It was introduced to increase health spending and meet the health needs of the country's population, especially BPL (poor) and rural families. The general perception was that this cess would increase health sector spending.

Health budget

Health is one of the top priorities for every country. Without a strong and healthy society, a country's progress is impossible. In India, numerous schemes have been launched over the past few years to improve healthcare and the state of hospitals, but the real picture of the government budget tells a different story. In 2018, the Indian government implemented a special cess (tax) for health and education. This was introduced to increase health spending and meet the health needs of the country's population, especially BPL (poor) and rural families. The general perception was that this cess would increase health sector spending and support the government's existing health budget. However, data and budget details reveal the exact opposite. 

Health spending has decreased, while cess is being collected.

The government's total budget expenditure for the health sector is now lower than before. In 2017-18, spending on health and family welfare was 2.4 percent of total government expenditure. However, in the budget estimates for 2026-27, this has declined to just 1.9 percent. As a percentage of GDP, it has fallen from 0.28 percent to 0.26 percent. It is noteworthy that the money collected from the health cess in 2026-27

It represents approximately 30 percent of the total health budget, meaning that if this cess were removed, health spending would amount to just 1.3 percent of the total budget, less than half of what it was in 2017-18. This means that the cess is only pretending to increase spending, but in reality, health spending is decreasing. Without the cess, the health sector budget would have been only 0.18 percent of GDP. 

What do the budget figures reveal?

The data clearly shows that the Indian government's actual spending on health is steadily declining, even though the budget shows a slight increase due to cess. The share of health in total government expenditure, from 2.4 percent in 2017-18, falls to 1.9 percent in 2026-27. Excluding cess, this share is even lower, at just 1.3 percent. The same decline is observed in the proportion of GDP, falling from 0.28 percent to 0.26 percent, and after excluding cess, it falls to only 0.18 percent. This means that despite cess, the actual budget allocated to the health sector is steadily declining and falls far short of the National Health Policy's goals.

According to the National Health Policy, health spending was to reach 2.5 percent of GDP by 2025. The central government's share was to be approximately 0.9 percent of GDP. However, health spending currently stands at just 0.26 percent of GDP, nearly three times less than the target. If 2.4 percent of the total budget, similar to 2017, were spent on health, the budget in 2026-27, without cess, should have been approximately ₹1.2 lakh crore. However, actual spending, even including cess, is only ₹1 lakh crore. 

The real purpose and drawbacks of cess

Experts say that the health and education cess only creates the illusion of increased spending. The cess money goes into a reserve fund outside the main budget, and there is no transparency or performance measurement required. In 2018-19 and 2019-20, the health cess collected went into general revenue. Approximately ₹20,600 crore collected for health remained unutilized.