financing and delivery of health services ncmch

Financing and Delivery of H

ealth Care Services in IndiaBackground Papers of the N

ational Comm

ission on Macroeconom

ics and Health

MINISTRY OF HEALTH AND FAMILY WELFARE

GOVERNMENT OF INDIA, 2005 EQUITABLE DEVELOPMENT • HEALTHY FUTURE

Financing and Deliveryof Health Care Servicesin India

Background PapersBackground PapersBackground PapersBackground PapersBackground Papers

National Commission onNational Commission onNational Commission onNational Commission onNational Commission onMacroeconomics and HealthMacroeconomics and HealthMacroeconomics and HealthMacroeconomics and HealthMacroeconomics and Health

Background Papers of theNational Commission onMacroeconomics and Health

Financing andDelivery of HealthCare Services in

India

National Commission on Macroeconomics and HealthMinistry of Health & Family Welfare

Government of India, New DelhiAugust 2005

NCMH Background Papers

©Ministry of Health & Family Welfare, Government of India

September 2005

ISBN 81-7525-632-8

This Report does not address tertiary care and related areas such as super speciality hospital development in the publicor private sector, telemedicine, medical tourism, environmental pollution or food safety etc. though they are all equallyimportant. The Commission Report is based on background papers which can be accessed from the NCMH websitewww.mohfw.nic.in. They have also been published in two companion volumes. This report was written during theperiod April 1, 2004 - March 31, 2005.

Printed at: Cirrus Graphics Private LimitedB 261, Phase I, Naraina Industrial Area, New Delhi 110 028Tel: + 91 11 51411507/1508Fax: +91 11 51417575email: [email protected]

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ii Financing and Delivery of Health Care Services in India

IN PURSUANCE OF THE RECOMMENDATIONS MADE BY THE COMMISSION ON MACROECONOMICS ANDHealth, WHO, India established the National Commission on Macroeconomics and Health (NCMH) in March,2004. The main objective of the NCMH was to establish the centrality of health to development and make anevidence-based argument to increase investment in health. The Terms of Reference of the NMCH were mainlycentered on identifying a package of essential health interventions that ought to be made available to all citizensand also list systemic constraints that need to be addressed for ensuring universal access to this package ofservices. The NCMH was also to indicate the resources required and targets that ought to be achieved by 2015.

The Terms of Reference of the NCMH were very widespread and spanned across a wide range of issues.Foraddressing each of the major concerns a broad outline of the approach to be adopted was prepared and sharedwith a large number of researchers, policy makers, experts from donor agencies and health activists. Based onthe suggestions received, topics to be addressed were identified and studies / papers commissioned. Every paperwas also peer reviewed by experts in that field. In all over 35 papers were commissioned. Due to limitations ontime and resources, original field surveys were limited to a hundred percent facility survey in eight districts ofKhammam(AP), Ujjain(MP), Varanasi(UP),Udaipur(Rajasthan), Kozhikode(Kerala), Jalna(Maharashtra), Nadia (West Bengal) and Vaishali (Bihar). For arriving at the estimates of public spending, we obtained informationfrom other government departments, PSU's, FII's etc. and analyzed the data under the National Health AccountsFramework. Analysis of consumer surveys, the 57th. Round Survey National Sample Survey Organization onestablishments, and other data bases related to drug manufacture and sales, import and export of medical devicesetc. were also analyzed.

Principal focus was on critically evaluating the current status of the health system - its organizational structure,financing mechanisms, regulatory frameworks etc. The three key drivers of health costs - namely human resources,drugs and technology were specially studied in detail as the main concern for the future is going to be the rapidescalation of costs. Such analysis highlighted and reiterated several shortcomings in the country's health systemwhich are well known and have been recognized for long. Clearly, a well conceived and sequenced system ofreform emerged to be the priority area for policy attention so as to develop the capacity to absorb the promisedfunding of 2-3% of GDP in the next five years committed in the Common Minimum Program. What also emergedwere that solutions for many of the issues have been known for long, but routinely ignored and not acted upon.It was impossible not to conclude that if only timely attention to the large number of recommendations alreadyavailable had been accorded, the health system need not have been so inefficient, insensitive, dysfunctional andin such a crises as we find it today.

Preface

Financing and Delivery of Health Care Services in India iii

iv Financing and Delivery of Health Care Services in India

The background papers formed the basis for the main report of the Commission and its recommendations.We have attempted to bring into the public domain all the data and analysis that has been carried out by theNCMH, both in printed form ( 2 volumes) as well as in the website of the NCMH - www.ncmh.org. The mainpurpose has been to stimulate greater debate and research that would be useful for policy formulation. If thishas been achieved even in a small measure, we would be content that our efforts have been worthwhile.

I wish to thank my colleagues at the Sub-Commission - Dr. Ajay Mahal, Dr. Avtar Dua, Dr. Sakthivel, Dr. SomilNagpal, Ms. Madhurima Nundy and Shri Sunil Nandraj and Dr. Rama Baru for their help and assistance. I alsothank all the contributors and reviewers for taking time off to write the paper or review it and helping us in everypossible way, very often at short notice. And finally a special thanks to Dr. Ranjit RoyChaudhury , member ofthe NCMH and chair of the sub-commission for his constant support, encouragement and advise. I am gratefulto each and every one of them.

Sujatha Rao

Secretary, NCMH

AJAY MAHALAsstt. Prof.Harvard School of Public HealthBoston, U.S.A.

ANIL VARSHNEYConsultant90/2, Malaviya Nagar,Opp. Govt. Senior Secondary School,New Delhi

ANUP K. KARANFellowInstitute for Human DevelopmentIAMR Building, 3rd Floor,I.P. Estate, New Delhi

ASHOK D.B. VAIDYAMedical and Research DirectorBhartiya Vidya Bhavan's SPARC,13th N.S. Road, J.V.P.D. Scheme,Juhu, Mumbai 400049

AVTAR SINGH DUAAsstt. Prof., Deptt. of PSMSMS Medical College,Jaipur

MS. CONSUELO ESPINOSA MARTYSenior Health Economist and Advisor,Health Care ReformsMinistry of Finance,Chile

DHIRENDRA KUMARAssociate ProfessorIndian Institute of Health Management & Research1, Prabhu Dayal Marg,Sanganer Airport,Jaipur 302011

K. SUJATHA RAOPrincipal Secretary,Government of Andhra Pradesh,HyderabadAndhra Pradesh

LALIT MOHAN NATHFormer Dean (AIIMS)E-21, Defence ColonyNew Delhi 110003

M. GOVINDA RAODirectorNational Institute of Public Finance & Policy,18/2, Satsang Vihar Marg,Special Institutional Area, Near JNU,New Delhi 110067

MADHURIMA NUNDYResearch Scholar,Centre for Social Medicine in Community Health,School of Social Sciences, JNUNew Delhi

MARCELO TOKMANDirector, Economic PolicyMinistry of FinanceChile

MITA CHOUDHARYEconomistNational Institute of Public Finance & Policy,18/2, Satsang Vihar Marg,Special Institutional Area, Near JNU,New Delhi 110067

MUKESH ANANDSenior EconomistNational Institute of Public Finance & Policy,18/2, Satsang Vihar Marg,Special Institutional Area, Near JNU,New Delhi 110067

N. RAVICHANDRANAssistant ProfessorIndian Institute of Health Management & Research1, Prabhu Dayal Marg,Sanganer Airport,Jaipur 302011

N. VEERABHRAIAHAndhra Pradesh Vaidya Vidhan ParishadDepartment of HealthGovt. of Andhra Pradesh,Hyderabad

P. DURAISAMYProfessorDepartment of EconometricsUniversity of MadrasChepauk, Chennai - 600005

List of Contributors and Reviewers

Authors

Financing and Delivery of Health Care Services in India v

SHIV CHANDRA MATHURDirectorState Institute of Health & Family WelfareJhalana Institutional Area,South of DD KendraJaipur 302004

S.D. GUPTADirectorIndian Institute of Health Management & Research1, Prabhu Dayal Marg,Sanganer Airport,Jaipur 302011

S. SAKTHIVELResearch Associate,Institute of Economic GrowthDelhi University Enclave,Delhi 110007

SOMIL NAGPALWHO Consultant,TB DivisionNew Delhi

S. SELVARAJUConsultant,BD-3 G, DDA Flats,Munirka, New Delhi

T. DILEEP KUMARAdvisor (Nursing), Dte.GHS andPresident,Indian Nursing CouncilNirman Bhavan, New Delhi

vi Financing and Delivery of Health Care Services in India

ALAKA SINGHWorld Health Organisation,Geneva, Switzerland

ANURAG BHARGAVAConsultantJan Swasthya Sahyog,Village & Post: Ganiyar,District Bilaspur 495112Madhya Pradesh

BARUN KANJILALDeanIndian Institute of Health Management & Research,1 Prabhu Dayal Marg, Sanganer Airport,Jaipur

C.H.S. SASTRYDirector(Retd.), National Institute of Ayurveda, Jaipur3-599/4, Congress Office Road,Near Ayappa Temple,Undavalli, Tidapalli (Mandal)Distt. Guntur, Andhra Pradesh

CHARU GARGWorld Health OrganisationGeneva, Switzerland

D. NARAYANAProfessor, Department of Economics,Centre for Development Studies,Thiruvananthapuram

DARSHAN SHANKARDirectorFoundation for Revitalisation of local Health Traditions74/2, Jarakabanda KavalP.O. Attur, Via VelahankaBangalore- 560064

DINESH AGARWALTechnical Advisor,UNFPA, 53, Jor BaghNew Delhi

D.K. SRINIVASRajiv Gandhi University of Health Sciences,4-T Block, Jayanagar,Bangalore (Karnataka)

GANGA MURTHYAdditional Economic AdvisorMinistry of Health & Family WelfareNirman Bhavan, New Delhi

GIRISH CHATURVEDIJoint Secretary (Insurance)Ministry of FinanceJeevandeep Building, Parliament Street,New Delhi

GIRISH N. RAOManaging DirectorTTK Health Care Services Pvt. Ltd.,#7, Jeevan Bhima Nagar, Main RoadHAL III Stage,Bangalore-560075

G.P. DUBEYProfessorDepartment of Biofeedback,Institute of Medical Sciences,Banaras Hindu University,Varanasi, Uttar Pradesh

INDRANI GUPTAInstitute of Economic GrowthUniversity Enclave, Delhi - 110 007

J.V. MEENAKSHIIFPRI,Washington

JAYAPRAKASH MULIYILPrincipalChristian Medical College,Vellore

K.S. RAGHAVANConsultant102, Jyothi Manor, Plot No.41, Srinagar Colony,Hyderabad 500073

M.S. VALIATHANHonorary Advisor,Manipal Academy of Higher Education,Manipal 576104

MIRA SHIVASenior ConsultantVoluntary Health Association of IndiaB-40, Qutub Institutional AreaNew Delhi- 110 016

N.K. SETHIDirectorNational Institute of Health & Family Welfare,Munirka, New Delhi

Financing and Delivery of Health Care Services in India VII

Reviewers

NARENDRA BHATTVice PresidentIndian Association for the Study of Traditional AsianMedicine15 - Bachubhai Bldg.J. Bhatnagar Marg, ParelMumbai- 400 012

PRAKIM SUCHAXAYAFaculty of NursingChiang Mai University,Chiang Mai, Thailand

RAVI NARAYANGlobal SecretariatC/o Community Health CellNo.359 (Old No.367)Srinivas Nilaya, Jakkssadlu, First Main,1st Block, Kormangala,Bangalore 560002

RAMESHWAR SHARMAConstultantB-32, Vijay PathTilak Nagar,Jaipur-302004

R.D. BANSALConsultantKothi No.3059Sector 19 DChandigarh-19

RAVI DUGGALCoordinator, CEHATAram Society Road,Vakola, Santacruz(E)Mumbai -400055

R.L. MISHRAFormer Secretary HealthNo.4403, Qutub Enclave,DLF Phase IV,Gurgaon 122002

RAMESH BHATProf. of FinanceIndian Institute of ManagementVastrapur, Ahmedabad- 380 015

RAMA BARUCentre for Social Medicine & Community HealthSchool of Social Sciences,Jawaharlal Nehru University,New Delhi 1100067

SEETA PRABHUUnited Nations Development ProgrammeLodhi EstateNew Delhi

SRINIVASAN RFormer Secretary (Health)D-402, Kaveri Apartments,Alaknanda, New Delhi

S. SRINIVASANLOCOST, 1st Floor,Premanand Sahitya Sabha Hall,Opp. Lakadi Pool, Dandiya Bazar,Baroda 390001

SUNIL NANDRAJNational Professional Officer,Health Systems Developments,WHO, Nirman Bhavan,New Delhi

V.N. PANDITSri Sathyasai Institute for Higher Learning,Prasantinilayam,Distt. Ananthapur,Andhra Pradesh 515134

VAIDYANATHAN A.Madras Institute of Development Studies79, Second Main Road,Gandhinagar, Adyar,Chennai 600020

WILAWAM SEMARATAMAAssistant ProfessorChiang Mai UniversityChiang Mai,Thaniland

VIII Financing and Delivery of Health Care Services in India

Preface iii

List of Contributors and Reviewers v

SECTION I: Health, Poverty and Economic Growth in India 1

Health, Poverty and Economic Growth in India 3

Health, nutrition and poverty: Linking nutrition to consumer expenditures 19

SECTION II: Delivery of Health Care Services in India 37

Primary Health Care in India: Review of Policy, Plan and Committee Reports 39

Delivery of health services in the public sector 43

Training for effective delivery of health services 65

Effective Integration of Indian Systems of Medicine in Health Care Delivery: 77People's Participation, Access and Choice in a Pluralistic Democracy

Delivery of health services in the private sector 89

The not-for-profit sector in medical care 125

People’s Partnership for Health Towards a Healthy Public in India 135

SECTION III: Drivers of Health Care Costs 151

Human Resources for Health 153

Nursing for the delivery of essential health interventions 175

Access to Essential Drugs and Medicine 185

Appropriate Policies for Medical Device Technology: The Case of India 213

Annexure 1: Medical equipment use pattern in the public and private 226sectors in India: Policy implications

SECTION IV: Financing of Health Care in India 237

Financing of Health in India 239

Annexure 1: National Health Accounts for India 256

User charges in India’s health sector: An assessment 265

Health insurance in India 275

Resource Devolution from the Centre to States: Enhancing the Revenue 297Capacity of States for Implementation of Essential Health Interventions

Contents

Financing and Delivery of Health Care Services in India vii

SECTION I

Health, Poverty and Economic Growth

in India

S E C T I O N I

HE IMPORTANCE OF ECONOMIC GROWTH, MEASURED BY INCREASES IN GROSSdomestic product (GDP) and GDP per capita, for policy purposes can hardly be overem-phasized. Economic growth is commonly used as an indicator of a nation’s economicperformance, and the level of GDP per capita is a key component of the HumanDevelopment Index of the United Nations Development Programme, a popular indi-cator of national well-being. The benefits of economic growth are so pervasive thatit has been a central agenda everywhere and countries have accorded top priority toachieving high rates of growth. Some experts and policy-makers have also argued thatit is difficult to achieve declines in poverty rates by relying on redistribution strate-gies alone, without a concomitant improvement in size of the national economic cake,as reflected in the magnitude of real GDP and real GDP per capita. It is difficult toimagine a sustained decline in poverty unaccompanied by a simultaneous improve-ment in aggregate economic performance.

There is now a large body of theoretical and empirical research on the determinantsof economic growth. Much of the early work highlighted growth in labour and thestock of physical capital as the key determinants of economic growth. However, earlyempirical work was unable to ‘explain’ a significant portion of the growth in GDPand GDP per capita, by the growth in labour force and capital alone, and so atten-tion turned to other factors-most notably technological change embodied in capi-tal goods, and on the quality and quantity of labour, referred to as human capital, inpromoting economic growth. Two key elements of human capital are the extent towhich the labour force is educated, and the level of its health. Recent empirical workhas sought to assess the association between human capital and aggregate eco-nomic performance and found that, given labour and capital, improvement in healthstatus and education of the population lead to a higher output (Barro and Sala-i-Martin 2004).

The role of health in influencing economic outcomes has been well understood atthe micro level. Healthier workers are likely to be able to work longer, be generallymore productive than their relatively less healthy counterparts, and consequently ableto secure higher earnings than the latter, all else being the same; illness and diseaseshorten the working lives of people, thereby reducing their lifetime earnings. Betterhealth also has a positive effect on the learning abilities of children, and leads to bet-ter educational outcomes (school completion rates, higher mean years of schooling,achievements) and increases the efficiency of human capital formation by individu-als and households (Strauss and Thomas 1998; Schultz 1999).

However, more recent research has also established a strong causal association run-ning from health to aggregate economic performance. Thus Bloom, Canning andSevilla (2004) report evidence from more than a dozen cross-country studies and allthese studies, with a single exception, show that health has a positive and statisti-cally significant effect on the rate of growth of GDP per capita. The causal relation-ship does not run in only one direction-from health to aggregate economic per-formance-and there is strong case for considering a reverse link, running from‘wealth to health’. Higher incomes potentially permit individuals (and societies) toafford better nutrition, better health care and, presumably, achieve better health. Thereis some cross-country evidence that such a relationship holds at the national level(Pritchett and Summers 1996; Bhargava et al. 2001). Several experts believe, how-ever, that the causal direction from health to economic performance is stronger.

The previous empirical findings have implications for the role of health improve-

Health, Poverty and Economic Growth in India

T

Financing and Delivery of Health Care Services in India 3

P. DURAISAMY DEPARTMENT OFECONOMETRICS

UNIVERSITY OF MADRASCHENNAI 600005, INDIA

E-MAIL:[email protected]

AJAY MAHALHARVARD SCHOOL OF PUBLIC HEALTH

DEPARTMENT OF POPULATIONAND INTERNATIONAL HEALTH

BOSTON MA 02115, USAE-MAIL:

[email protected]

ments among workers in influencing another key policy objec-tive-poverty reduction. First, to the extent that improvementsin health result in improvements in national income, povertycould decline on account of both the standard ‘trickle-down’effects and an increased financial capacity of nations to setup safety nets. There is a good deal of evidence suggestingthat countries that experience a steep rise in growth rates ofreal GDP per capita also experience impressive declines inpoverty (Barro and Sala-i-Martin 2004). Second, improve-ments in health, when directed at the poor, can contributemore directly to poverty reduction and serve as an elementof a ‘pro-poor’ growth strategy. The poor bear a dispropor-tionately higher burden of illness, injury and disease thanthe rich. The poor suffer ill health due to a variety of causes,poor nutrition for instance, which reduces the ability to workand weakens their resistance to disease. With their bodyoften being their main income-earning asset, sickness anddisability have significant adverse implications in terms of lossof work and incomes, compounded by their inability to obtainadequate health care. Frequently, treatment expenditureand loss of earnings force poor families to exhaust their sav-ings and assets, and take recourse to borrowing, leading tomore poverty and poor health status.

This paper contributes to existing analyses of the health-poverty-income nexus by examining these relationships at theState level in India, using the most recent empirical methodsavailable in the literature (Bloom et al. 2004). Our analysis iscarried out using a cross-State panel dataset for 14 majorIndian States for the years 1970/71, 1980/81, 1990/91 and2000/01, spanning a thirty-year period.

The analysis of this paper is important for several reasons.First, there is no denying the policy significance of under-standing the determinants of economic growth and its rela-tionship with poverty and improvements in health. If healthturns out to have significantly influenced India’s economicperformance, this may call for investing more public fundsin health, given that health budgets have been severelyresource-constrained in recent years. One way this could hap-pen is by greater emphasis on the commitments India hasmade to meet the targets set by the Millennium Declaration.These targets include significant improvement in healththrough reduction in infant and child mortality by two-thirdsby 2015 (World Bank 2004). Conversely, this also calls forunderstanding better the impact of economic growth onhealth, so that one can assess the improvements in economicperformance necessary to achieve the desired goals. Sec-ond, unlike the existing literature which relies on cross-national data, our paper examines the interlinkages betweenhealth and economic performance within a single country.Intracountry analysis has the advantage of being much bet-ter equipped to handle data-comparability issues relatingto health, education and economic performance. At the sametime, the significant variation in inter-State performance inhealth and economic achievement means that our estima-tion procedures yield estimates that are reasonably robust.Third, significant inter-State differences in India’s eco-nomic performance call for enhanced efforts in understanding

these differentials. Unfortunately, there have been only a fewrecent attempts at examining the relative growth perform-ances of the States in India (Ahluwalia 2001; Sachs et al.2002), and most of the major studies do not emphasize therole of health in influencing economic performance. The onlystudy that sought to do this in the Indian context was oneby Gupta and Mitra (2003), which examined the link betweengrowth, health and poverty in India. While useful, the chiefdrawback of this paper is that its empirical specification wasessentially ad hoc, and not influenced by developments inthe economic growth literature. As a consequence, there arelegitimate concerns with their model specifications, includ-ing the criteria used for the inclusion (or exclusion) of explana-tory variables. There are now newer and more powerful meth-ods to assess the links between health, poverty and economicgrowth. For these reasons, we believe that the estimatesreported in their paper are unlikely to be robust.

Economic growth and health: A review ofcross-country and regional studies

Modern growth literature includes, in addition to the stan-dard labour and capital variables, indicators of human capi-tal-the stock of education and health-among the determi-nants. Particularly, the influential works in this area are thecross-country studies by Barro (1991, 1997) and Barro andSala-i-Martin (2004) and the theoretical framework devel-oped by Mankiw, Romer and Weil (1992). A comprehensivereview of empirical evidence on the new macroeconomics ofgrowth is contained in Temple (1999). Barro (1991) used across-sectional framework and the human capital variablewas restricted to school enrolment rates at the primary andsecondary levels. He showed, using cross-section data for 98countries, that the growth rate of real GDP per capita overthe period 1960-85 was positively related to the initial (1960)enrolment rate, and inversely related to the starting (1960)level of real per capita GDP. In subsequent analyses, Barro(1997) and Barro and Sala-i-Martin (2004) used a panel datasetof countries, and included health as a determinant (lifeexpectancy at birth [LEB]) besides years of educational attain-ment and other factors that could potentially influence thegrowth of real income per capita. Their results indicate thatthe log of LEB has a positive and statistically significant effecton growth rate with a coefficient of 0.042, which implies anannual rate of increase of per capita real GDP of 4.2%. Fogel(1994) showed that about one-third of the increase in incomein Britain during the nineteenth and twentieth centuries couldbe attributed to improvements in health and nutrition. Mayer(2001) concluded that improvements in adult survival werecausally linked to improvements in growth performance inBrazil and Mexico; and Weil (2001) found that health (indi-cated by average height and LEB) explained about 17% of thevariation in income per capita across countries. Gyimah-Brem-pong and Wilson (2004) find that 22% and 30% of the growthrate of per capita income in sub-Saharan Africa and OECDcountries, respectively, can be attributed to health.

Bloom, Canning and Sevilla (2004) review several studies

4 Financing and Delivery of Health Care Services in India

SECTION I Health, Poverty and Economic Growth in India

that include health as an explanatory variable in growth equa-tions, in addition to presenting new results, based on a cross-national panel dataset for countries. They use a productionfunction model of economic growth with a measure for humancapital which takes account of the indicators of health, edu-cation and labour market experience. There are two note-worthy findings from their analysis. First, their analysis rec-onciles microeconomic analyses of the rate of return to school-ing with macroeconomic analyses of returns to education.Second, they report a positive and statistically significanteffect of health on economic growth. Their empirical find-ings reveal that an increase of one year in LEB raises the growthrate of GDP by 4%. Bhargava et al. (2001) found that the adultsurvival rate (ASR) has a positive effect on growth rate of percapita GDP and that a 1% increase in ASR increases the growthrate by 0.05% for the poorest countries.

