Healthcare expenditure in India less than 2 per cent of GDP, says Ex-RBI Governor C Rangarajan

India's healthcare expenditure is currently less than 2 per cent of its GDP, and the government must urgently increase it, former Reserve Bank governor C Rangarajan said on Friday. Speaking at the ICFAI Foundation for Higher Education (IFHE), Rangarajan stressed on the importance of "ensuring efficient fund utilisation before increasing healthcare spending." 

“In India, there is a consistent discussion on raising healthcare expenditure to at least 2.8 per cent of the GDP. However, current data indicates that we are spending only about 1.8 or 1.9 per cent of the GDP,” he said. "Governments should increase healthcare spending, focus on establishing hospitals that offer free services, and ensure these funds are utilised efficiently." 

The former chairman of the PM's Economic Advisory Council stated that education and health are crucial for accelerating the country's progress. "However, in India's social expenditure system, more resources are allocated to education than to health, which may not be the ideal approach." 

Commenting on international practices, Rangarajan noted that insurance-linked medical services, common in developed nations, have limited relevance in India. Instead, he advocated for "cross-subsidisation principles to establish more institutions that can serve both the poor and the affluent." “Medical services in many Indian hospitals are comparable to those in developed countries,” he added. 

The event also featured Dr Gullapalli N Rao, founder and chairman of the LV Prasad Eye Institute, Hyderabad, who delivered the 13th NJ Yasaswy Memorial Lecture.