Despite progress over the past decades, India continues to carry nearly 20 per cent of the global disease burden while accounting for less than 2 per cent of global healthcare spending. The economic implications of this imbalance are profound. A persistently high disease burden lowers workforce participation, reduces productivity, and imposes an estimated annual opportunity cost of over $1 trillion on the economy.
This is not merely a public health issue, it is a structural constraint on growth.
The relationship between health and economic performance is well established. Improvements in health-adjusted life expectancy (HALE), the number of years lived in good health, are closely associated with higher income growth. Once HALE crosses a threshold of around 57-60 years, GDP per capita growth accelerates materially. India has already crossed this threshold, with HALE improving from about 50 years in 1990 to around 61 years today.
But this is not enough. To align with its 2047 ambition, India will need to push HALE closer to 70 years. The growth challenge, therefore, is no longer just about expanding the workforce, it is about improving the quality and productivity of those working years.
Policy imbalance
A healthier population works more, earns more, and saves more. Households protected from medical shocks invest more productively. At the macro level, these effects translate into stronger and more resilient growth. At the heart of this challenge lies a fundamental policy imbalance. India’s public investment in health remains among the lowest in the world. Government health expenditure is still around 1.3-1.5 per cent of GDP, well below the 2.5 per cent target articulated in the National Health Policy 2017, and significantly lower than levels seen in comparable economies.
There was a temporary correction during the Covid-19 pandemic, when public spending on health increased to respond to the crisis. However, this increase has not been sustained. As the pandemic receded, health spending as a share of GDP has once again declined, effectively reverting to pre-Covid levels.
The consequences of this underinvestment are visible in the structure of health financing itself. India’s total health expenditure stands at about 3.3 per cent of GDP, compared to 6-7 per cent in many peer economies. Even more telling is its composition: out-of-pocket expenditure, though declining, still accounts for around 44 per cent of total health spending, among the highest globally.
This is not just a health concern; it is a macroeconomic inefficiency. High out-of-pocket costs suppress household consumption, delay care, and push families into financial distress, thereby dampening aggregate demand and slowing growth. The next phase requires a shift from incremental expansion of access to systemic improvement in outcomes. Estimates suggest that India will need over $200 billion to address gaps in healthcare infrastructure and service delivery.
Equally important is the prioritisation of primary and preventive care, which offers the highest long-term returns by reducing the burden of disease before it escalates into more complex and costly conditions. This requires sustained public investment, stronger risk pooling through insurance, and a stable policy environment that encourages private investment and innovation.
The writer was founding CEO of Ayushman Bharat
Published on May 25, 2026