While there is compelling evidence that health contributessignificantly to economic growth, there is also voluminous lit-erature that focuses on causality in the reverse direction-fromincome to health. Much of this work is based on micro-leveldata that focus on the impact of income on the health statusof households and their members (Behrman and Deolalikar1988; Strauss and Thomas 1998). There has also been somerecent work at the macro-level, using cross-national paneldatasets; and much of the current work using cross-countrytime series data has tended to account for reverse causalityand inter-dependence between health, income and economicgrowth. Thus, Pritchett and Summers (1996) estimate the effectof income on health, measured by infant and child mortalityas well as life expectancy. Some authors have also inquiredinto the distributional aspects of the income-health relation-ship. For instance, Preston (1975) used cross-country evi-dence to suggest that the effect of income improvements onhealth was greater for the poorest countries than for the rich-est countries. Deaton (2001) argued that income inequality isnot a major determinant of health of the population.

How about the relationship between health, income andpoverty? In a purely accounting sense, increases in real GDPper capita will be accompanied by simultaneous declines inthe number of people living in poverty, provided the distribu-tion of income remains more or less constant. Growth may beessential to reducing poverty and one might presume that poli-cies promoting distributional improvements will prove diffi-cult to sustain in the absence of long-term increases in realGDP per capita-that is, economic growth. Empirically, Barroand Sala-i-Martin (2004) demonstrated that regions of theworld that experienced higher growth rates also witnessedsteeper declines in poverty. Bourgoignon (2004) cites studiesthat provide evidence on the poverty-reducing impact of growthgiven that income distribution remains the same, and of increasesin poverty with a worsening of income distribution. In India,poverty levels have declined the fastest over periods thatexperienced the highest growth rates, during the1990s(Ahluwalia 2001). According to Srinivasan (2003), there wasno perceptible decline in poverty in India until growth accel-erated in 1980s and hence a necessary condition for eradi-cating mass poverty is to accelerate average annual rate of

aggregate GDP growth to at least 8%-10% and sustain it atthat level for a sufficiently long period. Bourguignon (2004)examines theoretically the interrelationship between growth,inequality and poverty, and shows that both growth and changesin inequality contribute to changes in poverty. However, therelative effects of these phenomena may be country-specificand depend on initial income level and inequality.

It was noted earlier that health improvements contributeto income improvements or growth. With much evidencealso pointing to the growth-poverty reduction nexus, betterhealth can be seen as a factor that contributes to povertyreduction via some form of trickle-down mechanism. Whenhealth improvements are concentrated among people livingclose to, or below the poverty line, both a trickle-down mech-anism and a redistributive one work to reduce poverty. Roughcomputations by the World Bank, using National Sample Sur-vey (NSS) data, suggest that ill-health and associated eco-nomic losses cause as much as 22 lakh Indians, most livingmarginally above a poverty line standard of living, to tem-porarily fall below the poverty line each year, owing to acombination of income losses on account of being unable towork and declines in non-medical care consumption. The NSSfor India for 1995-96 also reveal that when the poor fall sick,they are often unable to afford treatment, and even whenthey do decide to get treated, tend to sell off productive assetsand rely on borrowing, all of which have the potential ofdecreasing their long-run earning capacity-and the capacityto take advantage of any trickle-down labour market advan-tages offered by a growing economy.

There are several studies in India on health status and health-seeking behaviour. In an early attempt Kannan et al. (1991)analysed the linkages between health, development and socio-economic factors in Kerala. Vaidyanathan (1995) examinedthe measurement issues related to nutritional and healthstatus and the adequacy of currently available data for assess-ing nutrition-health status. A number of studies examinedlevels and changes in morbidity and health expenditureusing the National Sample Survey 1986-87 health survey data(Visaria and Gumber 1994, Krishnan 1995, Duraisamy 1995,and Gumber 1997). Sundar (1995) studied the levels andchanges in health status and health expenditure based onNCAER survey. These studies are mainly descriptive and referto earlier periods.

The relationship between income, health and productivityhas been analysed at the household level based on micro-econometric framework. Duraisamy (1998, 2001) foundevidence of a strong negative effect of income or total con-sumption expenditure on morbidity and household assetsemerged as an important determinant of child survival andpreventive health care (Duraisamy and Duraisamy 1995). Deo-lalikar (1988) demonstrated that health was a significantdeterminant of labour productivity using farm level data. Astudy on health, wages and labour supply by Duraisamy andSathiyavan (1998) revealed that a 10% increase in the bodymass index of males and females increased their wage rateby 7% and 2% respectively and labour supply by 20% and11% respectively.


Health, Poverty and Economic Growth in India SECTION I

At the macro level, very little is known on the associationbetween income/economic growth and health (Gupta andMitra 2003, World Bank 2004). Gupta and Mitra (2003) exam-ined the relationship between health, poverty and economicgrowth in India for the years 1973/74, 1977/78, 1983, 1987/88,1993/94, 1999/2000 based on data for 15 Indian States. Theireconometric analysis showed that per capita public healthexpenditure positively influences health status, that povertydeclines with better health, and that growth and health havea positive two-way relationship. Despite reporting what appearto be significant findings, this study suffers from certainmethodological drawbacks as indicated earlier. Identifica-tion restrictions in the model specification appear to be arbi-trary rather than based on economic theory, or empirical lit-erature. Their empirical specification with growth of net Statedomestic product (NSDP) as the dependent variable uses NSDP(not per capita NSDP) in the base year as an explanatoryvariable, a procedure not used previously in the literature, andfor which no justification is provided. The same specificationomitted population as an explanatory variable, an assump-tion which appears not to be standard (Bloom and Freeman1986; Bloom and Williamson 1998). Many of the estimatedcoefficients in their analysis turned out not to be statisticallysignificant. For example, in the growth equation (growth ofNSDP), poverty, infant mortality rate, initial NSDP and liter-acy are statistically not significant even at the 10% level ofsignificance. In the same equation, the infrastructure (INF)variable has a significant negative effect on growth rate.

In a World Bank (2004) study, the effects of per capitaGDP, per capita health expenditure and female literacy oninfant mortality were examined using State-level data forthe period 1980-99 based on econometric framework. Theresults show that both per capita public spending on healthand per capita GDP are inversely related to IMR, but they arenot very robust to alternative specifications of the model.However this study does not examine the effect of per capitaincome on LEB, an alternative and perhaps better measureof health status of the population.

The lack of consistent findings in the literature, and possi-bly specification problems in the early works, lend further jus-tification to the empirical analysis that we pursue in this paper.

Database

To empirically examine the linkages between health, povertyand economic growth at the sub-national (State) level in India,we constructed a panel dataset of 14 States, including obser-vations every ten years-1970/71, 1980/81, 1990/91 and2000/01. This study is confined to the major Indian Statesfor which consistent time series data are available. The Statesexcluded from the study are: Jammu and Kashmir, Goa andHimachal Pradesh, eight north-eastern States, and seven UnionTerritories. In the year 2000, three of the States included inour sample, Bihar, Madhya Pradesh and Uttar Pradesh, werebifurcated. We have merged the data on the new States (Chat-tisgarh, Jharkhand and Uttaranchal) with their respective par-ent States and constructed a comparable series of all the

variables for the study period. The States included for thestudy account for 90% of India’s population and 83% of thecountry’s total land area at present.

State-level income and per capita income are representedby the respective State’s NSDP and the per capita NSDP(PCNSDP). Data on the NSDP and PCNSDP are produced ona regular basis by the Central Statistical Organisation (CSO)of the Government of India. We obtained these data frompublications of the EPW Research Foundation (2002a, 2003)and CSO (2004). The value of NSDP and PCNSDP in these isreported in current prices and this has been converted intoconstant price series using a GDP deflator.

The poverty variable is the head count measure, i.e. theproportion of the population living below the poverty line.In India, the poverty line is defined as the minimum expen-diture required for achieving a basic calorie requirement,plus comparable non-food consumption expenditures. Thesource of poverty data for this paper is the Planning Com-mission, which computed poverty levels from the NationalSample Survey Organization (NSSO) ‘consumer expenditure’surveys using the ‘expert group methodology’. Poverty dataare available for the years 1972/73, 1983, 1993/94 and1999/2000, respectively, and for the purposes of our statis-tical analysis, are taken to correspond to the years 1971, 1981,1991 and 2001.

The health status of the population is captured through twoindicators-LEB and the infant mortality rate (IMR). Data onthese two health indicators were obtained from the RegistrarGeneral of India (1999) and updated for recent years usingthe Sample Registration System (SRS) Bulletin published bythe Registrar General of India. Data for 1971 for Bihar andWest Bengal were extrapolated using the time series data ofthe concerned States. LEB estimates for 1961 were taken fromthe estimates published by the Registrar General of India,which is based on the population census of that year.

Apart from health, human capital is measured along twoadditional dimensions-average years of schooling and workexperience. First, we computed years of schooling using cen-sus data on completed levels of education by age and sex ofthe population. The completed years of education for vari-ous levels are assumed to be as follows: literate below pri-mary-4 years; primary-5 years; middle-8 years; secondary-10 years; higher secondary/pre-university-12 years; techni-cal and non-technical diploma-13 years; graduate and above-16 years. The variable for average years of schooling is con-structed from the census tables on completed levels of edu-cation by age and sex of the population given in the Socialand Cultural Tables, Census of India, published by the Reg-istrar General of India for various census years, weighted byits appropriate population share. Second, following Bloom,Canning and Sevilla (2004), the years of labour marketexperience is constructed using the age and gender distri-bution of workers provided in the General Economic Tables,Census of India, Registrar General of India for various years.The ‘years of experience’ is defined as age minus years ofschooling minus six, the age of entry into schools as used inthe micro-studies in labour economics. The average work



experience is the weighted average of the age- and sex-groupspecific potential experience with the respective group’s shareof the total. The data on the number of workers for variouscensus years were obtained from the General Economic Tablesof the population census (Registrar General of India [variousyears]). Total workers include both main and marginal work-ers. The total population in the working age groups of 15-59 years were also collected from the decennial populationcensus for the respective years. As the age distribution ofthe population for 2001 was not available when this workwas completed, projected instead of actual population byage groups was used.

Physical capital is another key explanatory variable in analy-ses of economic growth. Unfortunately, data on gross cap-ital formation or the level of investment at the State levelcomparable with the national-level data on physical capitalfrom national accounts statistics are not available. Data ongross fixed capital formation (GFCF) is available only for afew States from 1993-94 onwards. However, data on thevalue of fixed capital for the industrial sector are availablefrom the Annual Survey of Industries (ASI) published by theCSO and compiled and published by the EPW Research Foun-dation (2002b). These values were expressed in current pricesand have been converted into a constant price series usingthe GDP deflator.

Public expenditure on health is an important determinantof the health status of the population. State-level

government expenditures on health, water supply and san-itation, and family welfare were compiled from the RBI Bul-letin for various years. We also constructed two variables torepresent political power: (i) the percentage of votes gainedby the ruling party at the Centre in the Assembly elections;and (ii) the percentage of votes secured by socialist andcommunist parties in the respective State Assembly elections.The data for these variables were gathered from the Elec-tion Commission.

Using the above data we first present a descriptive analysisto understand the association between some of the variablesused in the study. This is followed by the specification of theeconometric model and discussion of the results.

Health, poverty and economic growth:Inter-State descriptive analysis

The basic socioeconomic characteristics of the 14 States andfor all of India are given in Table 1. Clearly, there is largeinter-State variation in the level of PCNSDP for the most recentyear (2000/01). The richest State is Punjab, with a per capitaincome of Rs 15,390; with Bihar being the State with the low-est income per capita of Rs 4123.

The estimated growth rates of real per capita income overthe thirty-year period 1970-2000, also shown in Table 1, revealsimilar trends. The range of variation in growth rates is froma low of about 0.9% and 1% respectively in Madhya Pradesh



Table 1

Basic characteristics of the States included in the study

State PCNSDP Annual average Life expectancy IMR 2000 Poverty Population Annual average 2000/01 rate of real at birth 1995-99 (per 1000 1999-2000 2001 rate of population (Rs)Life PCNSDP growth (years) live-births) (% below (in thousands) growth 1971-2001

1970-2000 (%) poverty line)

Andhra Pradesh 9,982 2.6 63.1 55 15.77 75,728 1.8

Bihar 4,123 1.0 60.2 62 42.6 82,879 1.3

Gujarat 12,975 3.6 62.8 62 14.07 50,597 2.1

Haryana 14,331 2.8 61.5 67 8.74 21,083 2.5

Karnataka 11,910 3.5 64.0 57 20.04 52,734 2.0

Kerala 10,627 1.9 73.5 14 12.72 31,839 1.3

Madhya Pradesh 7,620 0.9 56.4 87 37.43 60,385 1.2

Maharashtra 15,172 3.8 65.8 48 25.02 96,752 2.2

Orissa 5,187 1.7 57.7 95 47.15 36,707 1.7

Punjab 15,390 3.1 68.1 52 6.16 24,289 1.9

Rajasthan 7,937 2.5 60.5 79 15.28 56,473 2.6

Tamil Nadu 12,779 3.5 64.6 51 21.12 62,111 1.4

Uttar Pradesh 5,770 1.2 58.4 83 31.13 166,053 2.1

West Bengal 9,778 2.8 63.4 51 27.02 80,221 2.0

India 10,376 2.4 61.7 68 26.1 1,027,015 2.1

Note: 1. Data for Bihar, Madhya Pradesh and Uttar Pradesh include the three newly formed States of Jharkand, Chhattisgarh and Uttaranchal, respectively.2. The data for India includes all States and Union Territories. 3. Per capita income (PCY) refers to real per capita NSDP.

Sources: PCNSDP from EPW Research Foundation (2003), growth rate in PCNSDP is based on the authors computation, LEB and IMR are from the Sample Registration System Bulletin(2004) published by the Registrar General of India, poverty estimates are from Planning Commission (from www.indiastat.com), population for 2001 is from the Registrar General of India,GOI and the growth rate in population is computed by the authors.

and Bihar to a high of 3.8% in Maharashtra.The relationship between initial real per capita income

(1970/71) and annual average rates of growth of real incomeper capita is indicated in Fig. 1. In general, States with lowinitial incomes also witnessed low growth rates except AndhraPradesh, West Bengal and Karnataka. Conversely, States withhigher starting incomes experienced higher growth rates, withthe notable exceptions of Kerala and Madhya Pradesh.

Next, we examine the relationship between economic growthand initial per capita income pooling the data for the threeperiods, 1970-80, 1980-90 and 1990-2000. The computedgrowth rate is the decadal rate for the periods and the initialincome corresponds to the beginning year of the respectivedecade. The scatter plot with a trend line is exhibited in Fig.2. It is amply evident that there is a positive association between

initial income and growth rate. At first glance, this is at vari-ance with the cross-country results and the regional evi-dence reported in Barro and Sala-i-Martin (2004). However,the simple association of Fig. 2 does not control for con-founding factors such as human capital stock, and addi-tional analyses are called for to reach firmer conclusions.This issue will be explored further later in the paper.

Figure 3 presents all-India trends in life expectancy atbirth (LEB) during the period 1970-2000. It is immediatelyapparent that India experienced a remarkable improvementin LEB over this period, from 49.7 years during 1970/75 to61.7 years during 1995/99. The inter-State disparity in LEBin 1995/99 is laid out in Table 1. LEB is highest in Kerala(73.5 years) and lowest in Madhya Pradesh (56.4 years), imply-ing a difference of 18.1 years. Bihar, which is one of theStates with the lowest per capita income, seems to havefared better than Madhya Pradesh, Orissa and Uttar Pradeshin this health status indicator.

It is instructive to compare the simple association betweenLEB and per capita income, pooling the three-period data,as shown in the scatter plot (Fig. 4). The positive associationbetween income and life expectancy is vividly brought out in

the graph, and the declining slope of the curve indicates thatthe effect of LEB increases faster at lower than at higher incomelevels. The relationship is similar to the cross-country evidence

on the association between LEB and per capita income (in1985 purchasing power parity (PPP) in dollars) shown byPritchett and Summers (1996) as well as in Preston (1975).The positive association between LEB and per capita incomecould be due to (i) increased income causing better health;or (ii) healthier workers being more productive and hence hav-ing higher incomes; or (iii) a common factor that leads to bothbetter health and higher incomes. Thus, the simple associa-tion between LEB and per capita income cannot tell us exactlywhat the nature of the relationship is. This issue is furtherexamined below using multivariate techniques.

The inter-State variation in the second health status indi-cator-IMR-is seen in Table 1. Kerala again stands out with



Fig 3

Trends in life expectancy at birth (LEB), 1970-99, India

Fig 1

Per capita income and growth rate by States,1970-2000NSDP: net State domestic product

Fig 2

Relationship between initial income and growth rate NSDP: net State domestic product

the lowest IMR of 14 per 1000 live-births, compared to 95 inOrissa, which has the highest IMR. Interestingly, the secondlowest IMR is 48 in Maharashtra, nearly three times higherthan Kerala’s IMR. This clearly shows that even States withbetter health status than all of India have a long way to go

to ‘catch up’ with Kerala.The association between initial per capita income and

IMR, pooling the three-period data is shown in Fig. 5. Percapita income and IMR are negatively related. The decline inIMR as income increases is not uniform across all incomelevels. The decline is higher at the low-income levels and lowerat high-income levels.

Econometric model and empirical analysis

Our discussion on the correlations that exist between indica-tors of economic growth-income and health-cannot be inter-preted as a cause-effect relationship, including also the pos-sibility of two-way causality among the above-mentionedvariables.

We now develop an econometric framework to examinethe causal or simultaneity relationships among these threevariables.

Model specification and estimation issues

Following the cross-country empirical studies on the deter-minants of economic growth (Barro 1991; Barro and Sala-i-Martin 2004; Bloom and Canning 2004, the growth rate ofreal per capita income function can be specified as

(1) Git = α0 + α1lnYit + α2lnHit + α3 Sit + α4 lnWit + a5GWit + uit,i=1,2,..,N States, t=1,2,..T periods

Here Git =1/m[lnYit+1 - lnYit] is the growth in per capitareal income over the period t and t+1, lnY is the natural log-arithm of initial real per capita income, lnH is the logarithmof health indicator, namely LEB, S is another dimension ofhuman capital, namely average years of schooling of the adultpopulation, W is the ratio of working age to total popula-tion, GW is the rate of growth in W, m is the length of t -(t+1), αi are parameters to be estimated and uit is the ran-dom disturbance term distributed with zero mean and con-stant variance (see Bloom and Canning 2004 for the theo-retical derivation of the model). Several other variables to cap-ture the economic geography and quality of governancesuch as openness, institutional quality, ethnolinguistic frac-tionalization, landlocked, tropical area, average governmentsavings rates, access to ports, government consumption ratio,rule of law, etc. were included in the cross-country analysis(Barro 1997); Bloom and Williamson 1998). However, someof these variables are not relevant for a study such as this(e.g. openness) and data on many of the variables such as gov-ernance, investment or savings ratio, rule of law, etc. werenot available at the State level. Religious and caste compo-sition (percentage of the population belonging to various reli-gions, and schedule caste and schedule tribes), urbanizationand population density were considered. Due to high corre-lation between these and other variables, particularly LEB andschooling, these were not included in the final analysis. Inaddition to average years of schooling, we also tried includ-ing years of labour market experience but due to high collinear-ity between schooling and labour market experience, the expe-rience variable turned out to be statistically insignificant andhence was dropped in the final analysis.

The coefficient of the initial income variable Yit is an indica-tor of whether there is a conditional convergence in income percapita or not among countries or regions (States) within a coun-try. The conditional convergence hypothesizes a negative signof the initial income coefficient. A positive sign would implyincreased income dispersion among rich and poor countries(States). A problem with the initial income per capita is that this



Fig 5

Infant mortality rate (IMR) and NSDP real per capitaNSDP: net State domestic product

Fig 4

Life expectancy at birth (LEB) and per capitaNSDP, 1970-2000NSDP: net State domestic product

variable is potentially endogenous and also measured with error.The procedure adopted in the growth literature is to predict theper capita income using lagged values and the predicted valuesare used to compute the growth rate as well as for initial income(Barro 1997). We have also adopted this procedure.

Pritchett and Summers (1996), Bhargava et al. (2001) andothers argue that health cannot be treated as an exogenousdeterminant of growth. That is, increased income leads to moreinvestment in health and thus there is strong case for reversecausality. The current level of health status depends upon theinitial income per capita and mean years of schooling of thepopulation as specified in Pritchett and Summers (1996). Thedeterminants of health function can be specified as

(2) lnHit = β1 + β2lnYit + β3lnHExpit + β4Sit + β5Pit + eit ,

i=1,2,..,N States, t=1,2,…T periods where H, Y and S are asdefined above, HExp is the per capita State government expen-diture on health, water supply and sanitation, and family wel-fare, hereafter referred to as health expenditure in this study,P is a measure of political power, βi are the parameters to beestimated and e is the random error term assumed to be dis-tributed with zero mean and constant variance. Increases inper capita income of the people and public expenditure areexpected to improve the health status of the population. Thepolitical power factor should influence public spending in awelfare state. Two variables are considered. One is the per-centage of votes gained by socialist and communist partiesin the elections in the decade. The larger the share of votesgained by the socialist and communist parties, the greatertheir influence on public policy decisions such as govern-ment spending on welfare measures like health. Hence it isexpected that political power will exert a positive effect onhealth status. Another political variable considered is thepercentage of Assembly seats gained by the ruling party atthe Centre. The higher the number of Assembly seats won bythe ruling party at the Centre in the State, the more likely theState to get a higher share in central fund allocation. This vari-able is thus expected to have a positive effect on health. Giventhat elections are held once every five years under normal con-ditions, there were at least two elections in a decade. Hencewe assigned a weight equal to the number of years a partic-ular government stayed in power in a decade.

The initial income per capita is likely to be endogenousand researchers have instrumented initial income using laggedvalues of the per capita income variable (Barro 1997). How-ever, Bhargava et al. (2001) argue that lagged variables shouldbe treated as endogenous. Pritchett and Summers (1996)experimented with alternative instruments-terms of tradeshocks, investment/GDP ratio, black market premium andprice level distortions in their cross-country study. These vari-ables are probably less relevant within a country, and infor-mation on these is not available at the State level in India.

In the above formulation, initial income is used to controlfor the transitional dynamics induced by factor accumula-tion. If, on the other hand, data on factor inputs are avail-able, it is possible to formulate a model in which the change

in output is regressed on changes in inputs. Let the aggre-gate production function be of Cobb-Douglas form:

(3) Yit = AitKα

it LβitH

γitS

δitE

λit

where Y is aggregate output, A is a technology parameter,K is physical capital stock, L is labour force, H is health (lifeexpectancy), S is mean years of schooling, E is an experiencevector (experience and experience squared) and , , , , andare the parameters.

Taking logs of the Cobb-Douglas aggregate productionfunction (3), we can obtain the following model

(4) lnYit = µit + α lnKit + βlnLit + γlnHit + δSit + λEitwhere µit is lnAit. The inputs K, L and H are endogenous

and also measured with errors. To overcome these problems,the practice adopted in literature is to instrument the inputsusing their lagged values and this approach has been used inthis study for capital stock, total workers and LEB. Some lim-itations in the data should be noted. For instance, the defi-nition of ‘workers’ has changed between 1961 and 1981.The SRS provides data on LEB only from 1970-71 and hencethe LEB for the year 1960-61 is based on the estimates of thepopulation census of 1961.The estimation methodologydepends upon the assumption we make about the technol-ogy parameter µit. If µit is assumed to be the same for allStates over a period of time, then the production function(4) can be estimated by the OLS or by instrumental variables(IV) methods.

