pushed at least a decade back. In short, Covid-19 has exhibited that a country is only as strong as its health system.

As we all eagerly await the Finance Minister’s presentation of the Union Budget 2022-23 on February 1, the healthcare sector holds the hope for significant announcements and a substantial allocation for health. 

In India, government spending on health is less than 1.5 per cent of our GDP, which is one of the lowest in the world. The government itself has set a target of increasing public spending on health to 2.5 per cent of GDP by 2025. Considering India would be a US$ 5 trillion economy in 2025, we need to spend an additional Rs 1.2-1.5 lakh crore on health every year to reach this target by 2025. The budget allocation for health should be viewed separately and not be clubbed with drinking water and sanitation, as was done last year. 

The additional allocation can be channelized to improving primary healthcare in particular. In the Union Budget 2018-19, the government announced creation of 1.5 lakh Health and Wellness Centres (HWCs) by end of 2022. These HWCs now require adequate funding for providing the expanded range of primary health services. Ensuring availability of full complement of human resources, essential drugs and diagnostics and other primary health services, can significantly improve the utilisation of HWCs, improve early diagnosis and treatment and act as a gatekeeper for more complicated and expensive secondary and tertiary care. 

Currently more than 70 per cent of all out-patient and 60 per cent of all in-patient care is delivered by the private sector healthcare providers. Therefore, it is necessary for the government to consider tax reliefs and incentives for the private sector on capital expenditure for preparing health facilities for Covid-19 pandemic; establishing small hospitals and diagnostic labs in tier-3 and 4 towns and rural areas; expenses incurred on skill development activities; and expenditure on digitization of operations and accreditation. 

Further on the input side, there is a need for rationalisation of custom duties for essential medical items and equipment. Currently, India imports a significant amount of test kits, reagents and equipment. Total duties on import of essential medical items that includes labware, lab reagents, Covid test kits, auto samplers, centrifuge machines and other lab instruments, range between 25-30 per cent. Test kits and reagents imported from USA attract about 50 per cent duties. The custom duties on these imports need to be kept at the lowest rate, till the time they are manufactured in India in required quantities.

Further, there is also a need of GST rationalisation of all healthcare services at ‘zero rate’. Since health services are currently exempt from levy of GST, providers are not eligible to avail input tax credit on the GST paid on products and services used as inputs. Zero rating of healthcare services in the GST regime would enable providers to avail input tax credit and result in reduction in cost of healthcare.

George Osborne, Former Chancellor of the Exchequer of UK said, “Sound public finances are not the enemy of the sustained growth, they are its precondition”. It is time that we accept expenditure on health, not as an expense but as an investment for the country’s sustained economic growth.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Dr Arvind Lal

The author was Past President, NATHEALTH & now Chairman and Managing Director, Dr Lal Path Labs.

More From The Author >>