Image Source: Getty
This is the third piece in a three-part series discussing India’s Budget imperatives. Please read Part 1 and Part 2 here.
To set the foundation for a Viksit Bharat, a specification of long-run developmental goals, is of the essence for India. The goal to become a US$30 trillion economy by 2047 will require significant interventions in the field of development, in addition to growth policies. The former, focusing on the primary determinants of human well-being, such as education and health care, is needed to facilitate sustainable growth. Both education and healthcare have been central themes across Union Budgets. With the changing demographic dynamics and increasingly aspirational goals, the government needs to enhance budgetary allocation in these sectors.
The education budget is largely dominated by revenue expenditure, which entails only routine costs and not productive investment.
The emphasis on education
Over the past couple of budgets, education has seen a noticeable decline in the allocation of funds. In 2024-25, the education ministry was allocated INR 1,20,628 crore, which was 7 percent lower than in 2023-24. This major decline came from the reduction in funds to the Department of Higher Education. This poses a serious challenge, especially for Indians who have found themselves lacking employable skills, primarily in high-skilled jobs. Moreover, the education budget is largely dominated by revenue expenditure, which entails only routine costs and not productive investment. However, in 2024-25, PM Schools for Rising India (Pradhan Mantri SHRI) and PM Uchchatar Shiksha Abhiyan (PM-USHA) highlighted the capital spending priorities. Following the pandemic, digital education has been prioritised through investment in digital classrooms and labs under schemes like PM e-Vidya. There was also support for initiatives like e-learning platforms and digital devices for students.
Source: Budget 2024-25
Despite advances in terms of infrastructure and digitalisation, significant challenges remain in attaining wide-scale literacy and numeracy. Equitable access to devices and the internet is a challenge to the regional equity of educational outcomes. Similarly, despite higher revenue spending, teacher training is lagging. The 2025-26 Budget should incorporate programs needed to translate investments into improved learning outcomes, equitable access, and employability. Both higher revenue and capital expenditure should be included in the Budget, with the introduction of schemes that prioritise learning outcomes and knowledge application.
The government has consistently prioritised strengthening healthcare infrastructure, ensuring affordable healthcare access, and promoting public health programs.
Prioritising health
Healthcare has been a critical focus area of the government and has been heavily prioritised following the COVID-19 pandemic. The government has consistently prioritised strengthening healthcare infrastructure, ensuring affordable healthcare access, and promoting public health programs. Much like education, revenue expenditure dominates healthcare spending. It entails the salaries of healthcare workers, operational costs for public hospitals and health programs, and the cost of the procurement of medicines and vaccines. There has been significant growth in capital expenditure post-pandemic to address gaps in health infrastructure. This involved the establishment of new health centres and labs under PM- Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) and investments in critical care facilities and oxygen plants during and after COVID-19.
Source: Budget 2024-25
Before the pandemic, the focus was on universal health coverage (e.g., the Pradhan Mantri Jan Arogya Yojana (PM-JAY)) and maternal/child health programs with the gradual increase in funding for public health initiatives like the NHM (National Health Mission) and AYUSH. The pandemic period saw a massive surge in healthcare spending for emergency response, including vaccination, testing, and oxygen plants. As a long-term measure, PM-ABHIM was introduced to build resilience in healthcare infrastructure. Successive budgets have continued to focus on infrastructure development and digital healthcare. The 2024-25 Budget saw an increased focus on the Digital Health Ecosystem, through a growing emphasis on health records and telemedicine to improve efficiency.
The pandemic period saw a massive surge in healthcare spending for emergency response, including vaccination, testing, and oxygen plants.
Despite increases in expenditure, India’s public health spending remains below 2 percent of its GDP. There is a regional divide, as rural areas still lack adequate healthcare facilities and professionals. This also presents a digital divide since the implementation of digital health initiatives faces challenges in rural and remote areas. Even with schemes like PM-JAY and PMABHIM, which highlight the government’s commitment to universal health access and infrastructure, challenges persist inequitable access and preventive healthcare. Thus, the 2025-26 Budget should feature a heavy expansion of capital expenditure on healthcare, focusing on access, quality, and prevention.
Budget Recommendations
Healthcare and education merit higher spending for two overarching reasons. First, the services-oriented growth in the post-1991 period has created a huge demand for skilled workers. With technological evolution and rapid globalisation, the skill requirement has increased exponentially—making higher education indispensable for economic growth. Thus, the 2025-26 budget should entail greater expenditure on higher education given the need to generate services and employment. Besides the growth demand for services, higher education should be prioritised to nurture the potential and aspirations of the Indian populace.
To attain the goal of a Viksit Bharat in the next two decades, the government will have to undertake bold and unconventional moves.
Second, with a growing workforce, India also needs to accommodate an ageing population. To ensure quality of life for this growing section of society, preventive medication and healthcare facilities need to be widely developed. This would require significant enhancement in the health budget-to-GDP ratio. Critical investment in development should not be avoided to ensure fiscal prudence. To attain the goal of a Viksit Bharat in the next two decades, the government will have to undertake bold and unconventional moves. The focus should be on policies that yield long-run, efficient and inclusive outcomes. The 2025-26 Union Budget can set the tone for such a policy ecosystem.
Arya Roy Bardhan is a Research Assistant with the Centre for New Economic Diplomacy at the Observer Research Foundation
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