On the other hand, if all the States are at an identical tech-nology level but that technology itself changes over time asshown below

(5) µit = µt + witwhere wit is the random disturbance, µt is the time-specific

constant. Under this assumption, the equation can be estimatedby the ‘fixed effects’ (time) method or by including a set ofdummy variables for time. However, if the technology remainsthe same over a period of time but varies across States, then theassumption about the technology parameter can be stated as

(6) µit = µt + witSpecification (6) of the model can be estimated by intro-

ducing a set of dummy variables for States or by the ‘fixedeffects’ (states) method. The fixed effects method enables usto control for unobserved time-specific or State-specific fixedfactors such as genetic factors, climatic conditions, region-specific health problems, etc. An alternative approach is therandom effects model that can be estimated by the feasibleGLS method (Bloom et al. 2004). We have tested for thefixed versus random effects specification of the model usingHausman’s (chi-sqaure) specification test.

Empirical results: Estimates of economicgrowth and health equations

Table 2 contains the OLS and two-stage least squares (2SLS)estimates of the Barro-type growth equation (1). The depend-



ent variables are the growth rates of real per capita incomeover the three periods 1970-80, 1980-90 and 1990-2000,and the explanatory variables are initial levels of income, LEB,years of schooling, ratio of working age population to totalpopulation and the growth rate in the ratio of working ageover total population. The first column provides the OLSestimates of the initial levels of log per capita income andlog LEB. The effect of initial income on growth is positivebut not statistically significant even at the 10% level. The pos-itive sign of the coefficient of initial income implies that IndianStates do not converge to a steady-state growth of per capitaincome. This is largely at variance with the cross-countryevidence that supports the conditional convergence hypoth-esis. However, similar findings emerge from a study by Sachset al. (2002) using panel data on Indian States for the period1980-98. In the case of China, there are marked differencesin findings, with convergence and divergence in various sub-periods, due to major shifts in economic policy (Sachs et al.2002). The effect of log LEB on economic growth is positiveand the coefficient is statistically significant at the 5% level.In the second specification, we include years of schooling andwe observe that the effect of both log LEB and schooling turnsout to be statistically insignificant. The high correlation betweenthese two variables (r=0.87), indicates that there is a problemof multicollinearity. Education is expected to influence healthand the relationship is apparently quite strong at the macrolevel. Hence, the schooling variable was excluded in the remain-ing specifications of the model.

The 2SLS estimates are reported in column 3. The effect oflog LEB is positive but the coefficient is significant only atthe 10% level. The last specification includes two demographicvariables-ratio of working age over total population and itsgrowth rate over the decade. The effect of working age overtotal population is positive and statistically significant at the5% level. An increase in the share of working age populationincreases the potential labour force which in turn increasesthe growth rate. However, the growth in the share of work-ing age over total population is negative and not statisticallysignificant.

The IV estimates of the effect of income on health are reportedin Table 3. The estimates, given in column 1, show that bothlog per capita income and per capita health expenditurehave a positive and statistically significant effect on LEB, asexpected. A 10% increase in per capita income would increasethe LEB by about 2% while a thousand rupee increase in percapita health expenditure would lead to 1.3% increase in LEB.Next, the average number of years of schooling is added inthe specification and the results reported in column 2 revealthat a substantial effect of per capita income and health expen-diture is taken away by the schooling variable. Its effect is pos-itive and highly significant (at the 1% level or better). The nextspecification (column 3) includes the percentage of votesgained by the socialist and communist parties in the Assem-bly elections. The effect of the political factor variable is pos-itive but not significant. The other measure of the politicalvariable, namely the per cent of Assembly seats won by the



Table 2

The effect of health on economic growth inIndia, 1970-2000Dependent variable: Growth rate in per capita NSDPover the decade

Explanatory variable OLS OLS 2SLS 2SLS1 2 3 4

Log initial per capita NSDP 1.534 1.519 1.419 2.875

(1.58) (1.53) (1.27) (2.63)

Log initial LEB 5.567 5.172 5.990 -1.801

(2.23) (1.29) (1.86) (0.43)

Initial average years of schooling 0.463

(0.13)

Log initial working age over 14.162

total population (2.47)

Growth of working age over -9.837

total population (1.37)

Constant -33.223 -31.659 -33.690 -5.880

Adjusted R2 0.346 0.329 0.377 0.304

Number of States 14 14 14 14

Number of observations 42 42 42 42

NSDP: net State domestic product; LEB: life expectancy at birth; OLS: Ordinary leastsquares; 2SLS: two-stage least squares. Note: ‘t’ values are given in parentheses Source: Authors' calculation

Table 3

The instrumental variable (IV) estimates of theeffect of per capita income and healthexpenditure on LEB, India, 1970-2000Dependent variable: Log of life expectancy at birth (LEB)

Explanatory variable 1 2 3

Log per capita NSDP* 0.174 0.078 0.820

(3.01) (1.85) (1.77)

Per capita health expenditure 1.265 0.156 0.179

(in thousands) (2.35) (0.39) (0.42)

Average years of schooling 0.069 0.0671

(6.74) (5.17)

Average percentage of votes 0.000170

secured by socialist and communist (0.21)

parties in the Assembly election

Constant 2.480 3.123 3.092

Adjusted R2 0.521 0.776 0.770

Number of observations 42 42 42

NSDP: net State domestic productNote: ‘t’ values are given in parentheses

* Instrumented using lagged values of per capital NSDPSource: Authors' calculation

ruling party at the Centre, also had a positive effect on LEBbut the effect was not statistically significant.

Panel data estimates of the aggregate Cobb-Douglas production function

The effect of health on output at the State level is examinedby estimating a production function as specified in equations(4-6). Output is measured by the real NSDP. To overcome theproblem of measurement errors and year to year fluctuationsin NSDP, predicted rather than actual values of NSDP areused. The NSDP for a particular year is predicted using its laggedvalues. Two conventional inputs-capital and labour-are usedin the production functions. At the State level, there is no infor-mation on capital stock or investment, even though data onthese two variables are available at the national level over aperiod of time. In this study, we use the value of fixed capitalnet of depreciation for the manufacturing sector to capturethe capital input. The capital stock should include public sec-tor investment as well as private investment in other sectorsalso. In the absence of such comprehensive data, the capitalmeasure used in this study captures only the partial and notthe full effect of capital on aggregate output. The labour inputrefers to the total number of workers including main andmarginal workers. The measure of health-LEB-and averageyears of schooling are as defined in the previous section. Poten-tial experience and its squared term were also computed andincluded but due to the small variation in these variables andhigh collinearity between the two variables, the parameter esti-mates turned out to be imprecise and hence were dropped fromthe final analysis. The input variables-log capital, log labourand log LEB-are instrumented using their lagged variables asin Bloom, Canning and Sevilla (2004). As there is high corre-lation between the two human capital variables of LEB andschooling, all the models are estimated with and without theschooling variable.

The OLS and IV estimates of the aggregate production func-tion (4), based on the assumption that the technology is con-stant over time and across States, are reported in Table 4. TheOLS and IV results reported in columns 1 and 3 indicate thatthe conventional inputs-labour and capital-and health (LEB)exert a positive and statistically significant effect (1% level)on output. The magnitude of the coefficient of LEB is high,which is puzzling. The average number of years of schoolingis included in specification 2. The effect of the schooling vari-able is positive and statistically significant at the 1% level.However, once the schooling variable is included, the effectof LEB on output became statistically insignificant, which isdue to the high correlation between the two variables as dis-cussed above. The coefficient estimates from the OLS and IVmethods are similar in sign but the standard errors of thecoefficients are somewhat higher in the case of IV estimates.

The estimates of the fixed effects model under the assump-tions made in equations (5) and (6) are reported in Table 5.The Hausman specification test statistic suggests that theerror terms are correlated with the inputs and thus the nullhypothesis that the random effects model is appropriate

stands rejected. We begin the discussion with specification 1. The effect of

the changes in the two conventional inputs-labour and cap-ital-and LEB on the change in output is positive and statisti-cally significant (1% level) on output. The results suggestthat a 1% improvement in LEB would result in a 1%-2% increasein output. The effect of health on output is much higher thanthe effect of the two conventional inputs. Specification 2includes the average years of schooling along with health andother conventional inputs. Schooling exerts a positive and sta-tistically significant effect at the 10% level. Both the magni-tude and significance of the health effect on output are reduceddue to inclusion of the education variable.

Economic growth, poverty and health:Theory and empirical evidence

Poverty is a measure of income that indicates inadequate com-mand over material resources. The level of poverty in a coun-try or region depends upon the level of income as well as itsdistribution. Any policies or programmes which alter the dis-tribution of income would affect poverty. In a country or Statewith a large income inequality there would be a relatively largenumber of poor people or people with a low income (belowa fixed poverty line), even if the country/State has a high percapita income. A higher rate of economic growth would reducepoverty if growth affects the distribution of income in waysthat pulls up the bottom tail of the distribution. Countriesthat pursue a growth-oriented strategy firmly believe that



Table 4

Estimates of the aggregate production function,India, 1970-2000Dependent variable: Log (NSDP)

OLS (levels) IV (levels)Inputs 1 2 1 2

Log Labour 0.461 0.475 0.678 0.686

(7.15) (7.74) (10.86) (11.11)

Log Capital 0.414 0.384 0.355 0.341

(7.58) (7.23) (5.66) (5.46)

Log LEB 1.134 0.163 1.960 1.250

(4.51) (0.37) (5.74) (2.27)

Years of schooling 0.105 0.0718

(2.60) (1.64)

Constant -7.639 -3.905 -13.793 -11.064

R2 0.934 0.941 0.909 0.915

F statistics 244.00 204.89 180.48 140.40



NSDP: net State domestic product; OLS: Ordinary least square; IV: instrumental variable; LEB: Life expectancy at birth

Note: ‘t’ values are given in parentheses.The input variables (log labour, log capital and log LEB) in IV (levels) columns are instrumented using lagged values of their values.

Source: Authors' calculation

growth will have its trickle-down effects that will help reducepoverty.

Bourguignon (2004) argues that while rapid elimination ofpoverty (absolute poverty) is a meaningful development goal,attainment of the goal also requires that the growth strategybe combined with distribution measures that are country-specific. Poverty reduction at a given point in time in a coun-try is fully determined by the rate of growth of mean incomeand changes in income distribution in the population. A changein income distribution can be decomposed into a ‘growtheffect’ (the effect of a proportional change in all incomes withthe distribution of relative income remaining unchanged) anda ‘distributional effect’ (change in relative incomes). He alsopoints out that there is a case for strong interdependencebetween growth and distribution. What do empirical verifi-cations suggest? The studies reviewed in Bourguignon (2004)point to ambiguous and contradictory results. Cross-sectionalstudies have come out with the finding that countries withmore inequality in income distribution have experienced slug-gish growth. But when country specific (regions) effectswere controlled for, the inequality effect turned insignificant.Decadal country data, on the other hand, found a positiverelationship between growth and inequality.

On the poverty-health link, some argue that poverty cancause poor health while others maintain that low incomeand poor health are caused by some common factor such asgenetic endowments or education. Poverty can have an adverseimpact on health because of malnutrition and also due topoor sanitation, unsafe drinking water supply, etc. Much of

the disease burden in developing countries is due to the intakeof an inadequate diet. Since expenditure on food forms amajor portion of the budget of the poor, eradicating povertycould be instrumental in reducing malnutrition and the result-ing ill health (Wagstaff 2001).

The association among growth rate of PCNSDP, level of percapita income and poverty is first examined using data per-taining to 14 major States over a period of 30 years (1970/71-1999/2000). The relationship between long-run growth ofper capita income and level of poverty is shown in Fig. 6.The poverty level is above the all-India average in the BIMARUStates (with the exception of Rajasthan), Orissa and WestBengal. It is interesting to note that States which experi-enced higher levels of growth over the thirty-year period wit-nessed a lower level of poverty except Kerala. Similarly, inStates where the long-run growth rate is lower, the currentlevel of poverty is higher. A notable exception here is WestBengal. It is worth mentioning that the two ‘exception’ Stateshave many similarities, particularly in respect of political ide-ology and policy decisions. The growth-poverty link seemsto suggest that rapid growth of per capita income may berequired for States to achieve poverty reduction. Such growthwould be able to generate productive employment and thusincrease per capita incomes.

The simple association between per capita income andpoverty across the States over a period of time is displayed inFig. 7. As one may expect, increase in per capita income andthe percentage of population living below the poverty line arenegatively related and the decline in poverty is sharp, espe-

cially at lower levels of per capita income. Possibly the growthin income in the past three decades has had the desirabletrickle-down effect.

Next, we turn to the association between poverty for theperiods 1972/73, 1983, 1993/94 and 1999/2000, and five-year average life expectancy corresponding to the above yearsat the national level. As shown in Fig. 8, the percentage of



Table 5

Estimates of the aggregate production function,India, 1970-2000Dependent variable: Log (NSDP )

Fixed effects (States) Fixed effects (time)Inputs 1 2 1 2

Log labour 0.910 0.787 0.607 0.612

(6.82) (5.41) (8.24) (8.46)

Log capital 0.318 0.202 0.451 0.405

(4.91) (2.27) (4.78) (4.21)

Log LEB 1.510 1.026 1.817 0.870

(2.71) (1.70) (3.73) (1.19)

Years of schooling 0.154 0.079

(1.84) (1.72)

Constant -15.317 -10.992 -13.344 -9.248

R2 0.883 0.905 0.910 0.916

F statistics 197.91 158.52 85.37 67.35

Chi-square (p value) 3.05 3.80 3.23 3.71

(fixed vs. random effects) (0.38) (0.43) (0.36) (0.45)



NSDP: net State domestic product; LEB: life expectancy at birthNotes: 't' values are given in parentheses.The inputs variables (log labour, log capital and log LEB) are instrumented using laggedvalues of their values.Source: Authors' calculation

Fig 6

Growth rate and poverty by States, India

population living below the poverty line has considerablydeclined over the period and there is a negative relationshipbetween poverty and LEB, which shows a small increase dur-ing the period.

The scatter plot in Fig. 9, constructed using State-levelinformation on poverty and LEB clearly points to the inverserelationship between the two variables. An important ques-tion in this context is whether poverty is the cause or conse-quence of poor health status. Both may be interdependent.

Conclusion and policy suggestions

This study examines the determinants of economic growthand health using a panel data of 14 major Indian States forthe period 1970/71-2000/01. The association between ini-tial per capita income, growth rate, and health across the

Indian States has been explored using scatter plots and charts.The interesting findings are as follows:� A strong positive association is observed between initial

per capita income and long-run economic growth in percapita income across the States. That is, States with a higherinitial income have grown faster than States with a lowerinitial income. This has the effect of widening the gapbetween the rich and poor States.

�There is also a strong association between per capita incomeand health status (LEB and IMR) of the population.The nexus between growth, poverty and health based on

cross-sectional data of Indian States over a period of timepoint to the following:� States that have experienced higher (lower) levels of growth

over the thirty-year period witnessed a lower (higher) levelof poverty, except Kerala and West Bengal.

� Per capita income and the percentage of the populationliving below the poverty line are negatively related; possi-bly the growth in income in the past three decades has hadthe desirable trickle-down effect.

� There is an inverse relationship between poverty and LEB.The descriptive analysis indicates only associations between

the variables and it is not possible to infer any cause-effector simultaneous relationships among them. We have formu-lated an econometric framework based on the recent devel-opments in growth theory and this is applied to inter-Statepanel data for the years 1970-71, 1980-81, 1990-91 and2000-01. The following important findings emerge from oureconometric analysis:� There is a two-way causation between economic growth

and health status. The effect of health measured by lifeexpectancy is positive and significant on economic growtheven after controlling for initial income levels.

�There is evidence of a significant effect of per capita incomeand per capita public expenditure on health on LEB. Aver-age number of years of schooling emerges as the most sig-



Fig 8

Trends in poverty and life expectancy at birth,India 1972/73-1999/2000LEB: life expectancy at birth

Fig 9

Health-poverty nexus, India, panel data, 1970-71 to 1999-2000 LEB: life expectancy at birth

Fig 7

Per capita income-poverty association, panel data, 1970-71 to 1999-2000

nificant determinant of LEB.� Our analysis shows that a thousand rupee increase in per

capita health expenditure would lead to a 1.3% increase inLEB, while a 10% increase in per capita income is requiredto increase the LEB by about 2%.

�The production function estimates indicate that the effect ofhealth (LEB) on NSDP is very high, in fact, much higher thanthe effect of the conventional inputs of capital and labour.The following policy suggestions are made based on the

empirical findings of our study:

� Increasing investment in health is a required policy inter-vention for accelerating the economy’s growth rate.

� Growth-oriented policies would result in bringing aboutimprovements in the health status of the population.

� Policies promoting growth would also have the desirableeffect of reducing poverty. Overall, there is a compelling rea-son for stepping up both public and private investment inhealth which would pay off in the long run.



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HERE IS NOW SUBSTANTIAL RECENT LITERATURE ON THE IMPACT OF IMPROVEMENTSin the health status of a country's population on its aggregate economic performance(Bloom and Canning 2000; Bhargava et al. 2001). The main conclusion of this set ofliterature, with a few exceptions, is that improvements in health provide a substantialboost to the economies of countries where they occur. There is also evidence that theaggregate economic performance of a country can influence the health status of itspopulation (Pritchett and Summers 1996). While there is some debate about the actualmagnitude of this effect (see Subramanian 2004 and Ruger et al. 2001 for a review),its overall direction is not subject to much debate. In fact, more can be said aboutthe association between increased income and health empirically.

Increases in the average income are also associated with declines in the poverty ratio,especially when the overall distribution of income does not simultaneously worsentoo much. To the extent that commonly used measures of absolute poverty incorporate expenditure required to achieve the consumption of a ‘minimal basketof food items,' or the purchase of food items required to achieve a ‘minimal level ofenergy defined in calories', it is reasonable to argue that increases in the averageincome, taking account of disparities, will tend to be associated with improvementsin the nutrition of the poorest. In this regard, Bhargava (1999) suggests that whenpeople can afford to do so, they do consume healthier diets. Bhargava (1991) presents evidence from International Crops Research Institute for the Semi-Arid Tropics(ICRISAT) data that improvements in ‘permanent' income are positively associatedwith improvements in the consumption of food items and some nutrients. (This debatewas triggered by the pioneering study of Behrman and Deolalikar (1987) which showed,in (six) ICRISAT villages of south India, the income elasticity of calorie intake wasquite low, and not significantly different from zero in statistical terms. The authorsnote that even among the very poor, as incomes rise, households mostly purchaseadditional ‘taste'.) Nutrition has been positively associated with anthropometricalindicators such as height and weight (e.g. Jamison et al. 2003). Nutritional deficiency (e.g. of iron, calcium, vitamins A, B and C) in the human body has beenassociated with a variety of adverse health conditions (Willett 1998).

Since the 1980s, there has been a consistent decline in India's poverty rate, togetherwith a significant growth in the real income per capita. During 1980-2000, India'sreal per capita income has nearly doubled, having grown at an annual average rateof 3.3%. In 1983, as per the head-count measure, India's poverty ratio was 45.7% inrural areas and 40.8% in urban areas, which declined to 27.1% and 23.6%, respec-tively, by the year 2000 (Planning Commission 2001). This has been used to bolsterthe claim that India's rapid economic growth can be effective in substantially reducingpoverty (Lal et al. 2001; Datt and Ravallion 2002). This ought, by implication of thediscussion in the preceding paragraph, to enhance the ability of the Indian poor toreduce the level of their malnutrition.

This paper adds two wrinkles to the above set of issues relating to poverty in theIndian context. First, we broaden the definition of ‘minimal consumption' that, forpurposes of measuring poverty, focuses only on energy intake (in calories). We dothis by incorporating in the notion of minimal consumption the requirements of abalanced diet across a vector of nutrients, such as proteins, vitamins, fats, carbohydrates,etc. Second, we move away from the focus on the ‘minimal basket of pre-identifiedfood items' to allow for variation in the relative proportions of different items consumed, as well as the inclusion of newer items in the food consumption basket.

Health, nutrition and poverty: Linking nutrition to consumer expenditures

T


S E C T I O N I

ANUP K. KARAN INSTITUTE FOR HUMAN

DEVELOPMENTNIDM BUILDING, I.P. ESTATE,MAHATMA GANDHI MARG

NEW DELHI 110002E-MAIL:

[email protected]

AJAY MAHALAssistant Professor



[email protected]

Further, we argue that this departure does not loosen the comparability of the poverty line over time. This is becausethe poverty line is constructed by the method of estimatingthe smallest consumption expenditure required to achieve afixed (minimum) nutritional requirement.

We provide some justification for these modifications to theway in which poverty is assessed in India. In particular, thereis one advantage of these modifications over the traditionalapproach to measuring poverty. This is the benefit that resultsfrom being better able to account for the nutritional impactof relative price changes in food commodities, and also ofthe evidence from the nutritional literature of the need for a‘balanced diet' that includes a variety of nutrients. Moreover,we argue that many of the arguments against using thesemodifications are not as debilitating as has been suggestedin the literature.

Using this perspective, we construct revised estimates of thehead count measure of poverty in India for two periods-1993-94 and 1999-2000-and for individual provinces, further classified into rural and urban populations. We foundfirst the poverty line (PL) based on a ‘balanced diet' measureto be higher than that calculated by the Planning Commissionmethodology. Second, the poverty ratio in our frameworkdeclines at a rate that is markedly slower than the povertymeasure used by the Planning Commission at the all-Indialevel. In addition, there are major differences in trends in thetwo sets of poverty estimates at both the provincial levels, aswell as for rural and urban populations.

Our main conclusions are as follows. If the focus of the food-poverty line is a minimal level of nutritionally balanced diet,the official method of estimating poverty that typically failsto fully account for the impact of changes in relative pricesand a diet that includes the consumption of micro-nutri-ents, is inadequate for assessing the impact of rising incomeson the health of the poor. Moreover, why relative prices changeand the role that governments sometimes play in bringingabout such change is a subject of crucial policy importance.

Poverty Line Measurement with Referenceto a Nutritionally Balanced Diet

This section examines the way poverty is usually measured in India, and lays out the case for the approach taken in this paper.

Measuring Absolute Poverty

The standard approach to measuring poverty is to define a‘poverty line' level of income (or expenditure), and then toestimate the proportion of total population that lives belowthe PL, to arrive at the so-called ‘head count' measure of poverty.

The PL defines an absolute minimum level of consumptionof food and non-food items that is necessary for sustenanceand acceptable to a society. The standard approach is to firstdefine a ‘food-poverty line (FPL)' which estimates the expen-ditures needed to fund a minimum level of nutrition. There

are two main (but related) ways of doing this. First, one canestimate the minimum amount of expenditure needed toachieve a certain minimum level of nutrition typically expressedin energy units (kilocalories). This approach allows for variationin the proportion of food items consumed (as well as the typesof food consumed), and the combination chosen is the onethat minimizes the cost of achieving a pre-specified calorieintake. The second method also focuses on the expendituresused to achieve a minimum energy level but, unlike the firstmethod, it requires predetermining the combination of fooditems and their proportions at some base-year level, andthen calculating the expenditure needed on this combinationto achieve the requisite energy level. It is entirely possible and,in fact, very likely that the first approach will yield a lower PLthan the second in the base year.

