Social expenditure in India
Updated: Aug 3, 2022
An ASAR Data Story
By ASAR Blogs Team
Calculations & Visualizations
Pratik Gavhane, Jatin Terde & Siddhesh Zadey
Ideation & Drafting
Review & Editing
Economy does not lie in sparing money, but in spending it wisely
-Thomas Henry Huxley
The world is just recovering from a pandemic, Sri Lanka being in an economic crisis and the current war going on between Russia and Ukraine, it makes one wonder how ready our country is to face such challenges. While India is a fast-paced growing economy, in this era of dire health and social challenges, the need to focus expenditures to achieve better outcomes is crucial. The answers to these questions can be majorly found in patterns of Gross Domestic Product (GDP) expenditure. So what is the GDP? GDP measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time (say a quarter or a year). It is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. Simply speaking, it is a measure of the total income of a country in one year. The budget of the country is then determined on the basis of the percentage expenditure of this GDP.
With this data story, we want to explore the patterns of GDP expenditure in India over the past two decades and its comparison with other countries for healthcare, education and military expenditures- the three important pillars of any country. We’ve used data from WHO’s Global health expenditure database (GHED), Stcokholm’s International Peace Research Institute (SIPRI), UNESCO Institute for Statistics and National Health Accounts estimates for India FY 2017-18.
1. How much money are we spending on health, education, and military from 2000 to 2020 as % of our country's GDP?
In the last two decades, India has spent around 7% more of its GDP on military (around 10.5%) than on health or education sectors (around 3.5%). This means that India has spent three times more on military than on health or education in the past two decades. The variability of GDP spending on health is only around 1% (highest being 4% and lowest being 3%) when compared to the expenditure on military which is around 3% (highest being 11% and lowest 9%). The patterns in the % GDP expenditure on military shows that there were greater fluctuations in expenditure (around 3%) from 2000 to 2010, but the fluctuations decreased to around 1% in the last decade (2010 to 2020). Further, there is a lack of consistent data on the % GDP spending on education.
In general, there is a decrease in % GDP spending for all the three sectors.
2. What is the scenario with other countries? What is the per capita expenditure on health? (Note: This includes expenditure by the government and expenditure out of pocket by the people)
Healthcare is a broad term used to describe the various systems we as humans rely upon to help us maintain our personal health through the treatment (or prevention) of illness, injury, disease, and other physical or mental impairments. Developed countries like the USA and European nations like Switzerland, Norway, Iceland and Denmark are seen to be the top spenders for per capita health spending. It is interesting to note that only 3 (Switzerland, Norway and Denmark) out of the top 10 highest spenders on healthcare per capita make it to the top ranks of the World Population Review ranking of best healthcare systems of the world 2019. The third-world nation of Uruguay, stands out in its high per capita GDP spending, with a budget almost twice that of its neighboring nations. Most South-east Asain nations such as India and Pakistan along with African countries such as Sudan and Ethiopia are seen to have significantly lesser healthcare spending per capita. Also, African nations of Madagascar, Demographic Republic of Congo and Ethiopia are noted being the least spenders on healthcare per capita.
3. What is the per capita expenditure on the military across the world?
As seen in the figure, the United States (US) spends the most on military in the entire world followed by Saudi Arabia, Oman and Norway. Norway appears as a deviation from the trend followed by its neighboring nations, spending almost three times more than its neighboring country of Sweden, making it the fourth biggest per capita military spender. While we can observe most of the African countries do not spend much on military, with Madagascar spending as little as $2.84 per capita, there are countries like Iceland, Costa Rica and Panama which according to the Central Intelligence Agency World Factbook are amongst the 39 countries which do not have a standing military in place.
While being the biggest spender on defense does put the United State’s military on the top in terms of strength, India spends remarkably less and still ranks fourth according to the Global Firepower annual ranking 2020, which takes in various individual factors in account such as military might and financials.
4. What is the ratio of military to health expenditure per capita (current US$)?
In this figure by taking the ratio of military to health expenditure per capita, we try to understand how countries around the world prioritize their spending. We can notice there are some countries such as Namibia (1.012) and Nepal (1.013) which spend equally on health and military per capita, focusing their expenditure almost equally in both sectors. Nations like Pakistan (5.53), Belarus (5.42), Congo (5.36) and Oman (4.77) have some of the greatest discrepancies in military vs healthcare expenditure. On average, these countries spend 4.2 times more on military than on healthcare. On the other end of the spectrum, there are countries like Argentina (0.19), Switzerland (0.20), Canada (0.20), Sweden (0.21), Denmark (0.26) and Norway (0.35) which have a ratio of less than one, which indicates focused spending on healthcare. The US also spends more on its healthcare than its military with a ratio of about 0.57.
Interestingly, Denmark, Norway, Switzerland and Sweden take the 1st 4 ranks in the best healthcare systems in the world.
India (2.9) spends significantly more on military than on health, and referring to the last figure, this focused spending has put India fourth in terms of military strength but 101st in terms of healthcare rankings.
5. What is the trend in healthcare expenditure in the different states of India? How much does each state government spend on health?
In this figure, we compare the health expenditures as % Gross State Domestic Product (GSDP) for each state in India. While GDP is calculated for an entire country, GSDP is its equivalent on a state level.
We find Arunachal Pradesh (a northeastern state) spends 4.2% of GSDP, making it the biggest spender on healthcare while Haryana spends only 0.6% GSDP i.e., one-sixth when compared to it, making it the lowest spending state on health services. A trend can be seen where the South-Western States spend only half or even less of % GSPD when compared to North-eastern ones. Some notable examples include Maharashtra and Karnataka which spend only 0.7 of % GSDP which is half of an Eastern State such as Assam, spending 1.6% on healthcare.
In the past two decades, we can see that India has spent more of its GDP (by around 3 times) on military than on health or education. There is a serious lack of data on the expenditure for education. In terms of per capita expenditure, India lags behind significantly in terms of both military and health expenditure when compared to other nations. However, it ranks 4th when it comes to military prowess and 101st when it comes to healthcare.
Comparing countries, higher per capita expenditure does not always equate better healthcare or better military. For example, the United States is the top spender in per capita healthcare but ranks 18th in its healthcare system while Denmark spends half of what the US spends and ranks first. When it comes to military, the United States spends the most and has the best military but India spends around 40 times less and still ranks fourth. Denmark, Norway, Switzerland and Sweden, the top 4 best healthcare systems in the world, spend more on their health than they do on their militaries. Pakistan, Belarus, Congo and Oman spend approx 5 times more on military than on healthcare but only Pakistan makes it to the top 10 in military strength rankings. Lastly, we found great disparities in healthcare spending per capita within the states of India. We found that north-eastern states tend to spend as much as six times more than western states like Maharashtra.
Education, health and military are three areas which form the pillars of any country. Focused, balanced and data-based and evidence-based expenditure in these areas, is critical for population well-being and ultimately for positive economic growth. This blog highlights and aims to start a conversation about the inequitable distribution of expenditure and lack of data on education. We believe more thorough studies are needed to investigate the efficiency of social expenditure with respect to money spent vs benefit attained.