Public Expenditure on Health Needs to be Reprioritised

Synopsis:  Stimulating Economic growth and Mass vaccination are key to overcome the pandemic-induced economic crisis in India. Increasing public expenditure on health can help India recover from the economic crisis.

Background

• A nominal growth of 14.4% was assumed in the Union Budget. However, because of a prolonged lockdown, India will witness a fall in the nominal GDP numbers assumed in the Budget.
• A reduction in nominal GDP numbers will lead to a lowering of tax and non-tax revenues. Whereas an increase in the fiscal deficit as compared to the budgeted magnitudes.
• Hence, the fiscal projections of Centre’s 2021-22 Budget require recalibration. Further, the center needs to reprioritize expenditures.
• The allocation for the health sector should be increased substantially by reprioritizing expenditures.

Why the allocation for the health sector should be increased?

• Firstly, need to strengthen the health care infrastructure in the country.
  • The second wave of the Covid19 has exposed India’s serious under-capacity in health infrastructure.
  • Given the possibility of a third COVID-19 wave, there is an urgent need to increase the health and related infrastructure. Such as the number of hospitals and hospital beds, sources of oxygen supplies, and the manufacture of COVID-19 vaccines and drugs.
• Secondly, inadequate budgeting for health care.
  • Centre’s 2021-22 Budget for the Department of Health and Family Welfare is ₹7,597 crore less than the 2020-21 budget for Department of Health and Family Welfare.
  • The budget 2021-22 for health care is quite inadequate for an economy challenged by COVID-19 for two successive years.
  • Hence, the allocation for the health sector needs to be increased substantially by reprioritising expenditures.
• Thirdly, investment in health care will have a multiplier effect on the economy. For example, Construction activities within the health sector will have high multipliers. Will benefit vulnerable groups of the society including migrant labour and the rural and urban unemployed
• Fourthly, Speedy and larger vaccination coverage of the vulnerable population is key to minimise economic damage.

Why Centre government should procure vaccines?

• One, COVID-19 vaccination is characterised by strong inter-State positive externalities. This makes it primarily the responsibility of the central government.
• Two, if the center becomes the sole agency for vaccine procurement, the economies of scale and the Centre’s bargaining power would keep the average vaccine price low.
• Three, some smaller States may find procuring vaccines through a global tender a quite challenging.

The Centre has had allocated ₹35,000 crore for vaccination as an amount to be transferred to the States. Rather than transferring the money to states, the central government should transfer the vaccines by acting as a single procurement agency for India.

Source: The Hindu