Having defined the FPL by either of the above techniques,the challenge is then add some non-food expenditure component to the FPL that reflects a minimal level of consumption of non-food items. In India, the share of non-food expenditure in total spending for the household on themargin of poverty is based on an exogenously determinednormative standard. As per the approach adopted by the Plan-ning Commission, on an average, this share amounted to about26.50 per cent of total spending in urban areas and 19.58per cent of total expenditure in rural areas (Malhotra 1997).Another approach has been to estimate this additional amountas being the non-food expenditures of the individual whosefood expenditure equals the food poverty-line level of spend-ing. Adding the food- and the non-food components of thePL yields the PL level of expenditures.

There are several conceptual and empirical issues that arisewith these methods of arriving at the PL. These methods needto be understood clearly since they have implications for themethods used in this paper. First, it has been argued that themethod of estimating the FPL using a predetermined foodbasket is more desirable than the approach that estimates aminimum-cost food combination. This is because the lattermethod can sometimes give rise to cost-minimizing combi-nations that may not be culturally acceptable, or that are not‘tasty' (Stigler 1945). Moreover, some have noted that thecost-minimizing approach poses difficulties in solving linearprogramming problems and so, may be expensive in terms ofcomputing time (Lanjouw 1997). Finally, it has been suggested that the cost-minimizing approach is less well suitedfor making inter-temporal comparisons since it is not comparing ‘like with like' combination of goods.

It is not apparent to us, however, that the above, in fact constitute reasons enough to discard the least cost-minimizing approach. First, extremely powerful and relativelycheap mathematical computing software are now available(e.g. MATHEMATICA and MATLAB), which can solve, whatappear at the first sight to be complex linear programmingproblems.

Second, it is not apparent to us that a base-year combinationof food items can be taken as more-or-less descriptive of population tastes. Patterns of food consumption (includingproportions of items consumed) depend on the price levels,


SECTION I Health, nutrition and poverty: Linking nutrition to consumer expenditures

relative prices and income, and they may reflect the nutri-tional needs (e.g. Bhargava 1991). If food consumption isallowed to change along these lines, it is no longer obviouswhy a base-year food-consumption basket possesses any morevalidity than a food-consumption basket for any other year.Food habits may be slow to change, but change they will;and that will pose challenges for extended inter-temporalcomparisons under the currently preferred method of a predetermined food basket.

We do not deny that certain habits such as vegetarianism(Bhargava 1991) may be difficult to give up, but that is a muchless restrictive imposition than the share of different items inthe food basket. One can think of various methods to incor-porate culturally acceptable food consumption patterns,although none of them are perfect. One way is to calculatethe PLs for each State, and by rural and urban populations ineach State, to account for the differences across space. Anotherway is to pre-specify the tastes, and directly incorporatethem as additional constraints (or a constraint) in the linearprogramming exercise. There will be some degree of arbitrariness in describing these constraints but this problemcan be addressed by taking account of the patterns of foodconsumption by populations over fairly long periods of time.

Finally, we do not see why comparing ‘like with like' offood items is so crucial for inter-temporal comparisons ofpoverty ratios. Suppose the issue is one of achieving a minimallevel of energy intake for people living at the very margin ofsurvival. What is relevant is comparing like with like in ‘energyunits', which is taken account of by the cost-minimizing combination method. As one obvious, albeit extreme, exampleof survival needs determining food intake, and not merelyculturally determined tastes, one has to consider only the foodhabits of the survivors of the recent tsunami in Indonesiaand the Andaman Islands, many of whom lived off coconutsand the bark of coconut trees (Gray 2005). Moreover, thepredetermined food basket method for estimating PLs andcomparing poverty ratios over time is not equipped to handlenon-trivial changes in relative prices, especially if individualsare likely to change their food consumption patterns in response.

The approach taken in this paper has another attractive feature, which has to do with the concern about substitutionelasticity between different types of food, mainly on accountof the high price elasticity of the demand for non-cerealfood items. Nutritionists see high substitution elasticities asa cause for concern, at least among the poor, since the nutri-tional status is thereby threatened by price increase (Deatonand Muellbauer 1980). This does cause a difficulty with thestandard food-basket formulation of the FPL, which mayremain unchanged even when the relative prices change,and therefore are unable to capture nutritional deficienciesamong the poor that might result from a change in the relativeprices. Notice that a definition based on estimating the smallestexpenditure required to achieve some minimum nutritionallevel will reflect this, by means of an upward shift in the FPL.By emphasizing the role of relative prices in influencing thelevel of nutrition, this method can help draw policy attention to a variety of government policies that affect prices

of different food items-price support systems, public distribution systems, and the like.

A second set of conceptual issues arises with respect to thecalculation of the non-food component of the PL level ofexpenditures. As mentioned above, the most popular approachhas been to use as the non-food poverty line-the average non-food expenditures of individuals whose food expendituresequal the FPL. Caution must be exercised, however, becauseif this estimate is constructed separately for each year for whichdata are available, it may lead to unsatisfactory results. Forinstance, rising food prices may lead individuals to consumemore non-food items even if non-food item prices areunchanged (because their prices relative to food items havefallen), and thus there will be a simultaneous increase of thefood-and non-food poverty lines. That, in turn, may lead tosometimes spurious findings of increasing poverty, or higherurban poverty than rural poverty (Ravallion and Bidani 1994).One approach to fix this would be to use either some baseyear level of the ‘non-food poverty line' (scaled up to reflectthe inflation over time); alternatively, one could use a base-year ratio of non-food to food expenditures. The PlanningCommission estimates in India effectively use the base yearnumbers updated to calculate price increases over time.

A Nutritionally Balanced Diet

We have argued that a cost-minimizing approach to estimatethe FPL is not only readily feasible, but may also be concep-tually more satisfying than an approach that works with afixed basket of food items, apart from being flexible enoughto capture most of the good points of the latter method. Wenow make the case for estimating an FPL that requires theestimation of the lowest expenditures needed to achieve a‘minimum combination' of nutrients. The ‘minimum combi-nation' is defined not just as the energy requirement (incalories) but also as the requirement for a vector of nutrients,including both macro- and micronutrients, such as carbohy-drates, proteins, fats, Vitamins A, B, and C, carotene, iron,riboflavin and calcium.

Why does one need to go beyond the criterion of energyintake, irrespective of the source (carbohydrates, fats or proteins)?For one, even if energy intake were the sole objective, it mattershow such energy is obtained. Thus, Jamison et al. (2003) reportthat the proportion of energy consumed in the form of proteins matters much more for anthropometric indicatorssuch as height and weight, than the overall energy intake.Bhargava (1991) notes that the consumption of proteins with-out carbohydrates in the diet has an adverse effect on the ability of the dietary proteins to replace body proteins. Someof these theories have been disputed. For instance, Jamisonet al.’s paper has been criticized by a number of influentialcommentators for its weak methodology and, moreover, theimpact of protein on the human body has been questionedpreviously by Sukhatme (Sukhatme 1974; Martorell 2003).However, other research has tended to agree with Jamison etal.'s conclusions (Bhargava and Guthrie 2002).

Second, nutrients matter in ways that go beyond a narrow


Health, nutrition and poverty: Linking nutrition to consumer expenditures SECTION I

focus on energy intake. The lack of calcium, vitamins A, B1,B2, and C, and iron has been associated with a higher frequency of certain types of cancers, cardiovascular conditions,and other serious health disorders. In fact, it has been suggested that the results of Jamison et al. were confoundedby the presence of other micronutrients that could also influ-ence height and weight. Again, there is one key contentiousissue. Researchers have noted that the energy intake levelstend to be highly correlated with the intake of other nutrientsas well, because most diet and foods that constitute majorenergy sources also contain at least some quantity of keymicronutrients (Willett 1998). That might suggest a prefer-ential focus on energy intake only. Two considerations militate against this viewpoint. First, focusing only on energy-intensive diets may be an economically inefficacious way ofobtaining the requisite level of micronutrients. Moreover,nutrition research suggests that the quantity of various micronu-trients in the diet continues to impact for disease risk, evenafter being scaled by the level of energy intake (Willett 1998).This calls for attention to individual components of the minimum nutrition vector discussed above.

What precisely should the minimum be even if one agreesin principle with the notion that a certain minimum combi-nation of nutrients is necessary? For instance, energy consumption (and therefore needs) typically varies amongindividuals by their weight, level of physical exertion/activity(including in occupation), and the metabolic rate (the efficacywith which the body absorbs energy-providing foods). Forpeople living on the margins of poverty, one can reasonablyconstruct some estimate of their daily energy needs basedon the nature of their jobs and some intelligent guesses aboutweight for given age and sex. In India, the average minimumenergy requirement has been stated to be 2100 calories foran average urban resident and 2400 calories for someoneliving in a rural area.

In our framework, for each category of minimum energyintake, we must also define a corresponding quantity ofmicronutrients to be consumed. Given the current state ofscientific knowledge, this is possible only roughly, by defininga ‘recommended dietary allowance' (RDA), based on researchthat shows the efficacy of different types of nutrient consumption per calorie consumed in influencing specifictypes of disease risk. As defined in the literature, RDA is notsome minimum requirement, however, and we are still onlylearning about the possible consequences of having too muchof a specific nutrient. Moreover, if we were to set out theideal RDA as one that achieves some minimum desirable healthstatus (e.g. impact on overall mortality risk), then the task ofcoming up with an RDA is well-nigh impossible since we stillknow very little about interactions between various nutrientsand how they translate as a combination into mortality risk,for instance.

The difficulty outlined in the previous paragraph possiblyexplains the dominant focus in the poverty literature on energyintake. However, that ought not to divert us from emphasizingthe role of other micronutrients. To address the lack of precision about the amount of other nutrients required, we

can assess alternative PLs and poverty ratios for differentlevels of the RDA vector.

A second rationale for focusing solely on energy intake isthe following argument: provided that the minimum energyneeds are met, the poor may be able to participate effectivelyin the labour market and the additional incomes earnedfrom their labour can then be used to support the purchaseof food items containing other nutrients (Bhargava 1991).This sort of ‘hierarchy of human needs', even if observed inpractice, appears to us to be unsatisfactory as a rationale fordefining the FPL. The FPL, however defined, is a static concept,which describes the expenditure that is just enough to meetthe minimum nutrition requirements. If householdincome/expenditure is just enough to purchase minimumenergy requirements, and falls short of what is needed topurchase other desirable nutrients, then that is all the infor-mation we have. It is difficult to conclude from this factalone the future prospects of the individual, or the household,since future earnings depend on a host of other exogenousvariables that can affect labour market conditions. More significantly, behaviour by desperate households living on themargins of below survival levels of income cannot be takenas an indicator of a normative standard to which the FPL iscloser in spirit.

In the Indian context, there is a long history of debatebetween experts who have sought to incorporate the notionof a balanced diet, or adequate nutrition in the definition ofpoverty (e.g. Rao 1997; Sukhatme 1977, 1978), and thosewho have underplayed it (e.g. Dandekar 1996). The latter perspective has tended to dominate the calculations of PL inIndia. However, as biomedical research increasingly highlightsthe importance of micronutrients for health as against apure energy intake, it is difficult to bypass this perspective onnutrition. Dandekar (1996) has argued that poverty and under-nutrition are different and that, ‘…want of adequate income,howsoever defined, is poverty; deficiency of energy appropriatelydefined is under-nourishment. These two are related in thesense that statistically they go together. But the two are notidentical; in fact they are two different phenomena.' If wetake poverty as more than just income deprivation, and includeit to mean deprivation in other areas, such as health and nutrition, as per Sen's capability approach (Sen 1985), effortsto divorce under-nutrition from the notion of poverty appearless justified.

Poverty Line Measurement: A ‘How to' for this paper

Estimating the food- and the non-food poverty lineThe standard approach to measuring poverty is to define a

PL level of income (or expenditure), and then to estimate theproportion of total population that lives below the PL, to arriveat the so-called ‘head count' measure of poverty.

We estimated the balanced diet-based PLs for all the majorStates, and associated rural and urban areas of India, for twoyears, i.e. 1993-94 and 1999-2000. The estimation of the PLinvolved two steps. First, we calculated the minimum expen-diture required for meeting the predefined nutritional basket



of the Indian Council of Medical Research (ICMR). This providedus with the FPL. Second, we constructed an estimate forminimal non-food expenditures. These two components addedtogether, yielded the required PLs. The methods of estimatingthese two components of the PL are described below.

Food expenditure cut-off (FPL)

We will estimate the least possible expenditures required toachieve a predefined minimum nutritional basket, taken forour purposes, the RDA. Let this basket be denoted by the n x 1 vector N, where N = [N1 N2 … Nn].

Suppose there are m types of possible food items, whosequantities consumed are described by the m x 1 vector f, wheref = [f1 f2 … fm]. Let the corresponding per unit prices ofeach food item be described by m x 1 vector P, where P = [P1P2 … Pm]. Finally, let each food item Fi (i = 1… m) have a cor-responding n x 1 nutrient content vector fi = [Ni1, Ni2 …Nin]. Then the problem of solving for the FPL becomes oneof solving the following linear programming problem:

(1) Minimize f'P Subject toFf ≥ N and N ≥ 0

Here F is the nutrient content matrix, of dimension n x m. Thefirst constraint Ff ≥ N ensures that the nutrient intake equals orexceeds the RDA. The second constraint ensures that only non-negative amounts are consumed. It is also possible to introduceother constraints to satisfy requirements of ‘tastiness' or other‘cultural characteristics'. We will discuss some of these extraconstraints later. Solving (1) yields the cost-minimizing expen-diture E* that is a scalar product of two vectors-a given pricevector P, and the optimal combination of food items f*. We under-took this exercise for all States, rural and urban areas of India,and for years 1993-94 and 1999-2000. The resulting estimatesyield the FPL, which also indicates minimum expenditure requiredfor the minimum balanced nutrition on a per capita basis.

Non-Food Expenditure Allowance

For estimation of the non-food component of the PL for thecorresponding years, we estimated the State, and rural- andurban-specific ratios of food and non-food expenditure for themarginally poor (defined here as individuals belonging to house-holds with per capita expenditures that lie in a band of 10%(5% above and 5% below) of the PL as defined by the PlanningCommission methodology1 for the year 1993-94. The non-foodexpenditure ratio so worked out was used to calculate the min-imum necessary allowance for non-food consumption items.

Poverty Line

Finally, the PL level of expenditure (food and non-food) wasestimated by using the formula:

FPL x 1/(1-α)where FPL = food expenditure cut-off (or the FPL) α = non-food expenditure ratio to the total household

expenditure for the base year 1993-94.

This specification implies that to estimate the PL, we scaleup the minimum expenditure required for nutritionally balanced food expenditure, or the FPL, by an allowance forsome minimum needed non-food expenditure.

Sources of data

Our definition of the RDA was obtained from the ICMR. Thisinformation was available at the individual level, classifiedby age and sex. A simple average across age and sex of theRDA for 10 nutrients was calculated to arrive at the percapita RDA. The per capita RDA has been used as the minimum threshold of nutritional requirement at the house-hold level. On the basis of the ICMR recommendations ofdifferent nutritional requirements for different age and sex,

the calculated average per capita RDA for the 10 nutrientsare given in Table 1.

In addition, we needed information on the price vector P,the nutrient content matrix F, and the various types of fooditems available. Various types of food available and consumedwere listed based on the data collected by the National Sample Survey Organization (NSSO) in four nationally repre-sentative consumer expenditure surveys, 1983-84, 1987-88,1993-94 and 1999-2000. These surveys provided information on 125 different food items.

The information on prices was obtained from the previously



Table 1

Average per capita RDA per day of variousnutrients

Nutrients Per capita RDA per day

Calorie 2300

Protein 60

Fat 40

Iron 28

Calcium 400

B carotene 2400

Riboflavin 1.4

Thiamin 1.2

Niacin 16

Vitamin C 40

RDA: recommended dietary allowanceSource: Based on ICMR, 2002

1�We worked out three parallel estimates of the share of non-food expenditure. These are non-food expenditure share of (i) all poor below the Planning Commission poverty line; (ii) themarginally poor, who are around (5% below and 5% above the Planning Commission poverty line; and (iii) bottom 30% of the population as per the monthly per capita expenditure (MPCE).Poverty line estimates produced under these different procedures are not very different from each other.

mentioned consumer expenditure surveys as well. Unfortu-nately, there are several complications in defining these prices.First, different households face different food prices, andthey may be purchasing different quality products for whichno information is available in the survey. To an extent, someof these differences can be addressed by constructing PLs fordifferent States, and across rural and urban areas within a State.That may still not fully address the problem. To this end, wedefined ‘implicit' prices, as reflected by household-level information on expenditures for specific items, and the quan-tities purchased of each. The ratio of the total expendituresto the total quantity purchased is taken as the implicit price.

The nutrient content of food items is described in Appendix I. This information was obtained from publicationsof the National Institute of Nutrition (Gopalan et al. 1989).The number of food items covered by Gopalan et al. (1989)is approximately 450 and there is a perfect match for morethan 100 items between those in their study and the consumption baskets of households in the NSSO consumerexpenditure surveys. However, the data for about 15 fooditems do not match, either because these items were cooked,or were less commonly consumed. For these items, estimatesof the nutrient content were based on their closest substitute in the list of Gopalan et al.. The nutrient valuesper 100 g of food items were calculated.

Although the data are extremely comprehensive (and valuable), several cautionary remarks are in order. First, thenutrient content of a food item can vary considerably acrossgeographical areas, depending on a variety of conditionsincluding the quality of soil (Willett 1998). Second, the theoretical nutrient content of food and the actual nutrientconsumption of a person may vary markedly depending onthe method of food processing, and the combinations in whichthey are consumed. For instance, cut fruits rapidly lose someof their nutrients if not consumed soon; chemical propertiesof foods change in the process of cooking; the properties ofyoghurt, milk and skimmed milk are vastly different and surveysmay not always distinguish these products (Willett 1998).Third, nutrient consumption is not synonymous with nutrientintake. For example, as noted earlier, for dietary proteins to effectively replace body proteins, the simultaneous consumption of carbohydrates appears to be essential (Bhargava 1991).

Findings

Based on the methodology and data sources mentioned above,we solved the linear programming problem described aboveunder three different scenarios. Under scenario I, we imposedonly the constraint that the consumption of any food itemmust be non-negative, i.e. (fi ≥ 0). Under scenario II, in additionto the constraint in scenario I, we imposed the constraintthat the consumption of coconut, jowar, bajra, ragi and milletsequals zero. The main justification for this assumption isthat coarse grains such as jowar, bajra, ragi and millets areincreasingly vanishing from the average Indian diet, as istheir production. For example, the area under jowar cultivation

in India has gone down from approximately 9% in the early1980s to less than 6% in the late 1990s, with the value ofproduction falling from 1.64% to 0.71% during the sameperiod. Similarly, the area under cultivation and the value of

production of bajra, ragi and small millets have declinedconsiderably over the years (Table 2).

There are two main reasons for imposing the requirementthat the consumption of coconut is zero. First, in many partsof India, coconut is consumed in limited amounts. Second,including the possibility of coconut consumption in the linearprogramming exercise leads to unrealistic solutions wherelarge amounts of coconut are consumed, and items commonlyobserved in the consumption basket are excluded. Underscenario III, we impose the further requirement that at least200 g rice is consumed. This requirement was imposed becauserice did not figure in the optimum consumption basket inany of the State except three States viz. Andhra Pradesh, Assamand Tamil Nadu. However, a long-term consumption patternof different food items in India shows that, on an average,200 g per capita per day of rice is consumed in almost all theStates. (For consumption trends of different cereals seeMahendradev et al. 2004.)

We estimated the FPL by solving for the least cost combi-nation of foods separately for rural and urban areas in allstates. For illustrative purposes, however, we present in Tables3 and 4, the solution that would obtain if one was interestedin an FPL at the all India level, separately for rural and urbanareas.

In Table 3, scenario I describes the solution to the linearprogramming problem without imposing any constraint otherthan the RDA requirement and non-negativity of the con-sumption of food items. Here the optimum consumption bas-ket is 214 grams of Jowar, 361 grams of Bajra, 48 grams ofRagi, 32 grams of Spinach, 40 grams of coconut and 14 gramsof guava per person per day in rural areas. Similarly, in urbanareas the optimum quantity of consumption is 213 grams ofJowar 361 grams of Bajra, 48 grams of Ragi, 32 grams of



Table 2

Area under cultivation and production of jowar,bajra, ragi and small millets during the 1980sand 1990s

Crop Years (Triennium average)

1981-82 1991-92 1998-99

Cultivated Area as a Share of Total Cultivated Area (%)

Jowar 9.01 7.55 5.69

Bajra 6.35 5.71 5.08

Ragi 1.39 1.21 0.92

Small millets 2.08 1.32 0.83

Share in Total Agricultural Production (%)

Jowar 1.64 1.16 0.71

Bajra 0.75 0.66 0.49

Ragi 0.36 0.21 0.15

Small millets 0.19 0.08 0.06

Source: Government of India, 2000.

Spinach, 40 grams of coconut, and 14 grams of guava. Tak-ing their respective unit prices in rural and urban areas sep-arately, the total expenditure comes to be Rs. 2.44 per per-son per day, i.e. Rs. 73.14 per person per month in rural areasand Rs. 2.99 per person per day, i.e. Rs. 89.66 per person permonth in urban areas. These figures indicate the minimumrequired expenditure by households per capita per month inorder to secure the minimum level of nutrition.

However, it is likely that the optimum consumption basketis so uninteresting that no one can be expected to acceptthat as a balanced diet. In particular, the coconut consump-tion seems quite a bit excessive and the absence of rice andwheat from the diet appears unrealistic, given that the con-sumption of coarse grains such as jowar and bajra is low inIndia at the present time. Hence, scenario II requires that the

consumption of coarse grains such as jowar, bajra, and ragiand of coconut to be equal to zero in the linear programmingproblem. In the revised solution, the optimal consumptionbasket includes wheat, milk and oil in different proportionsboth in rural as well as urban areas. This solution gives amore diversified consumption basket relative to that underscenario I, but with the imposition of additional constraintsthe cost is a bit higher. Now the minimum food expenditurerequired by an individual is Rs 135 and Rs 155.10 in rural andurban areas per person per month, respectively. Figure 1summarizes the estimates of the food poverty line under the three scenarios at the all India level for 1993-94 and 1999-2000, and for rural and urban areas separately.

