Analyzing Budget 2026: A Mixed Approach to Health Care Spending

Budget 2026 presents significant health-care investments but falls short of GDP spending expectations, affecting overall health strategies.

Gopi

•February 6, 2026•5 mins read

Health Budget 2026: Increment Without Transformation

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1. Overall Allocation and Macroeconomic Context

The Union Budget 2026 has raised total health-care allocation to ₹1.05 lakh crore, reflecting a 10% increase over the previous year’s revised estimates. This increment signals sectoral attention, but it falls short of expectations that the Budget would mark a decisive leap toward higher public health investment.

Despite the rise, the health budget forms only 1.9% of total government expenditure and around 0.26% of GDP. This is significantly below the National Health Policy (NHP) 2017 commitment to reach 2.5% of GDP by 2025, raising concerns about fiscal prioritisation in a country with growing epidemiological and demographic transitions.

Experts note that sustained underinvestment risks widening healthcare disparities, as States—despite fiscal devolution—may not uniformly compensate for declining central allocations. Consequently, gaps in primary and preventive care may persist.

The underlying logic is that without adequate public funding, health systems struggle to provide equitable, affordable services, resulting in increased out-of-pocket expenditure and uneven health outcomes across States.

Key Statistics:

₹1.05 lakh crore total health allocation (2026)
10% increase over previous year’s revised estimates
1.9% of total government expenditure
0.26% of GDP
NHP 2017 target: 2.5% of GDP by 2025

2. Biopharma SHAKTI and R&D Push

The Budget highlights the Biopharma SHAKTI scheme, with a substantial ₹10,000 crore allocation. The initiative aims to make India a manufacturing hub for biologics and biosimilars over the next five years, signalling an important shift toward high-value biopharmaceutical innovation.

The scheme envisions building a nationwide, state-of-the-art clinical trial ecosystem through 1,000 accredited trial sites, addressing long-standing bottlenecks in India's R&D capabilities. This is expected to strengthen domestic innovation, attract global collaboration, and improve regulatory infrastructure.

Investments in R&D are crucial for reducing dependence on imports, boosting competitiveness, and preparing the country for emerging health threats. A comprehensive clinical trial network also enhances public trust in scientific processes and regulatory transparency.

The development logic is that research-driven manufacturing strengthens health security and industrial competitiveness; neglecting it risks losing out to global peers in high-value biopharma markets.

Policy Measures:

₹10,000 crore allocation for Biopharma SHAKTI
Target: Transform India into a biologics and biosimilars hub (5 years)
1,000 accredited clinical trial sites to be established

3. Expansion of Health Education and Workforce Capacity

The Budget proposes the establishment of three new National Institutes of Pharmaceutical Education and Research (NIPERs) and the modernisation of seven existing ones, enhancing pharmaceutical sciences education and research.

A second NIMHANS campus in North India and upgraded national mental health institutes aim to address regional imbalances in mental health infrastructure. This is critical given India’s rising mental health burden and persistent treatment gaps.

The government targets training 1 lakh allied health professionals and 1.5 lakh care workers over five years to support elderly care. As India transitions toward an ageing population and lower fertility rates, this creates a specialised workforce to meet long-term care needs.

The governance logic is that skilled human resources form the backbone of effective health delivery; inadequate training pipelines may intensify workforce shortages and undermine service quality.

Key Measures:

3 new NIPERs + modernisation of 7 existing units
Second NIMHANS campus for northern region
Training targets:

1 lakh allied health professionals

1.5 lakh elderly care workers

4. Affordability Measures for Critical Illnesses

The Budget exempts 17 cancer medicines and several treatments for rare diseases from customs and import duties, directly reducing treatment costs. This is significant for families often pushed into poverty due to catastrophic health expenditure.

The reduction of TCS on medical and educational remittances from 5% to 2% is aimed at lowering financial barriers for patients seeking specialised treatment abroad. This is particularly helpful for rare disease management, where domestic treatment options remain limited.

