Gap between allocations for health, outcomes in States
Fiscal space and good operational frameworks at the State-level could make a difference to the efficacy of the Budget allocations for health schemes.
(1) Introduction
The effectiveness of Union Budget allocations for the health sector is deeply influenced by State-level factors. Many of these allocations are linked to Centrally Sponsored Schemes (CSS), where States bear a significant portion of the cost and are responsible for implementation. The fiscal space and operational efficiency at the State level thus play a key role in determining how effectively these budgetary allocations are used.
(2) Centrally Sponsored Schemes and Health Initiatives
Currently, two major CSS initiatives aim to improve health infrastructure in States: the Pradhan Mantri Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) and Human Resources for Health and Medical Education (HRHME).
PM-ABHIM focuses on building health and wellness centres (AB-HWCs), establishing block-level public health units (BPHUs), integrating district public health laboratories (IDPHLs), and setting up critical care hospital blocks (CCHBs). The overarching goal is to enhance India’s preparedness for future health emergencies, such as pandemics.
HRHME seeks to address the shortage of medical personnel by creating new medical, nursing, and paramedical colleges and increasing the intake of students in existing institutions. Another key objective is to upgrade district hospitals and attach them to newly established medical colleges to improve healthcare delivery at the district level.
(3) Low Utilisation of Allocated Funds
Despite substantial budget allocations, fund utilisation under both PM-ABHIM and HRHME has been poor. In PM-ABHIM, only about 29% of the CSS component was spent in 2022-23, while the Revised Estimate for 2023-24 was around 50%, though the actual expenditure is expected to be lower. Similarly, in HRHME, the funds utilised in both 2022-23 and 2023-24 were only one-quarter of the allocated budget.
These low levels of fund absorption have led to cuts in the full Budget for both schemes compared to the interim Budget, highlighting concerns about the ability of the system to effectively utilise allocated funds.
(4) Reasons for Low Utilisation
There are several factors that explain the underutilisation of funds in PM-ABHIM:
(i) Complex Funding Structures: Around 60% of the funds for AB-HWC were supposed to come from 15th Finance Commission health grants, but only 45% of these grants were used between 2021-22 and 2023-24. The complex process involved in executing these grants has made it difficult for States to access and utilise the funds effectively.
(ii) Reorganisation Challenges: In the case of IDPHLs, States were required to merge public health labs operating under various vertical programmes, necessitating significant reorganisation and planning at the State level. This process has been slow, leading to delays in fund utilisation.
(iii) Construction Delays: Nearly all components of the PM-ABHIM, including BPHUs and CCHBs, involve construction, which is often delayed due to rigid administrative procedures and overlapping funding from multiple sources. These issues add to the complexity of the implementation process, further delaying the use of funds.
(iv) Overlapping Responsibilities: Certain scheme components have overlapping funding sources, which has made it more difficult for States to effectively utilise the available resources. The additional complexity has resulted in delays in fund absorption.
(5) Faculty Shortages in HRHME
While the HRHME has a clear focus on developing healthcare infrastructure, there is a severe shortage of qualified personnel to operate these facilities. According to a study by the Centre for Social and Economic Progress (CSEP), over 40% of teaching faculty positions are vacant in 11 out of 18 new AIIMS facilities across the country. This shortage is even more acute in State government medical colleges in Empowered Action Group (EAG) States.
For example, in Uttar Pradesh, where 17 new government medical colleges were established between 2019-21, 30% of teaching faculty positions remained vacant in 2022. The shortage of specialists also affects the operation of critical care hospital blocks (CCHBs) under PM-ABHIM, which require skilled personnel.
The challenge is exacerbated in community health centres (CHCs), both urban and rural, where specialist positions are also severely understaffed. In 2021-22, one-third of the specialist positions in urban CHCs and two-thirds in rural CHCs were vacant, further straining the health system.
(6) The Challenge of Recurring Costs for States
One significant concern for State governments is the recurring costs associated with maintaining the physical infrastructure developed under PM-ABHIM and HRHME. While the Union government provides support during the scheme’s duration (until 2025-26 for PM-ABHIM), it is the States that will have to bear the long-term financial burden of maintaining and staffing these facilities.
This necessitates additional fiscal commitment from State governments, which are already facing tight budgetary constraints. Planning for these recurring costs will be crucial to ensuring that the investments in health infrastructure yield long-term benefits.
(7) Fiscal Constraints and Budgetary Planning at the State Level
State governments must find ways to create fiscal space to accommodate the additional financial commitments required for these health initiatives. This is especially important as States not only need to fund their share of CSS schemes but also manage their own health programs.
Creating sufficient fiscal space—the capacity to generate additional resources without compromising financial stability—remains a significant challenge for many States, particularly those with lower revenues and higher expenditure commitments. Without this fiscal space, it will be difficult to sustain the healthcare infrastructure and human resources created under these schemes.
(8) Key Recommendations for Improvement
To bridge the gap between health budget allocations and outcomes, a multipronged approach is needed. Key steps include:
(i) Simplifying Fund Flow Mechanisms: The complicated structure of the 15th Finance Commission grants and other funding mechanisms must be streamlined to improve the ease of fund utilisation.
(ii) Addressing Human Resource Shortages: States must prioritise the hiring and retention of medical personnel, especially in newly established medical colleges and critical care units.
(iii) Streamlining Construction Processes: Delays in the construction of healthcare facilities can be mitigated by simplifying procurement and construction protocols, allowing States to utilise funds more effectively.
(iv) Long-Term Financial Planning: State governments need to develop comprehensive financial strategies that ensure the sustainability of newly developed healthcare infrastructure beyond the initial capital expenditure phase.
(9) Conclusion
The success of healthcare initiatives under the Union Budget depends on the ability of States to effectively utilise the funds allocated to them. Key challenges include addressing fiscal constraints, overcoming human resource shortages, and streamlining public financial management processes. By focusing on these areas, States can transform budgetary allocations into tangible improvements in health outcomes.