Scenario III introduced the additional constraint of a min-imum consumption of 200 grams of rice (or related prod-



Table 3

Three scenarios of optimum consumption basket and minimum expenditure required for recommendednutritional intakes in rural and urban areas in India, 1993-94 Region and food items Scenario I Scenario II Scenario III

Price in Rs Amount Total Amount Total Amount Total

per 100g (x 100 g) expenditure (Rs) ( x 100 g) expenditure (Rs) (x 100 g) expenditure (Rs)

RURAL

Rice 0.51 0.00 0.00 0.00 0.00 2.00 1.03

Khoi, lawa 0.30 0.27

Wheat/Atta 0.47 0.00 0.00 7.44 3.50 5.00 2.35

Jowar and products 0.32 2.14 0.68

Bajra and products 0.34 3.61 1.23

Ragi and products 0.39 0.48 0.19

Milk 0.49 0.33

Other milk products 1.70 0.00 0.00 0.02 0.04 0.16 0.27

Mustard oil 3.24 0.00 0.00 0.24 0.78 0.18 0.60

Spinach/other leafy vegetables 0.32 0.32 0.10 0.38 0.12 1.38 0.44

Coconut 0.42 0.40 0.17

Guava 0.44 0.14 0.06 0.14 0.06 0.13 0.06

Per capita per day total expenditure required 2.43 4.50 5.35

Per capita per month total expenditure required 72.90 135.00 160.50

URBAN

Rice 0.54 0.00 0.00 0.00 0.00 2.00 1.07

Khoi, lawa 0.34 0.34

Wheat/Atta 0.55 0.00 0.00 7.44 4.09 4.66 2.56

Jowar and products 0.40 2.13 0.86



Milk 0.49 0.40


Mustard oil 3.26 0.00 0.00 0.24 0.79 0.19 0.63


Coconut 0.45 0.40 0.18

Guava 0.56 0.14 0.08 0.14 0.08 0.13 0.07



Note: Scenario I: Food items consumed must be greater than or equal to zero. Scenario II requires the constraint that not only are food items consumed greater than zero, but also that no ragi, jowar, bajra, millets, andcoconut are consumed. Scenario III incorporates, in addition to the constraints under scenarios I and II, that at least 200 g of rice per capita per person is consumed.Source: Authors’ Estimates.

ucts) per person per day. The resulting solution for the consumption basket included rice, wheat, oil, milk, and guava(fruits) and is indicated in the last two columns of Tables 3and 4. The total expenditure required to command this foodbasket came to be Rs 160 per person per month in rural areasand Rs 185 per person per month in urban areas for 1993-94. The solution under scenario III was taken to bethe FPL for 1993-94 in Table 2. Similarly, the solution underscenario III for the FPL during 1999-2000 was Rs 264 per person per month in rural areas and Rs 317 per person permonth in urban areas.

It is interesting to note that in the solution of the linear

programming exercise under scenario I (i.e. without imposing any additional constraint other than the RDA itself)in 1999-2000 gives exactly the same composition of the consumption basket as in 1993-94, with the sole differencebeing that jowar in 1993-94 is replaced by groundnut inrural and by wheat in urban areas in 1999-2000. Under scenarios II and III, milk and milk products figure in the 1999-2000 consumption basket prominently indicating thatthe relative prices of milk and milk products may have declinedbetween 1993-94 and 1999-2000. In addition to milk, theoptimal 1999-2000 basket contains vanaspati, gram and otheredible oils.



Table 4

Three different scenarios of optimum consumption basket and minimum expenditure required forrecommended nutritional intakes in rural and urban areas in 1999-2000.Region and food items Scenario I Scenario II Scenario III

Price in Rs Amount Total Amount Total Amount Total

per 100g (x 100 g) expenditure (Rs) ( x 100 g) expenditure (Rs) (x 100 g) expenditure (Rs)

RURAL

Rice 1.09 0.00 0.00 0.00 0.00 2 2.19

Khoi, lawa 0.00 0.00 0.00 0.00 0.00 0.00

Wheat/atta 0.82 0.00 0.00 7.44 6.08 4.90 4.00



Milk: liquid 1.06 0.00 0.00 0.00 0.00 0.63 0.67


Vanaspati, margarine 4.10 0.00 0.00 0.06 0.24

Mustard oil 4.26 0.00 0.00 0.00 0.00 0.23 0.99

Groundnut oil 4.14 0.00 0.00 0.18 0.75


Coconut 0.86 0.15 0.13

Guava 0.73 0.15 0.11 0.14 0.10 0.08 0.06

Groundnut 2.99 0.08 0.23 0.00 0.00



URBAN

Rice 1.33 0.00 0.00 0.00 0.00 2 2.66

Khoi, lawa 0.00 0.00 0.00 0.00 0.02 0.05

Wheat/atta 0.94 2.47 2.33 7.44 7.01 4.87 4.59



Milk: liquid 1.24 0.00 0.00 0.07 0.09 1.20 1.49


Vanaspati, margarine 4.18 0.00 0.00 0.13 0.56 0.00 0.00

Mustard oil 4.24 0.00 0.00 0.11 0.46 0.24 1.03

Groundnut oil 4.27 0.00 0.00 0.00 0.00 0.00 0.00


Coconut 0.91 0.73 0.66 0.00 0.00

Guava 0.89 0.12 0.11 0.14 0.12 0.08 0.07



Scenario I: Food items consumed must be greater than or equal to zero. Scenario II requires the constraint that not only are food items consumed greater than zero, but also that no ragi, jowar, bajra, millets, and coconutare consumed. Scenario III incorporates, in addition to the constraints under scenarios I and II, that at least 200 g of rice per capita per person is consumed.Source: Authors’ Estimates.

In general, a comparison of the least cost consumption basket of 1993-94 with that of 1999-2000 (scenario III inboth cases) indicates that the latter has a higher proportionof expenditures allocated to cereals. This occurs presumablybecause of the comparatively slower price increase of cerealsbetween 1993-94 and 1999-2000, relative to non-cereal fooditem prices during the same period. However, since the con-sumption of cereals does not suffice for a balanced diet, theleast cost expenditure required for achieving nutritional require-ments in 1999-2000 consumption basket may be muchmore (in real terms) than the basket of 1993-94.

State-specific poverty lines and poverty ratios

To derive State-, rural- and urban-specific PLs, FPLs, esti-mated on the basis of methods discussed earlier are scaledup by using non-food expenditure ratios for the year 1993-94.

Poverty line estimates for the three scenarios outlined aboveat the all-India level are given in Table 5, for 1993-94 and1999-2000. Each of the FPL and PL in Table 5 refers to a specific ‘cultural' constraint (reflecting the three scenarios).

The three FPLs (FPL1, FPL2 and FPL3) indicate three dif-ferent levels of cut-off of the minimum expenditure requiredfor a nutritionally balanced food basket for the three differ-ent sets of cultural constraints. The three PL (PL1, PL2 andPL3) on the other hand, indicate the corresponding minimumexpenditure required to cover both the nutritional mini-mum, as well as the minimum non-food allowance.

We prefer to use PL3 for subsequent analyses, although PL1or PL2 may also be used. Using the standardized RDA andthe added constraints for scenario III, we estimated State-,rural- and urban-specific FPLs. Then, using State-, rural-and urban-specific non-food expenditure ratios of the marginally poor, we arrived at the corresponding PLs. ThePLs and the head-count poverty ratios for 17 major States inrural and urban areas for two years (1993-94 and 1999-2000)are given in Tables 6 and 7. These estimates were also usedto derive the all India level poverty ratios for rural and urbanpopulations and the overall poverty ratio. Corresponding official estimates for poverty ratios produced by the Planning Commission are given in Table 8.

The national level poverty ratios under both approaches produced by aggregating the population living in poverty atthe State level (nutrition and the Planning Commission) arefurther brought together in Table 9.

On comparing the two methods (i.e. ‘nutritionally balanced'and that of the Planning Commission) we find that the PLsas well as the poverty ratios are much higher under the ‘nutri-tionally balanced' approach than the Planning Commissionapproach. During 1993-94 and 1999-2000, the all-Indiapoverty ratio declined from 37.3% to 27.1% in the rural pop-ulation; and from 32.4% to 23.6% in the urban population.2

The head-count ratio of nutrition-based poverty also showsa decline in 1999-2000, compared to 1993-94. However,the head-count ratio of nutritional poverty was 38.8% in ruralpopulations and 27.5% in urban populations in 1999-2000as against the official poverty ratios 27.1% and 23.6% amongrural and urban populations, respectively in the same period.The ratios of nutritional poverty are higher than those ofofficial poverty both in 1993-94 and 1999-2000.

Apart from the fact that the nutritional poverty is much



Fig 1

Estimates of food poverty line (in Rs) underthree scenarios at the all India level in rural andurban areas for 1993-94 and 1999-2000

Table 5

Food poverty lines, non-food expenditure ratios and poverty lines under different scenarios for ruraland urban India, 1993-94 and 1999-2000

FPL1 FPL2 FPL3 NFE ratio PL1 PL2 PL3

1993-94

Rural 73.14 134.85 160.20 0.27 100.19 184.73 219.45

Urban 89.66 155.26 185.17 0.33 133.82 231.73 276.37

1999-2000

Rural 147.47 223.94 264.09 0.27 202.01 306.77 361.77

Urban 200.44 256.30 316.76 0.33 299.16 382.54 472.78

NOTE: 1, 2 and 3 indicate scenario I, II and III, respectively. Scenario I: Food items consumed must be greater than or equal to zero. Scenario II requires the constraint that not only are food items consumed greater thanzero, but also that no ragi, jowar, bajra, millets, and coconut are consumed. Scenario III incorporates, in addition to the constraints under scenarios I and II, that at least 200 g of rice per capita per person is consumed.FPL: food poverty line; NFE: ratio: non-food expenditure; PL: poverty line.Source: Authors’ Estimates.

Source: Authors’ Estimates.

higher in comparison to the official poverty in both rural and urban areas, the decline in the nutritional poverty has been

much lower than the official poverty between 1993-94 and1999-2000. As against a decline of approximately

10 percentage points in official povertyestimates over the period 1993-94 and1999-2000, the decline in nutritionalpoverty has been approximately 6% dur-ing the same period (Fig. 2).

As in the case of the all-India average,the decline in the nutrition poverty ratios



Table 7

Poverty ratios using the nutrition poverty line in India, 1993-94 and 1999-2000

1993-94 1999-2000

State Rural Urban Rural Urban

Andhra Pradesh 42.24 35.08 38.36 27.61

Assam 49.23 15.26 38.31 9.58

Bihar 60.51 35.08 51.52 34.59

Gujarat 27.61 23.87 22.49 12.71

Haryana 29.63 18.99 14.04 15.75

Himachal Pradesh 33.01 11.49 15.48 7.71

Jammu and Kashmir 18.33 6.72 12.15 3.37

Karnataka 38.59 44.80 32.22 25.75

Kerala 27.89 27.50 16.58 22.62

Madhya Pradesh 49.82 47.81 44.13 44.34

Maharashtra 49.89 35.13 32.44 26.49

Orissa 55.19 41.25 54.97 40.48

Punjab 13.32 12.78 12.95 8.25

Rajasthan 33.34 30.20 23.51 24.38

Tamil Nadu 36.98 40.39 37.29 29.19

Uttar Pradesh 47.53 36.58 40.23 35.11

West Bengal 45.51 23.81 37.00 16.84

All India 45.28 33.83 38.27 27.54


Fig 2

Relative decline in thenutritional and official poverty ratios

Table 6

Food (nutrition-based) poverty line, non-food expenditure ratios and poverty line for 17 major States,and rural and urban areas in India for 1993-94 and 1999-2000

State Food poverty line NF expenditure ratio Poverty line

1993-1994 1999-2000 1993-94 1993-1994 1999-2000

Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban

Andhra Pradesh 156.23 175.57 260.69 302.77 0.28 0.34 216.99 266.01 362.00 458.59

Assam 179.81 193.88 269.85 288.29 0.25 0.22 239.75 248.57 360.37 365.21

Bihar 164.84 172.09 264.40 271.58 0.25 0.28 219.78 239.01 354.38 376.39

Gujarat 159.25 195.31 232.46 258.94 0.26 0.30 215.20 279.02 369.24 461.76

Haryana 164.56 171.85 283.37 309.01 0.31 0.36 238.49 268.51 409.65 482.82

Himachal Pradesh 172.08 178.19 293.06 332.63 0.29 0.35 242.36 274.14 413.48 512.21

Jammu and Kashmir 173.23 202.05 294.76 325.53 0.26 0.23 234.10 262.40 398.53 422.81

Karnataka 141.25 213.25 254.70 342.84 0.31 0.34 204.71 323.10 369.19 520.62

Kerala 178.68 212.21 303.08 358.96 0.29 0.28 251.66 294.74 428.13 499.85

Madhya Pradesh 151.34 205.43 239.42 326.83 0.29 0.35 213.15 316.05 336.68 505.23

Maharashtra 154.98 213.69 246.11 349.88 0.31 0.35 224.61 328.75 356.76 537.91

Orissa 154.10 209.62 264.07 318.74 0.24 0.30 202.76 299.45 348.55 461.93

Punjab 168.25 179.92 294.12 296.31 0.30 0.31 240.36 260.76 423.87 425.33

Rajasthan 158.22 183.40 268.08 328.16 0.32 0.34 232.67 277.88 395.02 497.11

Tamil Nadu 152.14 203.25 275.68 368.20 0.26 0.32 205.59 298.90 372.69 532.82

Uttar Pradesh 160.85 178.60 266.99 302.41 0.29 0.32 226.55 262.65 369.29 444.98

West Bengal 175.14 178.90 283.35 301.30 0.24 0.29 230.45 251.97 372.40 425.21

All India 160.20 185.17 264.09 316.76 0.27 0.33 219.45 276.37 359.45 466.28



across most of the major States has been much slower in com-parison with the official poverty ratios (Table 10). A com-parison of changes in the two poverty ratios across Statesshows that in 10 of the 16 major States (viz. Andhra Pradesh,Bihar, Gujarat, Haryana, Jammu and Kashmir, Punjab, Rajasthan,

Tamil Nadu, Uttar Pradesh and West Bengal), the nutritionpoverty ratios have declined at a slower rate in both rural andurban areas. Further, in 3 states (viz. Karnataka, Kerala andOrissa) rural nutritional poverty has declined at a rate slowerthan officially estimated rural poverty ratios. In Madhya Pradesh,the nutritional poverty ratio has declined at a faster rate in

rural areas but at a slower rate in urban areas. Assam is theonly State that shows a faster decline in the nutritional povertyratio in comparison with the official poverty ratio, both inrural as well as urban areas. A comparison of decline in nutri-tional and official poverty ratios in rural areas of 16 majorStates between 1993-94 and 1999-2000 is presented in Fig. 3.

The comparison of the two PLs across States also indicatesthat the difference between the two estimates has beenhighest in Andhra Pradesh followed by Maharashtra, Madhya Pradesh and Rajasthan, particularly in rural areas. Thecase of Andhra Pradesh needs special mention. Official estimates of the rural poverty ratio in Andhra Pradesh havebeen a subject of controversy because the Planning Commission estimates much lower poverty in rural than inurban Andhra Pradesh. However, the nutritional povertyratio in Andhra Pradesh is not only much higher than theofficial poverty ratio but also rural Andhra shows higher povertyratio than the urban Andhra Pradesh. Similarly, in rural Jammuand Kashmir, the official poverty ratio shows a drastic declinebetween 1993-94 and 1999-2000 from more than 30% in1993-94 to less than 4% in 1999-2000. The nutritional povertyratio, on the other hand shows a systematic decline in ruralpoverty in Jammu and Kashmir from 18% in 1993-94 to12% in 1999-2000.



Table 8

Poverty line and head-count ratio of poverty by the Planning Commission estimates

State Poverty Line (in Rs) Poverty ratio (%)

1993-94 1999-2000 1993-94 1999-2000

Rural Urban Rural Urban Rural Urban Rural Urban

Andhra Pradesh 163.02 278.14 262.94 457.4 15.92 38.33 11.05 26.63

Assam 232.05 212.42 365.43 343.99 45.01 7.73 40.04 7.47

Bihar 212.16 238.49 333.07 379.78 58.21 34.5 44.3 32.9

Gujarat 202.11 297.22 318.94 474.41 22.18 27.89 13.17 15.59

Haryana 233.79 258.23 362.81 420.20 28.02 16.38 8.27 9.99

Jammu and Kashmir 233.79 253.61 367.45 420.20 30.34 9.18 3.97 1.98

Karnataka 186.63 302.89 309.59 511.44 29.88 40.14 17.38 25.25

Kerala 243.84 280.54 374.79 477.06 25.76 24.55 9.38 20.27

Madhya Pradesh 193.1 317.16 311.34 481.65 40.64 48.38 37.06 38.44

Maharashtra 194.94 328.56 318.63 539.71 37.93 35.15 23.72 26.81

Orissa 194.03 298.22 323.92 473.12 49.72 41.64 48.01 42.83

Punjab 233.79 253.61 362.68 388.15 11.95 11.35 6.35 5.75

Rajasthan 215.89 280.85 344.03 465.92 26.46 30.49 13.74 19.85

Tamil Nadu 196.53 296.63 307.64 475.6 32.48 39.77 20.55 22.11

Uttar Pradesh 213.01 258.65 336.88 416.29 42.28 35.39 31.22 30.89

West Bengal 220.74 247.53 350.17 409.22 40.8 22.41 31.85 14.86

All India 205.84 281.35 327.56 454.11 37.27 32.36 27.09 23.62

SOURCE: Planning Commission

Table 9

Head-count ratios of nutritional and officialpoverty among rural and urban populations inIndia, 1993-94 and 1999-00Region Nutritional poverty ratio(%) Official poverty ratio(%)

1993-94 1999-2000 1993-94 1999-2000

Rural 45.28 38.77 37.27 27.09

Urban 33.83 27.51 32.36 23.62

Combined 42.27 35.65 35.97 26.10

Source: Authors’ Estimates and Planning Commission.

2� The official estimates of poverty ratios in 1999-2000 have been a subject of intense discussion on account of their different methodology of recall period. Most of these discussions havecentred on the magnitude of and intensity of decline in poverty as reported by the Planning Commission (2001) based on the 55th round of the National Sample Survey (NSS). For a review ofthis literature see Visaria 2000; Deaton 2001; Deaton and Dreze 2002; Kozel and Parker 2002, Sen and Himanshu 2004; and Sundaram 2003

A slower decline in the nutritional poverty ratio in com-parison to the official poverty ratio suggests at least primafacie, the need for examining carefully the potential rolethat relative prices might play in influencing the nutritionalwell-being of people. This is particularly so in India, wherethe State has long subsidized, on the one hand, cereal pro-duction (wheat and rice) through various price support schemeswhile simultaneously subsidizing prices at which consumers

are able to purchase these commodities. Theoretically, thisought to lead to a setting where a much smaller cultivablearea is devoted to food commodities that are relatively richer(relative to cereals) in other nutrients that are components ofthe RDA, with obvious implications for affordability.

Conclusions

The main aim of this paper is to present the case for and todevelop an indicator of poverty for India that highlights theneed to achieve a balanced diet-in terms of a minimum setof required nutrients. Such an indicator is valuable both totake account of our increasing knowledge about the role ofmicro-nutrient consumption in influencing health outcomes;as well as to begin the process of examining the question ofhow the policies of the government on agricultural prices mayhave affected the health of Indians in general and of thepoor, in particular.

Our main findings are the following. First, estimates ofPLs that focus on the expenditures needed to achieve anutritionally balanced diet are readily constructed and typically are higher than the official PL. Thus, poverty ratiosbased on the nutrition-adjusted PL exceed official estimatesof head-count poverty. Second, trends over the period 1993-94to 1999-2000 suggest that poverty ratios based on the nutrition-adjusted PL declined more slowly than poverty ratiosbased on the official PL given by the Planning Commission.

Third, there were considerable inter-State and regional (urbanversus rural) differences in the poverty ratios in the 1990s.The incidence of nutritionally poor population is highest inOrissa and Bihar, followed by Madhya Pradesh, Uttar Pradeshand Andhra Pradesh. The official estimates show a higherpoverty ratio (and also the absolute number of poor) in urbanAndhra Pradesh compared to rural Andhra Pradesh. Similarly,the poverty ratio in Jammu and Kashmir is as low as



Fig 3

Decline in nutritional and official poverty ratios (rural) between 1993-94 and 1999-2000 in variousStates in India

AP: Andhra Pradesh, AS: Assam, BI: Bihar, GU: Gujarat, HA: Haryana, HP: Himachal Pradesh, J&K: Jammu and Kashmir, KA: Karnataka, KE: Kerala, MA: Maharashtra, MP: Madhya Pradesh, OR: Orissa, PU: Punjab, RA:Rajasthan, TN: Tamil Nadu, UP: Uttar Pradesh, WB: West BengalSource: Authors’ Estimates and Planning Commission.

Table 10

Decline in the poverty ratios between 1993-94and 1999-2000 in rural and urban areas in theStates of India

State Nutritional Official

Rural Urban Rural Urban

Andhra Pradesh 3.68 7.26 4.87 11.7

Assam 10.91 5.68 4.97 0.26

Bihar 8.79 0.48 13.91 1.6

Gujarat 5.12 11.16 9.01 12.3

Haryana 15.59 3.24 19.75 6.39

Jammu and Kashmir 6.18 3.35 26.37 7.2

Karnataka 6.37 19.05 12.5 14.89

Kerala 11.31 4.88 16.38 4.28

Madhya Pradesh 5.69 3.47 3.58 9.94

Maharashtra 17.45 8.64 14.21 8.34

Orissa 0.22 0.77 1.71 -1.19

Punjab 0.37 4.53 5.6 5.6

Rajasthan 9.83 5.82 12.72 10.64

Tamil Nadu -0.31 11.2 11.93 17.66

Uttar Pradesh 7.3 1.47 11.06 4.5

West Bengal 8.51 6.97 8.95 7.55

Source: Authors’ Estimates and Planning Commission.

approximately 3% in the official estimates registering a declineof more than 25 percentage points during 1993-94 to 1999-2000. Our estimates of the least cost balanced diet-basedpoverty ratio show more consistent results in these two States.Kerala shows much lower incidence of nutritional povertycompared to that of Karnataka and Tamil Nadu.

These trends and estimates raise obvious policy issues thatneed further examination and lie well beyond the scope ofthis exploratory paper. In particular, the paper strengthensarguments of those who state that increases in incomesalone are not enough to eliminate poverty and malnutritionquickly; that relative prices of essential nutrients may alsoneed policy attention. This, in turn, may require additionalattention to government policies with respect to the pricesof cereals such as rice and wheat.

Although our paper focuses on using a PL approach toestimate the lack of affordability of nutrients, other authorshave taken an alternative route that equates inadequate nutrition with poverty. We have shown that, in the contextof a balanced diet of macro- and micronutrients, the twoapproaches give rise to markedly different results, even if theirgeneral direction is the same. We conclude that a lack ofpurchasing power (and not simply choice) offers much in termsof developing an understanding of the roots of inadequatenutrient intake in India.