These measures enhance access for vulnerable populations, especially those requiring high-cost interventions. They align with the broader objective of reducing out-of-pocket expenditure, which remains one of the highest globally.

If such affordability initiatives are not sustained, financial hardship and treatment delays will continue to burden households, limiting progress toward universal health coverage (UHC).

Affordability Measures:

Exemption of 17 cancer drugs from customs duties
Duty relief on rare-disease treatments
TCS reduced from 5% to 2% on medical/educational remittances

5. Concerns Over Stagnation in Core Public Health Schemes

Critics point to reduced allocations for the National Health Mission (NHM), despite strong utilisation rates in past years. NHM remains central to primary health care, maternal and child health services, and disease control programmes.

A decline in central funding raises concerns that States may face uneven fiscal capacity to maintain service delivery, leading to disparities in health outcomes. Although devolution has allowed some States to invest more, reliance solely on State budgets may produce patchy results.

The gap between policy commitment (2.5% of GDP) and actual outlays reflects a persistent mismatch between goals and execution. Public health advocates warn that without strengthened primary systems, larger schemes and R&D investments may not translate into ground-level health improvements.

The policy logic is that underfunding primary care weakens the foundation of the health system; ignoring this risks widening inequalities and undermining long-term health indicators.

Challenges:

Reduced funding for NHM despite high utilisation
Potential disparities due to varying State capacities
Continued shortfall from NHP 2017 spending targets

6. Way Forward

India requires a calibrated strategy that balances high-value biomedical innovation with strong primary healthcare funding. Adequate budgeting toward NHP 2017 targets remains essential for long-term resilience.

Coordinated Centre–State financial planning can prevent regional disparities, while transparent allocation and monitoring mechanisms can improve resource utilisation. Expanding the health workforce and improving affordability must be matched with investments in primary, preventive, and mental health systems.

Going forward, India’s health financing must align growth ambitions with accessibility and equity to ensure sustainable, inclusive development.

Conclusion

Budget 2026 introduces important steps in biopharma innovation, workforce training, and affordability, but falls short of transforming public health expenditure in line with national goals. A balanced, adequately funded health system is essential for achieving equitable outcomes, supporting demographic transitions, and strengthening long-term human capital.

Quick Q&A

Everything you need to know

Overview of allocations:
The Union Budget 2026 allocates over ₹1.05 lakh crore to the health sector, marking a roughly 10% increase over the previous year’s revised estimates. However, in relative terms, health spending remains modest at about 1.9% of total government expenditure and only 0.26% of GDP. This highlights a continuing gap between absolute increases and proportional prioritisation within the overall fiscal framework.

Priority areas:
A major highlight is the Biopharma SHAKTI scheme with an allocation of ₹10,000 crore over five years, aimed at making India a global hub for biologics and biosimilars. Complementing this are plans for a pan-India network of 1,000 accredited clinical trial sites, expansion of pharmaceutical education through new NIPERs, and strengthening mental health infrastructure via a second NIMHANS campus and upgraded institutes. These choices signal a strategic emphasis on research, innovation, and tertiary care capacity.

Human resources and affordability:
The Budget also focuses on workforce development by proposing training for one lakh allied health professionals and 1.5 lakh elderly care workers, reflecting demographic realities of an ageing population. On affordability, exemptions on customs duties for cancer and rare-disease medicines and reduced TCS on medical remittances directly ease patient burdens. Overall, while the Budget prioritises innovation, skilling, and selective affordability, it raises questions about adequacy in primary and preventive health investment.

Policy commitment versus fiscal reality:
The National Health Policy (NHP) 2017 committed the government to raise public health expenditure to 2.5% of GDP by 2025. Against this benchmark, the 2026 allocation—at around 0.26% of GDP—falls significantly short. Critics argue that this gap reflects a lack of political prioritisation of health as a core development investment rather than a residual social sector expense.

