lipped from: https://www.financialexpress.com/opinion/the-human-factor-2/4113899/
Health and education schemes must et more funds and better design
Why Factor Reforms Need a Human Development Engine
Reforms in factor markets—covering land, labour, logistics, energy, and access to capital—are routinely cited as the key to raising India’s growth potential. The government has signalled its intent on this front through initiatives such as the new labour codes and the restructuring of goods and services tax slabs. There is also a renewed sense of urgency, reflecting a tacit recognition that the economy’s growth capacity has been dented. The Prime Minister has reiterated at multiple forums that the “Reform Express” will continue to gather momentum.
Yet growth-enhancing policies cannot be complete without a strong and sustained focus on human development. Improving the welfare of the population at large must be central to the reform agenda, given India’s demographic profile, low per capita income, rising inequality, and persistent regional disparities. The reality is that median incomes are far lower than per capita national income figures suggest, the latter being skewed upward by the prosperity of large business owners and high-earning professionals.
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India ranked a lowly 130th on the United Nations Human Development Index in 2025, with an HDI score well below the threshold for “high human development”. This is hardly new. For over two decades, every Union Budget has sparked debate on India’s chronically low public spending on education and healthcare—two pillars of human development. What has long been advocated is targeted spending that delivers visible improvements in outcomes. Yet a sustained and meaningful increase in budgetary allocations for HDI-enhancing sectors has remained elusive. Resource constraints alone do not explain this failure; the sluggish pace of allocations reflects underlying spending priorities.
Public health expenditure illustrates the problem starkly. At around 3.3% of GDP (2022), India’s health spending is far below the Organisation for Economic Co-operation and Development average of 12.8%, and significantly lower than other emerging economies such as China (5.4%) and South Africa (8.8%). Even the average health spend of least-developed Sub-Saharan African countries—about 5% of GDP—exceeds India’s.
Within the Union Budget, health spending declined from 2.2% of total expenditure in FY22 to 1.8% in FY23 and FY24, before inching up to 1.9% in FY25 (revised estimates). It is budgeted at the same level this year, though slippages cannot be ruled out. The National Health Policy’s target of raising public health expenditure to 2.5% of GDP by 2025 has been missed, with spending stuck well below 2%. Households continue to shoulder nearly half of healthcare costs, with out-of-pocket expenses at about 2.3% of GDP in 2023.
Missed Targets
The education sector tells a similar story. Government spending on education, at 4.6% of GDP in 2022, is higher than the average for lower-middle-income countries but still falls short of the 6% target set under the National Education Policy, 2020. Learning outcomes remain deeply troubling. The World Bank estimates that India’s learning poverty rate—measuring the share of 10-year-olds unable to read a simple text—rose to 70% after the pandemic, from 55% in 2019.
Teacher shortages, uneven quality, and high dropout rates, especially at the secondary level (14.1%), continue to undermine progress. What is needed is better-designed policies and sharper, more targeted implementation across all three tiers of government. Some initiatives point the way forward. The PM Jan Arogya Yojana health insurance scheme, which offers annual coverage of `5 lakh per family to the bottom 40% of the population, has demonstrated both effectiveness and cost efficiency. Similarly, the promotion of good-quality, low-cost generic medicines is a policy lever that merits urgency.
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