Acknowledgements:

Alok Bhargava, K. Sujatha Rao, S. Sakthivel, Himanshu,Sandip Sarkar, J.V. Meenakshi



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Appendix I

Nutrient composition of food items (Nutrient content per 100 grams of different food items)

Food item Calories Protein Fat Iron Calcium Carotene Riboflavin Thiamin Niacin Vitamin C

Rice 345 7 1 1 10 9 0.12 0.06 2.5 0

Chira 346 7 1 20 20 0 0.05 0.21 4 0

Muri 325 14 16 35 67 0 0.01 0.21 4.1 0

Other rice products 346 6 1 1 9 2 0.05 0.21 3.8 0

Wheat/atta 290 12 2 5 48 29 0.17 0.49 4.3 0

Maida 348 11 1 3 23 25 0.07 0.12 2.4 0

Suji, rawa 348 10 1 2 16 0.15 0.03 0.12 1.6 0

Sewai, noodles 352 9 0 2 22 0.12 0.05 0.19 1.8 0

Bread (bakery) 244 9 1 2 18 0 0.17 0.49 4.3 0

Other wheat products 245 8 1 1 11 0 0.17 0.49 4.3 0

Arhar (tur) 335 22 2 3 73 132 0.19 0.45 2.9 0

Gram (whole) 372 21 6 5 56 129 0.18 0.48 2.4 1

Gram (split) 360 17 5 5 202 189 0.15 0.3 2.9 3

Moong 348 25 1 4 75 49 0.21 0.47 2.4 0

Masur 323 24 1 9 77 12 0.2 0.51 1.3 0

Urad 347 24 1 4 154 38 0.2 0.42 2 0

Peas 315 20 1 7 75 39 0.19 0.47 3.4 0

Soya bean 432 43 20 10 240 426 0.39 0.73 3.2 0

Kesari 345 28 1 6 90 120 0.17 0.39 0.17 0

Gram products 369 23 5 10 58 113 0 0.2 1.3 0

Besan 372 21 6 5 56 129 0.18 0.48 2.4 1

Other pulse products 336 23 4 6 101 12 0.2 0.51 1.3 0

Milk: liquid (litre) 117 4 7 0 210 48 0.1 0.04 0.1 1

Baby food 67 3 4 0 120 420 1.36 0.31 0.8 2

Milk: condensed/ powder 357 38 0 1 1370 0 1.64 0.45 1 5

Curd 60 3 4 0 149 31 0.16 0.05 0.1 1

Ghee 850 0 100 0 0 600 0 0 0 0

Butter 729 0 81 0 0 960 0 0 0 0

Other milk products 421 15 31 6 650 500 0.41 0.23 0.4 6

Vanaspati, margarine 900 0 100 0 0 750 0 0 0 0

Mustard oil 900 0 100 0 0 162 0.26 0.65 0.4 0

Groundnut oil 900 0 100 0 0 37 0.13 0.9 0 0

Coconut oil 900 0 100 0 0 0 0.01 0.08 3 0

Fish, prawn 219 43.5 5 2.5 500 0 0.1 0 2.1 15

Goat meat/mutton 156 20 8.5 1.5 81 9 0.14 0.18 0 0

Beef/ buffalo meat 86 19 1 0.8 3 18 0.04 0.15 5.8 0

Pork 114 19 4 2 30 0 0.09 0.54 2.8 2

Chicken 109 26 1 0 25 0 0.14 0 0 0

Others (birds, crab, oyster, tortoise, etc.) 130.7 17 5.7 0 542 425 0.4 0.1 0.1 0

Potato 97 1.6 0.1 0.5 10 24 0.01 0.1 1.2 17

Onion 50 1 0 1 47 15 0.01 0.08 0.4 11

Radish 32 1 0 0 50 3 0.02 0.06 0.4 17

Carrot 48 1 0 1 80 6460 0.02 0.04 0.6 3

Turnip 29 1 0 0 30 0 0.04 0.04 0.5 43

Beet 43 2 0 1 18 0 0.09 0.04 0.4 10

Sweet potato 120 1 0 0 46 1810 0.04 0.08 0.7 24

Arum 120 1 0 0 46 6 0.04 0.08 0.7 24

Pumpkin 25 1 0 0 10 1160 0.04 0.06 0.5 2

Gourd 12 0 0 0 20 0 0.01 0.03 0.2 0

Bitter gourd 25 2 0 1 20 126 0.09 0.07 0.5 88



Appendix I

Food item Calories Protein Fat Iron Calcium Carotene Riboflavin Thiamin Niacin Vitamin C

Cucumber 13 0 0 1 10 0 0 0.03 0.2 7

Parwal/patal 20 2 0 2 30 153 0.06 0.05 0.5 29

Jhinga/torai 17 1 0 0 18 33 0.01 0 0.2 5

Snake gourd 18 1 0 2 26 96 0.06 0.04 0.3 0

Cauliflower 30 3 0 1 33 30 0.1 0.04 1 56

Cabbage 27 2 0 1 39 120 0.09 0.06 0.4 124

Brinjal 24 1 0 0 18 74 0.11 0.04 0.9 12

Lady's finger 35 2 0 0 66 52 0.1 0.07 0.6 13

Spinach/other leafy vegetables 26 2 1 1 73 5580 0.26 0.03 0.5 28

French beans and barbati 26 2 0 1 50 132 0.06 0.08 0.3 24

Tomato 21 1.3 0 1.3 38.7 351 0.06 0.12 0.4 27

Peas 93 7 0 2 20 83 0.01 0.25 0.8 9

Chillies (green) 29 3 1 4 30 1007 0.39 0.19 0.9 111

Capsicum 24 1 0 1 10 427 0.05 0.55 0.1 137

Plantain (green) 64 1 0 6 10 30 0.02 0.05 0.3 24

Jackfruit (green) 51 3 0 2 30 175 0.13 0.03 0.4 7

Other vegetables 25 2 0 1 34 325.3 0.06 0.08 0.46 30.55

Jackfruit 88 2 0 1 20 130 0.13 0.03 0.4 7

Watermelon 16 0 0 8 11 0 0.04 0.02 0.1 1

Pineapple 46 0 0 2 20 18 0.12 0.2 0.1 39

Guava 51 1 0 0 10 0 0.03 0.03 0.4 212

Orange, Mausambi 48 1 0 0 26 1104 0 0 0 30

Mango 74 1 0 1 14 1990 0.09 0.08 0.9 16

Watermelon 17 0 0 1 32 169 0.08 0.11 0.3 26

Pear (Naspati) 52 1 0 1 8 28 0.03 0.06 0.2 0

Berries 49.7 1 0.3 2 46.7 1248 0.13 0.04 0.5 30

Apple 59 0 1 1 10 0 0 0 0 1

Grapes 51.5 1 0 0.5 22.5 3 0.03 0.12 0.2 31

Coconut (Kopra) 662 7 62 8 400 0 0.01 0.08 3 7

Groundnut 567 25 40 3 90 37 0.13 0.9 19.9 0

Dates 317 3 0 7 120 26 0.02 0.01 0.9 3

Cashewnut 596 21 47 6 50 60 0.19 0.63 1.2 0

Walnut 687 16 65 3 100 6 0.4 0.45 1 0

Raisin (kishmish, monacca etc.) 308 2 0 8 87 2.4 0.19 0.07 0.7 1

Other dry fruits 687 16 65 3 100 0 0 0 0 0

Sugar 398 0 0 0 12 0 0 0 0 0

Gur 383 0 0 3 80 0 0 0 0 0

Candy (misri) 398 0 0 0 12 0 0 0 0 0

Honey 319 0 0 1 5 0 0 0 0 0

Turmeric (gm) 349 6 5 68 150 30 0 0.03 2.3 0

Black pepper (gm) 304 12 7 12 460 1080 0.14 0.09 1.4 0

Dry chillies (gm) 246 16 6 2 160 345 0.43 0.93 9.5 50

Garlic (gm) 145 6 0 1 30 0 0.23 0.06 0.4 13

Tamarind (gm) 283 3 0 17 170 60 0.07 0 0.7 3

Ginger (gm) 67 2 1 4 20 40 0.03 0.06 0.6 6

Curry powder (gm) 108 6 1 1 830 7560 0.21 0.08 2.3 4

Other spices (gm) 250 8 7 25 120 304 0.19 0.22 1.2 50

SOURCE: Adapted from Gopalan et al. 1998

SECTION II

Delivery of Health CareServices in India

S E C T I O N I I

RIMARY HEALTH CARE' IS A TERM THAT IS USED EXTENSIVELY WORLDWIDE BYpolicy-makers. What does this term imply? Is it merely a term or does it hold withinit a much wider and deeper significance to the concept of health?

The Alma Ata Declaration in 1978 gave an insight into the understanding of primary health care. It viewed health as an integral part of the socioeconomic development of a country. It provided the most holistic understanding to health andthe framework that States needed to pursue to achieve the goals of development.The Declaration recommended that primary health care should include at least: education concerning prevailing health problems and methods of identifying, preventing and controlling them; promotion of food supply and proper nutrition, andadequate supply of safe water and basic sanitation; maternal and child health care,including family planning; immunization against major infectious diseases; preventionand control of locally endemic diseases; appropriate treatment of common diseasesand injuries; promotion of mental health and provision of essential drugs. It empha-sized the need for strong first-level care with strong secondary- and tertiary-levelcare linked to it. It called for an integration of preventive, promotive, curative andrehabilitative health services that had to be made accessible and available to the people,and this was to be guided by the principles of universality, comprehensiveness andequity. In one sense, primary health care reasserted the role and responsibilities of theState, and recognized that health is influenced by a multitude of factors and not justthe health services. It also recognized the need for a multisectoral approach to healthand clearly stated that primary health care had to be linked to other sectors. At thesame time, the Declaration emphasized on complete and organized community participation, and ultimate self-reliance with individuals, families and communitiesassuming more responsibility for their own health, facilitated by support fromgroups such as the local government, agencies, local leaders, voluntary groups,youth and women's groups, consumer groups, other non-governmental organiza-tions, etc. The Declaration affirmed the need for a balanced distribution of availableresources (WHO 1978).

Keeping this definition in mind, we now discuss whether this holistic concept hasbeen utilized as a framework to guide policy-makers to develop various health policydocuments, health committee reports and the five-year plans since Independence soas to impact on the health system.

After Independence, India adopted the welfare state approach, which was dominantworldwide at that time. As with most post-colonial nations, India too attempted torestructure its patterns of investment. During that time, India's leaders envisaged anational health system in which the State would play a leading role in determiningpriorities and financing, and provide services to the population.

‘If it were possible to evaluate the loss, which this country annually suffers throughthe avoidable waste of valuable human material and the lowering of human efficiencythrough malnutrition and preventable morbidity, we feel that the result would be sostartling that the whole country would be aroused and would not rest until a radicalchange had been brought about' (Bhore Committee Report 1946).

The emphasis of the first health report, i.e. the Health Planning and DevelopmentCommittee's Report, 1946 (popularly known as the Committee Report) on the roleof the State was explicit. It was a plan equivalent to Britain's National Health Service.The Report was based on a countrywide survey in British India. It is the first organizedset of health care data for India. The poor health status was attributed to the prevalence

Primary Health Care in India: Reviewof Policy, Plan and Committee Reports

P


MADHURIMA NUNDY

CENTRE OF SOCIAL MEDICINEAND COMMUNITY HEALTH,

JAWAHARLAL NEHRUUNIVERSITY, NEW DELHI, INDIA


of insanitary conditions; malnutrition and undernutritionleading to high infant and maternal mortality rates; inadequacyof the existing medical and preventive health organizations;lack of general and health education; unemployment andpoverty that produced adverse effects on health and resultedin inadequate nutrition; improper housing and lack of medicalcare. Intersectoral linkages were well discussed with nutrition,housing and employment as essential precursors for healthyliving. It considered that the health programme in India shouldbe developed on a foundation of preventive health work andproceed in the closest association with the administration ofmedical relief. The Committee strongly recommended a healthservices system based on the needs of the people, the majorityof whom were deprived and poor. It felt the need for developinga strong basic health services structure at the primary levelwith referral linkages. It also recommended the need to investin the pharmaceutical sector to develop indigenous capabilitiesand reduce excessive reliance on multinational companies.India was therefore one of the few developing countries whichadopted a health policy that integrated the principles of universality and equity. Community participation and coop-erative efforts to promote preventive and curative health workwas important to achieve a vibrant health system. The Committee felt that large sections of the people were livingbelow the normal subsistence level and they could not affordto pay for or contribute to the health services. It was decidedthat medical benefits would have to be supplied free to all atthe point of delivery and those who could afford to pay shouldchannel contributions through the mechanism of taxation.Though the report stated that ‘…it will be for the governmentsof the future to decide ultimately whether medical serviceshould remain free to all classes of the people or whether aninsurance scheme would be more in accordance with theeconomic, social and political requirements of the country atthe time' (Bhore Committee Report 1946), one point wasapparent-that no individual should fail to secure adequatemedical care, curative and preventive because of the inabilityto pay for it. They recommended that State Governmentsshould spend a minimum of 15% of their revenues on health activities.

The National Planning Committee (NPC) set up by the IndianNational Congress in 1938 under the chairmanship of ColonelS. Sokhey stated that the maintenance of the health of thepeople was the responsibility of the State, and the integrationof preventive and curative functions in a single state agencywas emphasized. The Sokhey Committee Report was not asdetailed as the Bhore Committee Report but endorsed the recommendations of the Bhore Committee Report and com-mented that it was ‘of the utmost significance' (Banerji 1985).

The objectives of the First (1951-56) and Second Five-Year(1956-61) Plans were to develop the basic infrastructure andmanpower visualized by the Bhore Committee. Though healthwas seen as fundamental to national progress, less than 5%of the total revenue was invested in health. The followingpriorities formed the basis of the First Five-Year Plan: provisionof water supply and sanitation; control of malaria; preventivehealth care of the rural population through health units and

mobile units; health services for mothers and children; education,training and health education; self-sufficiency in drugs andequipment; family planning and population control. Startingfrom the first plan, vertical programmes started, which becamethe centre of focus. The Malaria Control Programme, whichwas made one of the principal programmes, apart from otherprogrammes for the control of TB, filariasis, leprosy and venerealdiseases, was launched. Health personnel were to take partin vertical programmes. However, the first plan itself failed tocreate an integrated system by introducing verticality.

The concern of the Health Survey and Planning Committee(Mudaliar Committee 1962) was limited to the developmentof the health services infrastructure and the health cadre atthe primary level. It felt the growth of infrastructure neededradical transformation and further investment. Another majorshift came in the Third Plan (1961-66) when family planningreceived priority for the first time. Increase in the populationbecame a major worry and was seen as a hurdle to the development process. Although the broad objective was tobring about progressive improvement in the health of the people by ensuring a certain minimum level of physical well-being and to create conditions favourable for greater efficiency,there was a shift in focus from preventive health services tofamily planning. During the Fourth Plan (1969-74), effortswere made to provide an effective base for health services inrural areas by strengthening the PHCs. The vertical campaignsagainst communicable diseases were further intensified.

During the Fifth Plan (1974-79), policy-makers suddenlyrealized that health had to be addressed alongside other development programmes. The Minimum Needs Programme(MNP) promised to address all this but became an instrumentthrough which only health infrastructure in the rural areaswas to be expanded and further strengthened. It called forintegration of peripheral staff of vertical programmes butthe population control programme got further impetus duringthe Emergency (1975-77) and most of the basic health workersgot sucked into the family planning programme. Meanwhilethe Chaddha Committee Report (1963), the Kartar Singh Committee Report on Multipurpose Workers (1974) and theSrivastava Committee Report on Medical Education and Support Manpower (1975) remained focused on giving recommendations on how the health cadres at the primarylevel should be distributed.

With the widespread disillusionment with vertical programmesworldwide and the need to provide universal health servicescame the Primary Health Care Declaration at Alma Ata in 1978,which India was a signatory to. The Sixth Plan (1980-84)was influenced by two policy documents: the Alma Ata Declaration and the ICMR/ICSSR report on ‘Health for All by2000'. The ICMR/ICSSR Report (1980) was in fact a movetowards articulating a national health policy that was thoughtof as an important step to realize the Alma Ata Declaration.It was realized that one had to redefine and rearticulate andget back into track an integrated and comprehensive healthsystem that policy-makers had wavered from. It reiteratedthe need to integrate the development of the health systemwith the overall plans of socioeconomic and political change.


SECTION II Primary Health Care in India: Review of Policy, Plan and Committee Reports

It recommended that the Government formulate a comprehensive national health policy dealing with all dimensions-environmental, nutritional, educational, socioe-conomic, preventive and curative. The National Health Policy,1983 attempted to incorporate all these. Provision of universal,comprehensive primary health services was its goal. A largenumber of private and voluntary organizations who wereactive across the country in the health field were to supportthe Government in its efforts to integrate health services.Evolving a decentralized system of health care and nation-wide chain of epidemiological stations were some of the mainrecommendations.

Once again, a selective approach to health care became thefocus when a strong lobby questioning the financial repercussions of the primary health care approach came up.Verticality was reintroduced as an ‘interim' arrangement andinterventions of immunization, oral rehydration, breastfeedingand antimalarial drugs were suggested (Warren 1988). Thiswas seen as a technical solution even before comprehensiveprimary health care could be realized. UNICEF too came outwith its report on The state of the world's children and suggested immunization as the spearhead in the selectiveGOBI-FF (growth monitoring, oral rehydration, breastfeeding,immunization, food supplements for pregnant women andchildren, and family planning) approach (Rifkin and Gill 1986).Programme-driven health policies were once again the central focus.

The plan documents henceforth, emphasized on restructuring and developing the health infrastructure, especiallyat the primary level. The Seventh Plan (1985-90) restated thatthe rural health programme and the three-tier health servicessystem need to be strengthened and that the government hadto make up for the deficiencies in personnel, equipment andfacilities. The Eighth Plan (1992-97) distinctly encouragedprivate initiatives, private hospitals, clinics and suitable returnsfrom tax incentives. With the beginning of structural adjustmentprogrammes and cuts in social sectors, excessive importancewas given to vertical programmes such as those for the controlof AIDS, tuberculosis, polio and malaria funded by multilat-eral agencies with specified objectives and conditions attached.Both the Ninth (1997-2002) and the Tenth Five-Year Plans(2002-2007) start with a dismal picture of the health servicesinfrastructure and go on to say that it is important to investmore on building good primary-level care and referral services.

Both the plans highlight the importance of the role of decentralization but do not state how this will be achieved.

The National Health Policy (2002) includes all that is wantedfrom a progressive document and yet it glosses over the objective of NHP 1983 to protect and provide primary healthcare to all. The Policy document talks of integration of verticalprogrammes, strengthening of the infrastructure, providinguniversal health services, decentralization of the health caredelivery system through panchayati raj institutions (PRIs)and other autonomous institutions, and regulation of privatehealth care but fails to indicate how it achieves the goals. Itencourages the private sector in the first referral and tertiaryhealth services.

Conclusion

The overview of the plans and policy reports not only throwslight on the gap between the rhetoric and reality but also theframework within which the policies have been formulated.There has been an excessive preoccupation with single-purpose driven programmes. Above all, the spirit of primaryhealth care has been reduced to just primary level care. Thehealth reports and plans mostly concentrated on buildingthe health services infrastructure and even this lacked a senseof integration. Most of the policy reports miss out on theimportance of a strong referral system. Instead, there has beenmore emphasis on building the primary level care and eventhat has lacked proper implementation. The Bhore committeereport and later, the Primary Health Care Declaration discussedthe operational aspects of integrating the other sectors ofdevelopment related to health. The multisectoral approachthat is much needed and the intersectoral linkages that areessential for a vibrant health system have not been well thoughtout, and there has been no plan drawn out for it later. Theoutline of plan documents and their implementation havebeen incremental rather than being holistic. It is importantto question whether it is only the low investment in healththat is the main reason for the present status of the healthsystem or is it also to do with the framework, design andapproach within which the policies have been planned.

Acknowledgement

I thank Dr Rama Baru for the valuable insights.


Primary Health Care in India: Review of Policy, Plan and Committee Reports SECTION II

Banerji D. Health and family planning services in India: An epidemiological, socio-cultural and political analysisand a perspective. New Delhi: Lok Paksh; 1985.

Government of India. Report of the Health Survey andDevelopment Committee, Vol. II (Chairman: Bhore). Delhi:Manager of Publications; 1946.

Government of India. First Five-Year Plan (1951-56) toTenth Five-Year Plan (2002-2007). New Delhi: Planning Commission ofIndia; 1961.

Government of India. Report of the Health Survey andPlanning Committee, (Chairman: Mudaliar). New Delhi:Ministry of Health; 1961.

Government of India. Report of the Committee of Multi-purpose Workers under Health and Family PlanningProgramme (Chairman: Kartar Singh). New Delhi: Ministryof Health and Family Planning; 1973.

Government of India. Health Series and MedicalEducation: A Programme for Immediate Action: A Reportof the Group on Medical Education and SupportManpower (Chairman: Srivastava). New Delhi: Ministry ofHealth and Family Planning; 1975.

Government of India. Statement on National HealthPolicy. New Delhi: Ministry of Health and Family Welfare;1983.

Government of India. National Health Policy 2002. NewDelhi: Ministry of Health and Family Welfare; 2002.

Indian Council of Social Science Research (ICSSR) andIndian Council of Medical Research (ICMR). Health forAll: An alternative strategy. Report of a Study Group.New Delhi: ICSSR; 1980.

Rifkin SB, Gill W. Why health improves: Defining theissues concerning comprehensive primary health care andselective primary health care. Social Science and Medicine1986;23:559-66

Warren KS. The evolution of selective primary health care.Social Science and Medicine 1988;26:891-8.

World Health Organization. Primary Health Care: Reportof the International Conference on Primary Health Care.Geneva: WHO; 1978.

References


SECTION II Primary Health Care in India: Review of Policy, Plan and Committee Reports

RE HEALTH SYSTEMS AN END IN THEMSELVES OR A MEANS TO ACHIEVING certain ends? Worldwide, there seems to be a consensus on measuring health systems in terms of improving the health status, enhancing patient satisfaction andproviding financial risk protection. In 2000, the World Health Organization (WHO)further expanded the definition to include a reduction in disparities for improvinghealth status; being mindful of the patient's need for privacy and confidentialityand providing services promptly and with courtesy as characteristics of a responsive system; and sharing the financial burden in accordance with the ability to pay asbeing a fair form of health financing (World Health Report, WHO, 2000). There is,however, little consensus on what constitutes an ideal health system in universallyacceptable terminology to enable better intercountry comparisons. This is because,unlike any other sector, health systems are highly contextualized and influenced byvarious exogenous factors such as societal values, epidemiology and disease burden, availability of financial resources, technical capacity, individual preferencesand the nature of demand.

Technological innovation in the health sector has improved the quality of life buthas also increased costs. In countries that have no social insurance and where the roleof the state is limited, people spend a substantial proportion of their incomes onseeking medical treatment, and in the process, get impoverished, thus widening disparities in the health status. To contain spiraling prices and distortions created bymarket failures such as moral hazard, asymmetry in information, induced demandetc., countries resort to multiple policy instruments.

Health systems have five aspects or knobs that interact with each other and influence its basic nature and direction: (i) financial (tax, user fees, out-of-pocketexpenditure, insurance), (ii) payment systems (how providers are paid: salary, perservice rendered, capitation), (iii) organizational (manner in which the delivery systems are organized/structured), (iv) legal (regulatory frameworks) and (v) social(access to health information, advertising) (Hsiao 2000). The effectiveness withwhich these instruments of state policy are designed and used determines the extentto which the health system is equitable, appropriate or fair.

The health system in India consists of a public sector, a private sector and an informal network of providers of care operating within an unregulated environment,with no controls on what services can be provided by whom, in what manner, and atwhat cost, and no standardized protocols to help measure the quality of care. Thereare wide disparities in access, further worsened by the poor functioning of the public health system.

In this chapter, we diagnose the nature of the health system in India, in the publicsector, analyse the problems that constrain it from achieving the stated goals, andidentify issues that require to be addressed for overhauling the system of health carefor meeting future challenges.

Part IAn overview of the evolution of the health system in India

The evolution of India's health system can be categorized into three distinct phases:� Phase I (1947-83)-when the health policy was based on two principles: (i) that

none should be denied care for want of ability to pay, and (ii) that it was the state's

Delivery of health services in the public sector

A


S E C T I O N I I

K. SUJATHA RAO SECRETARY

NATIONAL COMMISSION ONMACROECONOMICS AND

HEALTH, GOVERNMENT OFINDIA

NEW DELHIE-MAIL:

[email protected]

responsibility to provide health care to the people.� Phase II (1983-2000)-when the first National Health

Policy of 1983 articulated the need to encourage privateinitiative in health care service delivery, while at the sametime expanding access to publicly funded comprehensiveprimary health care.

� Phase III (post-2000)-which is witnessing a further shiftthat has the potential to profoundly affect the health sector in three important ways: (i) the desire to utilize privatesector resources for addressing public health goals; (ii) liberalization of the insurance sector to provide newavenues for health financing; and (iii) redefining the roleof the state from being only a provider to a financier ofhealth services as well.

