Why India must treat health as an economic investment, not a social spend

India has emerged as one of the fastest-growing economies globally in the past three decades. In constant terms, India’s GDP per capita has grown four times and India is now the world’s fourth largest economy. In terms of health outcomes, India’s average life expectancy stands at 69.8 years (Sample Registration System 2017-21), however, it’s  Health Adjusted Life Expectancy (HALE), which is average number of years lived in full health, stands at 58 years, against 68–72 years in countries like UK, Spain, Italy, and Korea, whose economies are relatively smaller in size.

1. Importance of Human Development Investments

Morbidity and premature mortality can lead to significant economic losses. According to a 2021 study, adolescent health issues alone led to losses worth USD 38 billion , which is almost 1.3% of India’s GDP. Human development and economic growth are mutually reinforcing. Human development investments increase productivity, equity and inclusive growth. India has recognised this through clear policy targets: the National Education Policy (NEP) targets  6% of GDP share on education, while the National Health Policy (NHP) targets 2.5% for health–  establishing that people remain central to India’s growth story. Currently, combined spending on health and education is approximately 5-6% of GDP, leaving a significant room to expand investments and reduce out-of-pocket expenditure (OOPE), which currently accounts for nearly 39.4% of health spending as per National Health Accounts, 2021-22.

India is at an inflection point where investing in human development now will yield maximum returns in the future. With a robust foundation built through physical infrastructure and industry expansion, India’s next wave of economic growth will will be driven human development-  health, education, and skills. Several monumental steps have been taken to invest in citizens’ health, which is a foundation for nation-building. The four pillars of Ayushman Bharat –  Ayushman Arogya Mandirs (AAMs), Pradhan Mantri Jan Arogya Yojana (PM-JAY), Ayushman Bharat Digital Mission (ABDM), and Pradhan Mantri–Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) –  together they constitute the world’s largest public funded health initiative. 

The Preston Curve below represents how health outcomes (HALE) improve rapidly once a country crosses a certain income threshold. India was at just over $2,200 GDP per capita and a HALE of 58 years in 2021, now approaching towards the steep part of the curve- where every additional rupee invested in health can yield outsized gains.

2. Why health is an investment, not an expenditure

Macroeconomic growth in itself does not guarantee human welfare. The link between increased GDP and health outcomes must be created deliberately through conscious investments towards healthcare. Case in Point: East Asia’s human capital centred economic growth

Between 1960 and 1990, eight High-Performing Asian Economies (HPAEs) demonstrated that investing in human capital especially health, was central to economic transformation. Public investments towards social welfare like clean water, sanitation, electrification, and disease control delivered sharp health improvements: life expectancy rose from 53 to 72 years in Korea, 58 to 71 in Malaysia, and 46 to 59 in Indonesia. Per capita incomes in HPAEs grew more than 5% annually. And poverty fell from 58% to 17% in Indonesia and 37% to under 5% in Malaysia. These outcomes illustrate that health gains were not byproducts of growth but instead active drivers of it, magnifying the returns to education, agriculture, and industrialization. 

ROI on Health Investments: Evidence from Global and Indian Studies

As per a Lancet Global Health (2022) study, health investments can yield a return ratio of nearly 15:1 over a decade, through improved productivity, reduced absenteeism and treatment costs. In India’s context, this translates to returns amounting to INR 1500, for every ₹100 invested in health. To put this in perspective, over the past decade (2015–2025), India’s benchmark indices, the Nifty 50 and Sensex, have delivered annualised returns of around 12–13%, turning ₹100 into about ₹325 through compounding. If health investments were viewed with a similar long-term, compounding mindset, the returns could be even more transformative, measured not in stock value but in human capital, resilience, and inclusive growth. 

Multiplier effects of health investments

The economic dividend of health comes not just from saving lives, but from multiplying prosperity across sectors and generations. Key multipliers include:

• Job Creation: As per WHO, each health sector job creates an estimated 3.4 additional jobs in allied industries – from pharma to diagnostics and IT. Bridging India’s 1.8 million health workforce shortfall would both expand access and fuel employment-led growth.
• Work Productivity: A healthier workforce is simply more productive. Fewer sick days, lower rates of chronic illness, and better physical and mental health all translate into steadier output.
• Education: Better child health raises school attendance and learning outcomes. Malaria eradication in Sri Lanka and Paragauy showed that a 10% decrease in incidence lead to 1-2% increase in literacy rates. These are long-term gains that compound through higher learning levels and stronger future earnings.
• Economic Resilience: COVID-19 demonstrated, with painful clarity, that inadequate health capacity becomes an economic risk . India’s GDP decreased by 6.6% in 2020, whereas, countries with stronger systems, like South Korea, limited mortality, avoided prolonged lockdowns, and sped up recovery.
• Female labour participation: With access to quality maternal and reproductive health services, women are better able to take up and stay in paid work. Even modest improvements in women’s labour force participation can make a visible difference to national growth, as documented in many middle-income countries.
• Equity and inclusion: Strong public health systems reduce catastrophic household spending, preventing millions from being pushed into poverty each year.

3. Unlocking Maximum Returns on Health Investments

India has already laid the foundations of a stronger health system- from Ayushman Bharat’s four pillars to a growing focus on research, digital health, and innovation. The challenge now is not just injecting investments into healthcare, but ensuring that every rupee delivers maximum value. Global evidence shows that what matters most is not only how much is spent, but how financing is structured, systems are designed, and accountability is enforced.

1. Strengthening Health Financing Model: While India’s health system is funded through a combination of tax-funded programs like the National Health Mission and  insurance-based schemes; however, out of pocket expenditure still stands at 40%. Strengthening health financing will require greater pooling of resources, reducing fragmentation between centre and state, and progressively shifting towards prepaid, pooled financing mechanisms (e.g., expanded insurance coverage, strengthened primary care budgets). 

2. Anchoring Primary Care as the Foundation: Evidence from WHO, OECD, and Lancet studies shows that strong primary healthcare consistently delivers the highest returns; A 2022 UK study found that each additional General Practitioner per 10,000 people reduces emergency visits and long-stay admissions, saving ~£82,000,  almost ofsetting the GP’s salary. For India, the opportunity lies in transforming Ayushman Arogya Mandirs into proactive population health hubs-  expanding universal screening for NCDs, strengthening referral linkages, and team-based care models. This approach strengthens PHC as a coordinated, continuous, and preventive platform, allowing hospitals to focus on complex care while the system shifts decisively away from “episodic treatment” toward population-level health management.

3. Building Institutions that hold accountability and ensure value: Spending more without institutions risks leakage into inefficiency. Independent Health Technology Assessment (HTA) ensure cost-effectiveness of drugs, devices, and interventions. Transparent procurement systems reduce costs and corruption. And digital dashboards for real-time outcome monitoring can improve accountability. Together, these institutional checks can shift the system from buying inputs to buying outcomes, ensuring that every increase in budget translates into measurable health and productivity gains.

4. Aligning fiscal frameworks with long-term returns: The benefits of health investments accrue over decades. By explicitly recognising health and education as growth-enhancing investments rather than short-term “consumption,” fiscal rules can be aligned to unlock their full economic and social potential.

5. Ensuring Equity and Financial Protection at the core: Simply increasing health spending does not guarantee protection from catastrophic household costs. To ensure the growth dividend of health is broadly shared, investments must be deliberately structured to expand pre-payment and pooling, reduce out-of-pocket expenses, and prioritise vulnerable groups. Making equity central to financing design will transform higher spending into inclusive gains in health and productivity. 

END OF ARTICLE