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Designing Health Equalization Transfers to Indian States

In: India's Public Finance and Policy Challenges in the 2020s

Author

Listed:
  • K. R. Shanmugam

    (Madras School of Economics)

  • Jyotsna Rosario

    (Vidyashilp University)

Abstract

States with larger fiscal capacity allocate more funds to healthcare, but the current transfer mechanism has not effectively addressed the disparities between more developed and lagging states. This study calculates the state-specific finance gap and total fiscal equalization transfers for healthcare to 29 Indian states, using Australia’s expenditure equalization procedure and static panel data model estimation techniques. Results indicate that states such as Uttar Pradesh, Bihar, Maharashtra, and West Bengal face substantial expenditure gaps. In 2021–22, the government spent just 1.2% of GDP on health, falling short of its goal to increase this to 2.5% of GDP by 2025. Providing additional equalization transfers could help bridge this gap and bring public spending closer to the target. These findings offer valuable insights for policymakers and researchers, aiding the development of effective strategies and designing appropriate equalization transfers for healthcare across Indian states.

Suggested Citation

  • K. R. Shanmugam & Jyotsna Rosario, 2025. "Designing Health Equalization Transfers to Indian States," India Studies in Business and Economics, in: K. R. Shanmugam (ed.), India's Public Finance and Policy Challenges in the 2020s, pages 265-290, Springer.
    • Handle: RePEc:spr:isbchp:978-981-96-2860-5_15
    DOI: 10.1007/978-981-96-2860-5_15
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    More about this item

    Keywords

    Fiscal equalization; Public health expenditure; Transfers; Indian states; Panel data;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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