Phase I (1947-83)

At the time of Independence, malaria affected almost aquarter of India's population; virulent diseases such as smallpox, plague and cholera were rampant, maternal mortalitywas over 2000 per 100,000 live-births and longevity of lifewas less than 32 years (Bhore 1946). While the public sectorconsisted of a few city hospitals, the private sector consistedlargely of individual practitioners of Indian systems of medicine and licentiates practicing in villages, as family doctors.With meagre resources, this period saw the effective containment of malaria, bringing down the incidence froman estimated 750 lakh to less than 20 lakh, eradication ofsmallpox and plague, halving of the maternal mortality rate(MMR), reduction of the infant mortality rate (IMR) from160 per 1000 live-births to about 105, containing cholera andincreasing longevity of life to almost 54 years. Institutes ofexcellence such as the All India Institute of Medical Sciences(AIIMS) were set up for research and quality training, makingIndia an exporter of highly trained medical doctors. Thesegains were in no small measure due to the strong foundationof public health on which the health system was groundedand the highly professionalized cadre of public health spe-cialists who provided leadership from the front, camping invillages in hostile environmental conditions, whether to erad-icate smallpox or supervise the malaria worker.

However, under the overarching influence of modernizationthat characterized the post-colonial phase of global development,the urge to be on par with the western norms of modernmedicine proved to be too strong to resist. India, unlike China,missed the opportunity to launch public health campaignsto promote, at the community and individual household levels,healthy lifestyles alongside expanding public investment toassure universal access to water, sanitation, nutrition and education. Instead, and more particularly during the 1960sand 1970s, public health campaigns were focused only onpromotion of the small family norm and family planning. Indiaalso failed to utilize the strengths of the traditionally used andaccepted modes of medical treatment and gave undue emphasis to allopathy, gradually laying the base for an expandedmarket for western style curative services, which are urban-based as well as costly.

Phase II (1983-2000)The National Health Policy of 1983

Despite the remarkable achievements in disease control, thefailure to control the population, the lack of access to basichealth facilities in rural areas, and the international commit-ment to focus on providing comprehensive primary care asenvisioned by the Alma Ata Declaration in 1978, led to theformulation of the National Health Policy of 1983. Limitedresources to meet the growing demand for health servicesled to the articulation for private sector to shoulder somepart of the burden. An estimated Rs 6500 crore worth ofsubsidy in terms of exemptions in customs duty for importof equipment, subsidized inputs such as land, etc. were extendedto stimulate private investment in health. Alongside, the focusof state policy shifted to primary health care to reduce theiniquitous urban-rural divide and expand access to the ruralpopulations, particularly the poor. Lack of resources resultedin segmenting health into independent silos of disease con-trol programmes rather than visualizing health care as a con-tinuum of service. Such segmentation led to simplistic for-mulations of the role of state being confined to primary healthcare and a selected list of diseases and health interventions,rather than being responsible for the well-being and healthof the people. This phase witnessed an expansion of healthfacilities for providing primary health care in rural areas andthe implementation of national health programmes (NHPs)for disease control under vertically designed and centrallymonitored structures.

The adoption of this twin strategy had its advantages. Withless than Rs 200 per capita investment (2000), prioritization ofinterventions that benefit the poor and entail wide externalities,provided a moral and technical justification. Besides the establishment of health facilities in accordance with a population norm, guinea worm was eradicated and the diseaseload due to infectious diseases reduced and deaths averted.During the 1990s, with assistance from the World Bank, NHPswere upscaled with impressive outcomes: the cure rate oftuberculosis (TB) under the Directly Observed Treatment,Short-course (DOTS) programme doubled and averted an estimated 50 lakh deaths, leprosy was eliminated except in70 districts, the incidence of cataract as a cause of blindnessreduced from 80% to less than 50% and the number of polio cases decreased drastically from 29,709 to about 100(Table 1).

Fiscal stress gave rise to innovation; various States attemptedto improve the overall performance of public health facilitiesby a combination of policies-improved availability of inputs,greater flexibility in spending; defining responsibilities andrationalizing performance outputs; widening the scope forinvolvement of local bodies, non-governmental organizations(NGOs), etc. Table 2 gives a broad idea of the policy areas,the direction and nature of such innovation and names ofthe pioneer states.

The initiatives taken and the outcomes are impressive whenanalysed in reference to wide disparities in income and sociocultural behaviour, a fast-changing economic scenario,


SECTION II Delivery of health services in the public sector

comparatively unstable political environment in several Statesand a near stagnant average per capita investment in primaryhealth care of Rs 105. Despite the reduced health spending asa result of fiscal pressures that States faced during this period,most of them took advantage of available opportunities to achievewhatever they could, underscoring the fact that a limitedlevel of investment can only give a commensurate level of out-come.

Notwithstanding the above, five serious omissions occurredin the public health policy: (i) the private sector was encour-aged without provisions for regulations, standards and accred-itation processes; (ii) there was an absence of surveillance and

epidemiological surveys to get a moreaccurate understanding of the changingprofile of disease prevalence and incidence,which is necessary for measuring risk fac-tors, designing interventions and launch-ing information campaigns to reduce riskybehaviour; (iii) advantage was not takenof the 73rd and 74th ConstitutionalAmendments for decentralizing pro-gramme implementation to the local bod-ies/community for increasing accounta-bility in the system; (iv) neglected ofresearch and development to promotetechnological innovation; and (v) providedinadequate investment in developing thecritical mass of required skills and humanresources. In other words, the governmentsran public health programmes that wouldhave been more cost-effective for the com-

munities and local bodies and in the processneglected their more fundamental responsibility of gover-nance-of laying down a framework, defining the rules of thegame and monitoring systems to see that no player takesundue advantage in the health sector.

Phase III (post 2000)National Health Policy II, 2002

By 2000, India had not achieved 13 out of the 17 goals laiddown in the first National Health Policy of 1983 (see Annex-ure IV). Analysis of the 52nd Round National Sample Survey(NSS) on the utilization of health services showed that dur-


Delivery of health services in the public sector SECTION II

Table 1

Evaluation of World Bank-funded projects in four States under the State Health Systems Project

Programme Indicator before the project Current status

TB control (cure rate) 25% (1997) 86% (2003)

Control of cataract blindness/number of surgeries 21 lakh (1995) 42 lakh (2003)

Control of Leprosy (prevalence per 10,000) 24 (1992) 2.44 (2003)

Control of HIV - per 1,000,000 3.5 (1998) 5.1 (2005)

Control of malaria in 8 project districts API 13.8 API (1999) 9.5 API (2002) In 32 out of 100 districts API

fell below 2.

Reduction in Polio cases 29,709 <100

SOURCE: Ministry of Health and Family Welfare (MOHFW)

Table 2

Innovation in the health sector by States 1995-2000

Area of Innovation Broad Direction of the innovation and innovators

Public-private partnerships Handing over the management of public facilities to NGOs (Gujarat, Karnataka); Contracting private specialist services and outsourcing other services, such as diet, distribution of IEC materials, etc. (most States)

Decentralization Transfer of budgets to and involvement of local bodies (Kerala, Karnataka, Himachal Pradesh, Orissa); Management Boards of Health Facilities (Rajasthan, Madhya Pradesh, Andhra Pradesh)

Human resources Contracting professionals for service delivery-ANMs, doctors, surveillance, auditing, etc. (all States); Multiskilling, pre-internship training, Mandatory pre-post graduate rural service (Orissa)

Financing User fees and financial autonomy to hospitals (Madhya Pradesh, Rajasthan, Andhra Pradesh, Karnataka, Punjab, West Bengal, Maharashtra); Health insurance (Andhra Pradesh, Karnataka, West Bengal); Direct transfer of funds from GOI to districts under NHPs; Financial delegation of powers to PHCs, CHCs and district CMO (Tamil Nadu. Gujarat)

Accountability Delegation of powers to district-level officials (Gujarat, Tamil Nadu, rationalizing responsibilities for better accountability, performance-based monitoring (Andhra Pradesh, Gujarat)

Community mobilization Link couple schemes (Gujarat, Rajasthan); Village Planning and Community Health Worker (Madhya Pradesh, Uttar Pradesh)

Regulation/standard setting Quality control circles (Gujarat); Blood transfusion standards (NACO); ISO certification (Karnataka, Himachal Pradesh) Ensuring the availability of essential drugs at health facilities under the Panch Byadhi Chikitsa scheme (Orissa); Centralized drug procurement (Tamil Nadu, Orissa, Andhra Pradesh, Rajasthan)

IEC: information, education and communication; GOI: Government of India; NHP: National Health Policy; PHC: primary health centre; CHC: community health centre; CMD: chief medical officer; NACO: National AIDSControl Organization.SOURCE: Initiatives from Nine States, MOHFW, GOI 2004

ing 1986-96, there was a decrease in the utilization of pub-lic facilities for outpatient care from 26% to 19%; a decreasein access to free care from 19% to 10% and an increase in thenumber of persons not seeking care due to financial inca-pacity (Table 3) see also Annexure I.

State-wise comparisons show that the poorest in the poorerStates of UP and Bihar had to pay substantial amounts foroutpatient treatment and a low utilization of public facilities,which indicates a virtual breakdown of the public health system.On the other hand, in Assam and Orissa, a large proportionof persons did not avail of treatment at all. Read along withthe number of untreated ailments due to financial reasons,the picture is dismal, as it further emphasizes the failure ofthe public health system in providing risk protection, sincethe average cost of outpatient treatment for every episode ofillness is equivalent to three to five days' wage of one earningmember of the family.

To reduce the disease burden affecting the poor and alarmedby the falling levels in the utilization of public facilities, the

government brought forth the National Population Policy(2000), the National Health Policy (2002), and the AYUSH Policy (2000), reiterating its resolve and commitment to achievea set of goals by 2010. The goals envisaged are to increasepublic investment in health from the current level of 0.9% to

2%-3%; to increase the utilization ofprimary care facilities from less than 19%to over 75%; to reduce the MMR by three-quarters from the current level of over 540per 1000; to reduce the IMR from 62 per1000 live-births to less than 30, eradicatepolio, eliminate leprosy, reduce deathson account of TB and malaria by over 50%,etc. Many of these objectives are in con-sonance with the Millennium Develop-ment Goals (MDGs) for 2015. The follow-ing section highlights the systemic issuesthat may constrain us from achieving thesegoals within the given time-frame unlessaddressed on priority.

Part IIOrganizational Structure of thePublic Sector Delivery System

There has been a clear absence of anydeliberate strategy to use the organiza-tional tool for achieving public healthgoals, except family planning, until theSixth Five-year Plan when, under the Minimum Needs Programme, concertedefforts were made to focus on expandingaccess to primary care in rural areas. Thus,built over the years, the public health deliv-ery system consists of a large number ofdispensaries, primary health care institutions,small hospitals providing some specialistservices, large hospitals providing tertiary care, medical colleges, paramedicaltraining institutions, laboratories, etc.(Table 4).

The failure to improve the health status,be accountable and responsive to people's

needs or protect them from financial risk has brought intofocus the functioning of the public health system, under-scoring its failure in fulfilling such legitimate expectations.The focus of this section is to understand the causal factorsthat have led to such a failure. These causal factors can bedivided into three broad groups:

1. Poor goal setting and lack of formulation of strategicinterventions;

2. Management Failures; 3. Limited role of the State.

Goal-setting and Strategic Interventions

The public health system is inaccessible, disconnected to



Table 3

Utilization of primary and community health centres for outpatient care in rural areas

State Utilization Utilization of Untreated Untreated Average totalof PHC/CHC PHC/CHC for OP ailments ailments householdfor OP care by the poorest out of total due to expenditure

(out of 2 quintiles number of financial for treatment total OP) (out of total ailments(%) reasons per ailment

(%) PHC/CHC OP) (out of total (OP) (in Rs)(%) number of

ailments)(%)1 2 3 4 5

Well performing States

Kerala 5.4 49 11.7 1.5 119

Tamil Nadu 7.2 41.5 22.4 - 79

Andhra Pradesh 5.7 52.1 25.5 5.2 116

Maharashtra 6.4 47.7 11.4 2.9 144

Karnataka 11.0 55.1 22.3 2.6 91

Moderate performing States

Gujarat 9.9 29.3 8 144

West Bengal 4.3 49.1 19.9 4 105

Punjab 1.8 41.2 1 0.5 173

Haryana 5.1 23.5 3 - 183

Poor performing States

Rajasthan 10.2 44.1 10.2 6.2 172

Orissa 18.4 30.2 32.3 14.6 99

Madhya Pradesh 8.9 27.6 16.3 1.7 129

Uttar Pradesh 1.5 38.6 9.4 - 202

Assam and NEast 27.13 - 44 9.02 83

Bihar 2.0 19.6 21.9 5.5 220

All India 6.4 37.9 17.3 3.5 144

PHC: primary health centre; CHC: community health centre; OP: outpatientNOTE: The total OP for a reference period of 15 days is 375.3 lakh.. The total number of ailments (rural) is 408 lakh yearly. The average totalexpenditure for OP care is for the reference period of 15 days. Total expenditure includes medical expenditure and all expenses other thanmedical expense incurred by the household for availing the treatment.SOURCE: Mahal et al. 2002

public health goals and inadequately equipped to addresspeople's expectations. For the majority of citizens, the publichealth system is out of their reach due to distance, lack ofmoney, lack of confidence in the system or the availability ofa cheaper alternative. The organizational structure requiresa villager to travel an average distance of 2.2 km to reach thefirst health post for getting a paracetamol; over 6 km for ablood test and nearly 20 km for hospital care. Given the poorroad connectivity, the unreliability of finding the provider atthe health centre, the indirect costs for transport and wagesforegone, the marginal cost of availing a public service out-weighs that of getting some treatment from the local quack.Further, even when accessed, there is no continuity of careguaranteed. In other words, the segmentation of the healthsystem into primary, secondary and tertiary, administered andmonitored by different bodies, with none working in coordi-nation, has resulted in the dilution of the concept of theintegral nature of health where curative services are a continuumof the preventive and promotive health care.

In 8 States, substantial investments were mobilized fromthe World Bank to upgrade, strengthen and establish hospitalsat the district, sub-district and block levels. Under theseprojects, the comprehensive definition of the primary healthinfrastructure (Health for All Report of 1980) got a furtherdistortion with the community health centres (CHCs) rechristenedas first referral centres (FRUs), divorcing them from theircontextual framework. In Andhra Pradesh, Karnataka, Punjab,etc. the World Bank-funded CHCs were brought under theadministrative control of autonomous Directorates dealingwith secondary level hospitals while those CHCs not coveredunder the project are continued to be administered by theDirector of Health Services. An evaluation report of West Ben-gal, AP, Karnataka and Punjab showed that while these proj-ects were successful in improving the quality of care in urbanand semi-urban areas (Table 5), an expected outcome, suchas, for example, an increase in institutional deliveries was

not realized. Had the focus been on establishing the referralsystem and linkages with the other World Bank-assisted dis-ease control and Reproductive and Child Health (RCH) proj-ects, investments made for strengthening the health systemswould have had a measurable impact on reducing maternal,neonatal and infant deaths, or deaths due to malaria, TB whichrequire hospitalization. This experience clearly demonstratesthat mere increase in investments in infrastructure does notautomatically translate into better public health outcomes.It also underscores the urgent need for conceptual clarity onthe expectations of the organizational structures that havebeen established and the urgent need for standardization offacilities across the country.

Shortage of funds has been primarily responsible for thenon-availability of facilities in accordance with the normsset by the government; and inadequate provisioning of criticalinputs such as drugs, equipment, facilities such as operationtheatre, etc.

Due to lack of budgets and the pressure to achieve targets,several States upgraded the two-roomed subcentres to PHCs.With no place for laboratory, examination, pharmacy, etc.most are non-functional. There are PHCs with over 33 sub-centres and there are subcentres which cover over 200 habitations. It is estimated that 25% of people in MadhyaPradesh and Orissa, and 11% in Uttar Pradesh could not accessmedical care due to locational reasons (NSS-India HealthReport, 2003). The question that then arises is to what extentis infrastructure an important determinant in health outcomes?Is there any association? Box 1 symbolizes the mockery wehave made of the health care service delivery system by havingsubcentres function in non-standardized places denying dig-nity and privacy to women who visit the ANM for treatmentand care. Annexure I gives the levels of utilization of thePHC facilities.

Annexure II links outcomes with the infrastructure to exam-ine if there is any such association. What emerges from the



Table 4

Public health infrastructure In India, 1951-2001

1951 1961 1971 1981 1991 1998 2000

Hospitals Total 2,694 3,054 3,862 6,805 11,174 NA 15,888

% Rural 39 34 32 27 22

% Private 43 57 71.2

Hospital/dispensary beds Total 117,000 229,634 348,655 504,538 664,135 NA 719,861

% Rural 23 22 21 17 11.06

% Private 28 32 38.2

Dispensaries Total 6,600 9,406 12,180 16,745 27,431 NA 23,065

% Rural 79 80 78 69 53

% Private 13 60 57

PHCs 725 2,695 5,131 9,115 18,671 22,149 22,842

Subcentres 27,929 84,736 130,165 136,258 137,311

CHCs 761 1910 2,633 3,043

PHC: primary health centre; CHC: community health centreSOURCE: Health Statistics/Information of India, CBHI, GOI, various years; Rural Health Bulletin, GOI 2002; National Health Policy, MOHFW, GOI, 2002

data is that while in the poorer performing States, the ratioof facilities to 100,000 population are on par with the rest ofthe States, and even better than that in Andhra Pradesh andWest Bengal, the health outcomes are poor. This shows thatit is not the mere establishment of a physical facility but acombination of factors such as distance, availability and qual-ity of skills, adequacy of infrastructure and access to alter-native sources of care that seem to influence health-seekingbehaviour and determine outcomes which have been cap-tured by a set of indicators such as complete immunization,percentage of those severely malnourished, full antenatal cov-erage, safe and institutional deliveries and finally, the IMRand the under 5 mortality rate (U5MR).

While it is clear that infrastructure development had littlelinkage to goal setting, it is also seen that policy interven-tions per se often lacked focus, were not based on hard evi-dence, and had weak institutional capacity to translate pol-icy into action.

Lack of Focus, Evidence and capacity

Lack of focus: Vertical versus horizontal programmesThe NHP 1983 made a strong policy commitment to estab-

lish a comprehensive primary health care, based on the active

involvement of the community and inter-sectorally linked to non-health determi-nants such as water, sanitation, etc. Suchan approach if implemented would havehelped avert an additional 15 lakh infantand 800,000 maternal deaths. Gains couldhave been impressive. However, as can beseen from Annexure III and AnnexureIV the NHP was hardly implemented.Instead, due largely to resource constraints,strategies contrary to what was stated inthe policy, were adopted (such as the selec-tive primary health care approach).

The adoption of the strategy of selec-tive primary health care, running counterto the vision of a comprehensive primaryhealth care laid down in the NHP of 1983was on account of resource constraints.

Compulsions to prioritize resulted in selecting interventionsbased on the criteria of the extent to which the disease/con-dition affected the poor disproportionately more, was tech-nically feasible to implement and could be made available atcomparatively low cost, and to be implemented vertically fromthe centre. Evidence from community-based experiments andsurveys however tell another story. They conclusively showthat people have other health needs and expectations fromtheir health system which make integrated approaches moreeffective, efficient and, in the long run, more sustainable. Theexperiments also show that vertical programmes fail to inte-grate with the provisioning of general health services, weakenthe health system as a whole and, over a period of time, getdisconnected from local health problems, priorities and thecommunity itself.

These observations find resonance in the experience gainedso far. A range of health needs such as treatment for debili-tating fever that incur wage losses for the labourer, treatmentfor epilepsy, uterine prolapse, infertility or menstrual problemsaffecting women's ability to work are concerns that are ignoredas public health systems narrowly focus on achieving pro-gramme targets: sterilization, immunization, collection ofblood smears in case of fever, providing drugs to sputum-positive persons etc. In fact, even under a programme such asthe RCH, which is expected to be gender-sensitive, due to itsvertical, target-oriented nature, the number of women receiv-ing postpartum care was very low (NFHS II). Given the largenumber of domiciliary deliveries, the health workers visitedan average of 5.1% mothers within one week of delivery and16.5% mothers within 2 months of delivery. In Madhya Pradesh,these figures were 1.8% and 10% and in Uttar Pradesh 2%and 7.2%, respectively. This not only explains the reason forsuch high neonatal mortality but also the unattended mor-bidity which in these two States was reported to have affectednearly 17% women, while 10%-13% suffered heavy vaginalbleeding (NFHS-2, 1998-99). Such postpartum morbidities gounmonitored, as they are not part of the programme targetsto be achieved. Apart from such distortions, vertical pro-gramming with line item-wise budgeting provides little flex-



Table 5

Evaluation of World Bank-assisted projects for State health systems

State/year of project Increase Increase Increase Additional Increase Reduction in the in the in beds in bed in institutional

utilization utilization laboratory (% occupancy deliveries of outpatient inpatient tests increase) (%) 1999-2003

care (%) care (%) (%)

Karnataka (1996-2001) 72.2 83.3 290 29.3 10.8 From 55% to 33%

West Bengal (1996-2004) 44.6 29.3 54.4 12.9 71.6 From 77% to 74%

Punjab (1996-2003) 115.9 65 456.6 45.6 14.4 From 97% to 26%

Andhra Pradesh (1995-2002) 102.2 100 67.3 From 35% to 33%

SOURCE: Implementation Completion Report, World Bank 2004

In one district, where the NCMH took up a facility survey,

officials stated that 90% of the 369 ANMs did not reside in the

area of their jurisdiction-a situation referred to in Rajasthan

and Gujarat as 'up-down'-and that with just Rs 75 per month

as rental most subcentres were functioning in verandahs. Now

the rent has increased to Rs. 250 but the 'verandahs cannot be

left as dues have to be paid'! Due to lack of any facility and privacy,

the ANM does not provide any maternal services.

The state of India's health delivery system

Box 1

ibility for front-line workers responsible for delivering care,making integration difficult as seen in the case of HIV withFamily Welfare or providing treatment for malaria or TB topregnant women.

Another example of a narrow, programmatic approach isTB. While there is no doubt about the technical efficacy ofDOTS for curing TB, there is some concern about the techno-managerial approach to a disease that is embedded in thebiosocial determinants of poverty, poor housing, illiteracy,financial problems, migration, and low resilience to the initialside-effects of the drugs affecting the ability to work. UK andother countries that achieved successes in TB reduction andcontainment had no DOTS - indicating that addressing socialdeterminants such as housing could have manifold dividendsas witnessed in post industrial UK. The DOTS programme is ahighly sophisticated one and very well designed, ensuring theavailability of microscopes, trained manpower and drugs etc.but has little effort or budgetary resources for tackling the rootcause of the disease, for spreading awareness about the pro-gramme, for social mobilization to see that people in needget the treatment. Inattention to the social causes or com-munity involvement can result in dropouts or the very poornot being able to access or continue with the treatment, forexample migratory labour. Besides, a legitimate concernexpressed widely is the potential for increase in primary mul-tidrug resistant (MDR) TB, which is currently estimated to be2.8% in North Arcot near Chennai. This is largely on accountof the existence of multidrug regimens being administered bydoctors in the private sector and the tendency of shoppingthat patients resort to, on an average about 6-9 providers,before finally reaching the DOTS center. Such frequent switch-ing of doctors by the patients is not only draining their finan-cial base but also, with the irrational prescriptions given,could well be contributing to drug resistance. In Russia, it isreported that during 1997-99, MDR TB rose from 6% to 13%while among the chronic cases it was over 60%. Drug resist-ance happens due to inadequate treatment, use of sub-stan-dard drugs, use of inappropriate preparation and non-com-pliance by the patient due to various reasons. MDR TB is notonly far more expensive to treat but may also not be treat-able. Yet, India barely has a surveillance network to closelymonitor this aspect. The story of TB reiterates the need forsocial/community control on the process and the need foradopting a public health approach to the disease (Atre andMistry, FRCH 2005).

