In the run up to the Union budget, Sidharrth Shankar, Partner, J Sagar Associates points out how to counter the pandemic’s effects, the government will need to stretch its bottom dollar
As per the statistics published by The Lancet, approximately 2.4 million Indians die of treatable ailments annually. In 2020, about 151 thousand lives were lost to the pandemic alone, mainly due to the inadequate healthcare system coupled with the increasingly high population density. The reign of COVID-19 has highlighted the infirmities in existing healthcare services in several of the world’s advanced economies. For India, the pandemic serves as a clarion call to take top-priority action towards upgrading its public healthcare system.
Unprecedented times have demanded unprecedented budgets worldwide. The Government of India too has had to meet the pressure by stepping up its budgetary allocation towards healthcare and the pharma sector. This essential measure has propelled the Coronavirus vaccination drive, which has been keenly awaited by the country’s citizens.
Currently, India’s caseload of COVID-19 is second only to the US. However, there is a stark difference in the public health expenditure of the two economies. While the US spends about 8.5 per cent of its GDP on public health, India’s expenditure has remained 1.2-1.6 per cent of its GDP in the decade 2010-2020. The government’s schedule for approximately 300 million citizens to be inoculated within the first 6-8 months of 2021 is likely to strain the existing machinery, requiring manufacturing units to maximise their last-mile delivery logistics.
To achieve its targets, the government’s allocation towards the healthcare sector will have to be sharply increased. The budget outlay for healthcare in FY 2020-21 is approximately Rs67,112 crore. Of this, 97 per cent (Rs 65,012 crore) is allocated to the Department of Health and Family Welfare, while the remaining 3 per cent (Rs 2,100 crore) is allocated to the Department of Health Research. Although this figure registers an increase of 3.9 per cent over the estimates for FY 2019-2020 (Rs 64,609 crore), it falls short of the target of 2.5 per cent of the GDP, set to be achieved by 2025.
Negotiations between Indian vaccine manufacturers hint at a ballpark figure of Rs 60,000-70,000 crores for only the procurement of vaccines during the first phase. These estimates exclude the costs for transformational infrastructure and storage at low temperatures, which have been estimated around $30-80 million, according to the GAVI report on the global COVID-19 immunisation programme. Therefore, to counter the pandemic’s effects, the government will need to stretch its bottom dollar.
The Indian government’s expenditure on healthcare as a percentage of the total expenditure, according to an economic survey conducted in 2020, has remained steady at 5.3 per cent for two consecutive fiscal years. However, the budget allocation of 1.2-1.6 per cent of the GDP to the healthcare sector is far lower than the average of 8.8 per cent of the GDP for the OECD nations across the world.
In an endeavour to finance vaccinations for low- and middle-income countries, The World Bank has announced support packages. Under the COVAX global vaccine-sharing scheme, a fund of $1 billion (i.e., over Rs 7300 crores) has been approved for any aspect of the vaccination drive that the Indian government deems fit. While this can potentially account for 20 per cent doses of all vaccinations, it should be noted that these numbers do not cover the finances required to vaccinate the country’s entire population.
The below par funding towards India’s healthcare sector is no longer a mere statistic, but a reality that demands attention. The health sector requires a booster of monetary and regulatory elixirs. This could be effected if the government increases the monetary allocations under the PLI Scheme to attract investments, provides faster single-window approvals, reduces/exempts duty on import of inputs and parts of medical devices, and rationalises GST rates on parts used in the manufacture of medical equipment.
(Aman Bhatia, Associate also contributed to this piece. All views expressed are personal)