Determinants of Public Health Expenditure in India: A State- Level Panel Data Analysis

Abstract

There is a large variation in public health spending among Indian states. This study investigates the extent to which income and other socio-economic and demographic characteristics account for disparity in health spending. The study employed panel fixed effect model for examining the determinants of public health expenditure in India using annual data of 15 major Indian states for the period from 2004-05 to 2020-21. The empirical result shows that per capita income is a major driver of the public health expenditure in India. The income elasticity of public health expenditure is greater than one indicating that health is like a luxury good in India. Besides the level of income, health infrastructure and fiscal balance are also having statistically significant positive impact on the level of public health expenditure. The health status, proxied by Infant Mortality Rate (IMR), is having a significant negative impact on public health expenditure. On the other hand, urbanisation and literacy have no significant impact on the public health expenditure.