Implications for health outcomes:
Underinvestment has tangible consequences. India continues to face challenges such as high out-of-pocket expenditure, uneven access to primary care, and persistent inter-State disparities in health indicators. Countries that significantly improved population health—such as Thailand through universal health coverage—did so by sustained increases in public health spending, particularly on primary care. The failure to scale up spending risks slowing progress on Sustainable Development Goals related to health.

Fiscal federalism concerns:
While States have increased their health spending due to fiscal devolution, a declining Central share can lead to patchy and unequal outcomes, especially in fiscally weaker States. Central schemes often provide standardisation and minimum service guarantees. Hence, the criticism is not merely about numbers, but about the Centre’s role in ensuring equity, predictability, and long-term system strengthening in line with its own stated policy goals.

Strengthening research and innovation:
The Biopharma SHAKTI scheme aims to position India as a global manufacturing hub for biologics and biosimilars, moving beyond its traditional strength in generic drugs. Coupled with a nationwide network of 1,000 accredited clinical trial sites, this can address long-standing bottlenecks in clinical research capacity, regulatory credibility, and innovation ecosystems.

Economic and strategic benefits:
A robust biologics sector has both economic and strategic value. It can reduce import dependence for advanced therapies, improve access to cutting-edge treatments for Indian patients, and enhance export competitiveness. For instance, India’s COVID-19 vaccine production capacity demonstrated how domestic capabilities can serve both national and global needs when supported by public investment and policy facilitation.

Systemic challenges and safeguards:
However, success depends on strong ethical oversight, regulatory transparency, and alignment with public health priorities. Without adequate safeguards, expanded clinical trials could raise concerns around informed consent and equitable benefit-sharing. Therefore, while these initiatives can transform India’s health innovation landscape, they must be integrated with strong governance, public sector research institutions, and linkages to affordable access to ensure inclusive outcomes.

Importance of the National Health Mission (NHM):
The NHM has been a cornerstone of India’s public health architecture, particularly in improving maternal and child health, disease control, and primary health infrastructure. Evidence consistently shows that NHM funds have been well utilised, delivering measurable gains in immunisation, institutional deliveries, and rural health access.

Concerns with reduced allocations:
Reducing Central allocations risks undermining these gains. While States may compensate to some extent, disparities in fiscal capacity mean poorer States could see stagnation or regression. This runs counter to the principle of cooperative federalism, where the Centre plays a redistributive and equalising role. Moreover, primary health care—often funded through NHM—offers the highest returns in terms of cost-effective health outcomes.

Balanced assessment:
From a fiscal perspective, the Centre may argue for greater State responsibility and flexibility. However, without adequate Central support and clear outcome-linked transfers, decentralisation can lead to uneven standards. A more balanced approach would involve restoring NHM funding while integrating accountability mechanisms, ensuring that efficiency gains do not come at the cost of equity and universal access.

Affordability measures in focus:
The exemption of 17 cancer drugs and treatments for rare diseases from customs and import duties, along with the reduction in TCS on medical remittances, directly targets the financial distress faced by patients. For many families, treatment costs for cancer or rare diseases can be catastrophic, pushing them into poverty despite insurance coverage gaps.

Real-world relevance:
Consider rare disease patients who often rely on imported therapies costing several lakhs per month. Even marginal tax reductions can significantly lower cumulative expenses. Similarly, cancer patients seeking advanced therapies abroad benefit from reduced remittance costs. These measures demonstrate responsiveness to patient-level realities rather than purely system-level reforms.

Limitations and way forward:
However, such steps are largely curative and selective. Without broader public provisioning, price regulation, and expanded insurance coverage, affordability gains may remain limited to specific drugs or patient groups. A comprehensive strategy would combine these fiscal measures with strengthened public hospitals, domestic manufacturing of advanced drugs, and preventive health investments to sustainably reduce the disease and cost burden.