Weak Evidence Base for Interventions Neither the Ministry at the Centre nor at the State level has

adequate in-house capability to design research studies, col-late data and analyze research findings of the various healthinterventions to enable evidence-based policy-making. Sub-stantial resources are being spent on programmes and inter-ventions that have a poor evidence base. For example, thereis no evidence to indicate the current burden of malaria, ormaternal mortality. Similarly, hardly any studies are availableto assess the efficacy of the use of a drug or of a treatmentprotocol in different settings and conditions for formulating

differential strategies to suit the diverse conditions prevail-ing in India.

Such non-availability of good quality research for evidence-based policy formulation is one instance of the health deliv-ery system missing the woods for the trees. For example, theprincipal goal of the National Reproductive Health Programmeis to reduce maternal mortality. Over 100,000 women die everyyear due to pregnancy-related reasons that necessitate skilledattendance and some surgical interventions. The internationaldefinitions of skilled attendants disqualify either the tradi-tional birth attendants (TBAs) or the 18 months' trained ANMs.Surgical interventions on the other hand require a minimuminfrastructure such as access to blood, an operation theatre,access to personnel skilled in surgery and administration ofanaesthesia, etc. It follows then that, as in Malaysia and SriLanka, public policy should in all these years have focusedon making investments on development of infrastructure andbuilding-up a professional and skilled cadre of attendantsfor facilitating safe and institutional deliveries. The failure tolink intervention with evidence has resulted in poor outcomes(Table 6).

The clarity and consistency of their strategy helped Sri Lankasucceed in bringing down the MMR. The organizational strat-egy consisted of three concepts: (i) Village-level clinics con-ducted by a professional health team consisting of a medicaldoctor, a trained nurse, laboratory assistant, etc. to provideantenatal care (ANC) and examine other ailments, with the aux-iliary nurse attending to mandatory registration of all preg-nant women, other public health duties and promoting insti-tutional deliveries, etc; (ii) Investment in establishing well-equipped maternal and child health (MCH) clinics/hospitalsfor delivery; and (iii) a strong health management informationsystem (HMIS) and monitoring system including a regular med-ical audit of every maternal death for taking corrective action.

Compared to the above, India for several years promotedtraining of village-based TBAs, consistently lowered the qual-ity of training and competencies of the ANMs and neglectedsupervision and monitoring. Resorting to such low-cost solu-tions helped avoid committing resources required for the estab-lishment of the requisite infrastructure and human resourcedevelopment. Table 7 depicts the health care strategies fol-lowed and outcomes in Malaysia, Sri Lanka and India.

The example of MMR is useful as it is a good proxy for



Table 6

Maternal mortality per 100,000 live-births

Country 1950 1963 1980 1996

Sri Lanka 555 245 58 24

Malaysia 580 280 (1958) 78 (1976) 20 (1995)

China 1500 1000 (1960) 100 61

India 1321 (1957) 1195 580 440

SOURCES: Bhat M. India. In: Maternal mortality: An update. 2002. For other countries: World Bank, 2003



Table 7

Comparison of the healthcare strategies of Malayasia, Sri Lanka and India

Intervention Malaysia Sri Lanka India

1950-1957 1950: 534 1947: 1056 1947: 2000

� Establishment of systems to train and supervise midwives, 1957: 282 1950: 486 1957: 1321

regulate midwifery practices Recognized the importance of

� Introduce accountability for results, systems for monitoring maternal care; focused on

births and deaths socioeconomic development and

� Models for effective communication with women and communities access to nutrition and antenatal

� Better obstetric techniques for those who already had access care

� Introduction of modern medical advances into existing services-general

health improvement including control of malaria, introduction of antibiotics

1957-1970 1957: 282 1950: 486 1957: 1321

� Improved access for rural population-the critical elements of obstetric care 1970: 148 1963: 245 1970: 900

were made available to the bulk of the rural population through development Created the post of an ANM but

of a widespread rural network of trained skilled midwives as its backbone, merged Maternal and Child Health

along with hands on support from supervisory staff competent in basic (MCH) and Family Planning

obstetrics and a system for prompt access to facilities that could treat Programme; family planning gained

obstetric complications priority

1970 onwards 1976: 78 1973: 121 1970: 900

� Use of strategies to increase the utilization of existing services through better 1985: 37 1981: 58 1980: 810

management, a focus on quality and systemic responsiveness to public needs 1991: 18 1992: 27 1990: 519

and expectations 1995: 440

1998: 540(NFHS)

1983 NHP recognized high MMR and

IMR but reiterated the need to train TBAs

as the main strategy; In 1985, the

technology Mission for UIP was

launched. In 1990, the policy shifted to

comprehensive CSSM programme Child

Survival and Safe Motherhood with focus

on providing EmOC in 1720 FRUs.

However, only 600 were set up but not

one had the full complement of inputs.

Besides, the focus on FRU was misplaced

as evidence showed that 85% of

maternal complication could be handled

at CHC/PHC with training in obstetrics

and midwifery; and providing 6 days'

training in skill improvement for

expanding access to skilled attendance.

In 1997, RCH-I designed with about 30

interventions, adding RTI treatment, RCH

camps, contractual appointees, etc.

without consolidating initiatives of the

earlier project.

ABM: auxiliary nurse-midwife; NFHS: National Family Health Survey; NHP: National Health Policy; MMR: maternal mortality ratio; IMR: infant mortality rate; TBA: traditional birth attendant; UIP: Universal ImmunizationProgramme; CSSM: Child Survival and Safe Motherhood; EmOC: emergency obstetric care; FRU: first referral unit; CHC: community health centre; PHC: primary health centre; RCH: Reproductive and Child Health; RTI:respiratory tract infection.SOURCE: World Bank, 2003

demonstrating the effectiveness of the health system. A sim-ilar mismatch between goal and strategic intervention is evi-dent in the case of reducing the IMR. While 40% of deathstake place within one week of birth, and nearly 23% on accountof upper respiratory tract injections and diarrhoeal diseases,strategies required to address these causal factors have beenovershadowed by the immunization programmes, particularlythe one for polio. The single-point pursuit of polio eradica-tion has resulted in adversely affecting the routine immu-nization programme, which was initiated in 1986 as a Tech-nology Mission for achieving full protection against all vac-cine-preventable diseases by 2000. As per a household sur-vey conducted in 1998 and again in 2003 (Indian Instituteof Population Sciences 2004), the data for 220 districts showedthat in the majority of the districts, there was either a declin-ing performance or no improvement at all under the Univer-sal Immunization Programme (UIP). Second, the high per-centages of drop-outs for oral poliomyelitis virus (OPV3) indi-cated the wrong perception among mothers of the need toadhering to the immunization protocol (Table 8).

Discussions with field staff seemed to suggest that thisdecline was largely on account of the emphasis given to polio,which not only commanded better resources and visibility inthe media but also consumed nearly one-third of the time,30 times the cost and exhausted the staff

In 2003, the Government of India (GOI) had to dispatchhalf the departmental officers to oversee the Pulse Polio Ini-tiative (PPI) Round due to resistance from the local staff whichhad got tired of participating in one campaign after another-4 rounds of PPI with each round requiring one whole monthof preparation, two family health awareness programmescamps of the National AIDS Control Organisation (NACO),health melas of the GOI, leprosy household rounds for iden-tification of left-out cases, registration of patients with guineaworm infection, RCH camps, family planning targets, and soon. Such isolated programmatic approaches have made itimpossible to allow the health system to develop. Therefore,even as we get set to achieving zero polio prevalence inIndia, the question remains as to whether vertically drivenstrategies implemented in a campaign mode, which are alsoresource intensive and neglect equally important public health

functions, are worthwhile.

Inadequate Capacity to Plan and Implement at the Centre,State and District levels

Failure to develop a public health cadre and widening theeligibility criteria to include clinicians, without making pub-lic health training a mandatory requirement for working inposts that need public health skills, have adversely affectedthe implementation of public health programmes. Non-reser-vation of posts or the absence of a dedicated public healthcadre have also reduced the employability of persons trainedin public health resulting in an accumulated shortage of thecritical mass of epidemiologists, biostatisticians and otherpersonnel. With radiographers, orthopaedicians, surgeonsworking as additional chief medical officers in charge of theRCH programme or programmes for malaria or TB, or IAS offi-cers as project officers of HIV/AIDS, etc., the lack of techni-cal capacity in providing the required level and quality of lead-ership at the State/district-level has been a serious handicap.

Mavlankar (Mavlankar 1999), persuasively argues that onereason for the successful implementation of the maternalhealth strategies by Sri Lanka and Malaysia is the availabilityof technical capacity to design and monitor at all levels, fromthe village to the Central Government. While Sri Lanka withits small population of 180 lakh has a Family Health Bureau(basically dedicated to maternal care) and 3 technical offi-cers and consultants exclusively for maternal health (MH) atthe Central level, India with a billion population has one Direc-tor-level officer for MH in the Ministry of Health at the Cen-tre. Besides the gross inadequacy of the number, technicalposts in the Central Government are manned by personneldrawn from the Central Health Service with no fixed tenurenor any pre-qualifications. For example, a Director of MHshould have knowledge of public health, obstetrics and mid-wifery and related fields. While so, unlike Thailand, the per-sonnel of the Central Health Service have a distinct handicapof not only not having these technical qualifications but alsono experience of working in a PHC or a CHC, made worsewith no field training upon recruitment as is the case withIAS officers.

Lack of technical expertise and non-availability of the crit-ical mass or a minimal number at the Central and State lev-els are reasons for public health programmes lacking in focuseddesigning, development of national treatment protocols andstandards, the non-integration with other related sectors/pro-gramme such as TB with HIV, HIV with MH, MH with malaria,health with nutrition or water, etc.; or absense of technicalleadership in States and districts on the operationalizationof interventions based on technical norms; or assessing andbuilding up of technical skills and human resources requiredby the programme. Most importantly, this absence of ade-quate technical skills have also been responsible for the nearabsence of operational research for obtaining the evidencebase for designing better targeted programmes in keepingwith the wide social and geographical disparities that char-acterize India. Instead, at the Central and State levels, almost



Table 8

Comparison of performance under the routineUniversal Immunization Programme in 220districts between 1998 and 2003 (%)

Vaccine Positive decline Stagnant Improved

BCG 13.2 72.3 14.5

DTP3 40.4 53.8 5.8

OPV3 54.1 43.6 2.3

Measles 30.0 57.7 12.3

Full immunization 48.2 43.2 8.6

BCG: bacille Calmette-Guérin; DTP: diphtheria, tetanus, pertussis; OPV: oral poliomyelitis vaccineSOURCE: IIPS, GOI

40% of the time of these ill-equipped officers in charge ofcomplex programmes is spent in attending to administrativeduties.

The situation in the States is no better. A survey conductedin 6 States to assess the technical capacity of these States formaternal health (MH) programmes, (or for that matter malaria)showed that except one Deputy Director-level officer in Ker-ala, in none of the other 5-States of Tamil Nadu, Maharash-tra, Rajasthan, Gujarat and Chhattisgarh was there even oneofficer exclusively earmarked for monitoring the maternalhealth programme (Mavlankar 1999). The situation in the dis-tricts is worse. The void in the unavailability of such capac-ity for surveillance and monitoring at district levels has tem-porarily been addressed under the TB control and Polio Pulseprogrammes by taking persons on a contract basis-many fromthe government itself, thus further weakening the alreadyfragile technical capacity required for implementing the largenumber of government programmes. In addition is also thequestion of the State Governments ability to sustain theseprogramme-based consultants after withdrawal of externalsupport.

The collection and review of data is hardly given any impor-tance, leave alone analysing it for future planning. Monitor-ing is essentially confined to the bare minimum of NHP tar-gets and now, polio pulse immunization targets. In the absenceof any system of surveillance or epidemiological data gath-ering, planning interventions lack an evidence base and alsomake it impossible for the system to be responsive to felt needs.

A study conducted in Zenana Hospital in Udaipur, Rajasthanfound that during 1983-93 nothing had changed despitethe improved road network and awareness levels (Pendse 1993).Table 9 compares the cause of deaths over the decade. Thereport further observes the failure of the system to provideambulance services, which resulted in incurring expendi-tures on transport ranging between Rs 150 and 300, borrowedfrom moneylenders ‘leaving the people poorer both materi-ally and emotionally when despite their desperate efforts thewoman's life could not be saved'. The study also showedthat during this period while there was a drop in eclampsia,there was a 6-fold increase of deaths on account of malaria-induced anaemia and abortions induced by unqualified prac-

titioners. ‘Abortion and emergency obstetric services remainalmost unavailable to the vast majority of the rural women.'

Inconsistent procedures

Rules and procedures do not synchronize with objectivesof a programme or foster any accountability among the func-tionaries. For example, unsafe abortion is said to cause at least8% of all maternal deaths. Yet field surveys showed thatuntrained and unqualified providers in the informal sectorroutinely conduct illegal abortions. This flourishing clandes-tine business is because of government procedures that takeover 15 months for getting a centre certified the the con-flicting provisions such as the requirements for a person trainedin medical termination of pregnancy to be working at the cen-tre, but then having no facilities to train such private providers,etc. It is for such reasons that a large State like Rajasthan hasonly 338 certified private facilities with 78% of them in 9districts, 5 districts having no private facility and 6 having one(Iyengar 2002). With no effective intervention to ensure gov-ernment facilities having all the required skills, equipment anddrugs, the number of deaths due to unsafe abortions remainshigh.

Management failures

Management failure due to a combination of reasons suchas low budgets, untimely and irregular supplies, corrupt prac-tices and poor governance has adversely affected the func-tioning of the health system. The dispersed and disaggregatednature of responsibilities, and conflicting job profiles makeaccountability a difficult proposition. While the Secretary ofthe Department of Health has no control on when and howmuch money will be made available to implement programmes,the medical officer (MO) in the peripheral centre has no admin-istrative powers over the front-line workers and other func-tionaries working under him. With most supplies such asvaccines and drugs being provided by the Centre for the NHPs,the States have little control to ensure outcomes, as in sev-eral instances procurement delays by the Centre can take aslong as over one financial year, affecting the credibility ofthe system. All these factors have serious implications for thequality of management and efficiency. We now discuss themost frequently cited and widely accepted reasons for man-agement failure.

Performance-based monitoring

There is absence of accountability in the system. To this end,Andhra Pradesh introduced performance-based monitoringin 1998-99. Primary health facilities, where the maximumabsenteeism among doctors and health workers were observed,were graded into four categories, and based on programmetargets/achievement indicators, scores/grades were given. Thiswas then the basis for review at the highest level. It enabledidentification of the problems and corrective action to betaken.



Table 9

Comparison of causes of death in ZenanaHospital, Udaipur, 1983-93

Indicator 1983-84 (in %) 1994-95 (in %)

Number of deaths 7 12

Poor 55 68

SC/ST 45 77

ANC 28 50 only change was

increase in tetanus

toxoid (TT)

Ambulance 8 6

SC: scheduled caste; ST: scheduled tribe; ANC: antenatal care.Source: Dr. Pendse, HOD Gyneacology Department, Zenana Hospital, Udaipur

Under various programmes and in some States, such per-formance-based monitoring is done but is neither timely norsystematic, except under the donor-funded programmes ofblindness, TB Control Programmes and the Pulse Polio Ini-tiative. It is however pertinent to note that an estimated1500 consultants were appointed by WHO at the field levelto monitor the TB and polio control programmes. In addition,common to these three programmes is the extensive com-puterization of monitoring and review systems that providedaccess to information at the district level. Such systems needto be adopted by other programmes and also for other aspectsof implementation.

Absenteeism from place of work

A majority of doctors opt for specialization and/or urbanpractice. The reluctance to serve in rural areas has become amajor impediment in the government's ability to provide healthservices to the rural population. Not surprisingly, absenteeismamong doctors and front-line workers from their place of workis high. A study conducted by the World Bank (2004) and otherstudies (Mohan et al. 2003; Rao 2003) show absenteeism rang-ing from 40%-45% among doctors working in primary healthcentres. The World Bank Study based on a simple regressionanalysis showed the relationship between income and absen-teeism, which suggested that higher income States have lowerrate of absenteeism with point value at 0.001, meaning thatevery increase of Rs 1000 State per capita income is associ-ated with a reduction in absence of 1% point, with p valueson the co-efficient on income at 0.13. However, this is a crudeanalysis as, at another level, absenteeism is high in these richStates where doctors are also engaged in private practice. Pun-jab has the lowest utilization of public facilities only becauseof large-scale absenteeism of doctors.

Quality of service delivery - An imbalanced mix of inputs

Vehicles without POL budgets, beds without washingallowances, X-ray machines lying idle for the want of con-sumables or maintenance budgets, empty shelves in phar-macy counters, etc. also contribute to management failure.In addition, quality is also perceived to be low due to the often

unfriendly, rude, corrupt behaviour of the personnel work-ing in these facilities, distance, inconvenient timings andlack of reliability in the availability or the skill of the provider,etc. reflecting management failure. The subcentres are neveropen as the single ANM is required to undertake village vis-its, attend to fixed day immunization schedules, domiciliarydeliveries, disseminate health information, oversee the workof the TBA, coordinate with the anganwadi worker (AWW),conduct household survey, attend review meetings in PHCsmaintain records, etc. With better rearrangement of these fac-tors utilisation can be drastically improved.

Lack of policies for human resource development

The recruitment policy is a contributory factor for the lackof motivation among doctors to provide services in rural areas.Quite often, postgraduate students are recruited by the gov-ernments and placed at PHCs where the skills acquired bythem during postgraduation are of little relevance. This ismade worse by the lack of equipment, drugs and adequatecaseload. Similarly, there is almost always a mismatch of skills-a gynaecologist is posted at a CHC where there is no anaes-thetist resulting in the underutilization of skills. Likewise,transfers are often arbitrary and without adherence to anynorms, resulting in the low morale of doctors. Even the Statesthat do have a transfer policy rarely adhere to it. Recently,there was an instance in a State where at a CHC all the 7 doc-tors were transferred out in one go, leaving behind a haplesslot of patients. Often, the skills needed or acquired in a train-ing programme are not taken into consideration. Therefore,under the NHP, money may be spent in training a doctor inanaesthesia, intraocular lens (IOL) implantation surgery, or amanual vacuum aspiration (MVA), but fail to impact on theprogramme as, more often than not, on return from training,he or she is posted to a place where the acquired skills are notrequired or the required equipment is not available. The absenceof transparent transfer policies, norms for deployment ofpersonnel, and reward for merit, are some of the factors con-tributing to the deviant behaviour among providers.

Limited promotional avenues

In many States (such as Orissa, Bihar, Uttar Pradesh, Rajasthan)an MO often gets the first promotion after 15-20 years ofservice. There are many doctors who continue to remainMOs without promotion while their counterparts in civil serv-ices might have been promoted from the post of an SDM toSpecial Secretary or even Secretary and from Accounts Offi-cer to Financial Advisor. Career stagnation affects morale. InMadhya Pradesh, the Departmental Promotion Committee(DPC) meeting has not been conducted in the past 20 years.In Chhattisgarh, all chief medical officers have been postedon an ad hoc basis.

Poor payment systems and dual practice

To compensate for the relatively low salaries, doctors are



� Doctors do not stay at PHCs and absenteeism among PHC staff is

high.

� Training during MBBS is not geared to impart skills for providing

service in rural areas.

� Doctors need to be provided financial and non-financial incentives

for staying in rural areas.

� There is a need for increasing paramedicalization of primary health

care services.

Management issues in the rural health Care

Box 3

permitted private practice outside office hours or are given anon-practising allowance, often 25% of the basic pay. Lackof monitoring, effective supervision and, at times, collusiverelationships are causes for the abuse of this facility affect-ing patient care in public facilities. Due to financial constraints,most States have now stopped recruiting MOs in the regularpay scales and instead are now offering contractual servicesfor as small a remuneration as Rs 8000 per month, a strategywhich has a high turnover with doctors joining services onlyfor getting rural service experience for admission to Post-graduate Entrance Examination, or as a makeshift service forpreparing for the PG entrance exams, or joining service andjust lingering on to it in the hope that some day their serv-ices might get regularized. Time has come to review sucharrangements keeping a long-term perspective in view. Doc-tors, particularly, specialists need to be paid better and thereis a need to sanction posts of specialists and public healthmanagers in hospitals at district and State levels. Low costsolutions or decisions based on present day contingenciescannot sustain the system which will develop fissures, andcost more to repair.

Poor Facilities at work

The most demotivating factor is the lack of appropriate facil-ities and required inputs to enable a qualified doctor to dohis best for his patient and derive job satisfaction. In addi-tion, lack of decent housing facilities and educational facil-ities for their children are further contributory factors to thereluctance to work in rural and underserved areas. The work-ing conditions of nurses / midwives is worse, ranging fromthe lack of basic amenities such as toilets to physical safety.Inadequate and unreliable supply of inputs, absence of super-vision and technical guidance, limited opportunities for careeradvancement, absence of accommodation with over 60% ofthe subcentres functioning in rented places hired for aboutRs 100-300 per month, and often doubling up as a part ofher residential accommodation are other factors that con-tribute to sub-optimal outcomes. Initially, subcentres wereenvisaged to consist of a multipurpose worker (male) (MPW-M) and one multipurpose worker (female) (MPW-F). However,60% of the posts of MPW-M are lying vacant, thereby increas-ing the workload of the ANM and affecting the ANM's qual-ity of services. In the community setting, female health func-tionaries face many problems with regard to transportation,accommodation, gender-based harassment and lack of secu-rity, in addition to lack of incentives, stagnation of careerdue to inadequate development opportunities and inade-quate provision for living with the family and education oftheir children.

Corruption

This then brings us to the key issue of corruption. As perTransparency International India, health has the maximumpublic interaction and is the second most corrupt sector. TheKarnataka Lok Ayukta has estimated that at least 25% of the

budget is siphoned off through corrupt practices. An analy-sis of the Lok Ayukta shows that all categories of govern-ment health functionaries-ayahs and ward boys to nurse, doc-tors and specialists-are involved. Corruption is in many areasranging from indulging in unauthorized private practice toissuing medical certificates, transfers, postings, recruitment,in ‘tolerating' absenteeism, etc. The most sensitive areas arein the procurement of drugs and licensing of blood banks,where unlicensed manufacturers have been recipients of ordersand action on spurious drug suppliers tardy.

The pervasive spread of corruption is not limited to the pub-lic sector. The private sector is also working under low thresh-olds of integrity. Patients are exploited by being made toundergo unnecessary tests only for making money. Providersin private practice are seen to own pharmacies and diagnos-tic centres. They get ‘cuts' and commissions for referrals andsuch fee splitting is the mainstay of many doctors' monthlyearnings. There are adequate studies that have shown the dis-proportionately large number of caesarean sections-66% ofall deliveries in private hospitals in Kerala (Kutty 1995). Therate of hysterectomies being performed among young womenis one example of the absence of ethical standards that needto be effectively countered by fostering transparency, widen-ing participation, strictly enforcing inspections and, aboveall providing leadership, in technical, administrative and polit-ical organizations in reiterating and reasserting value systems.

Enforcing good management and governance is thenabsolutely essential since the implication of bad practices inthe health sector hurts persons who are poor and suffer thedouble tragedy of being sick. No market can function or sus-tain itself unless there is a minimal level of integrity, fair playand rule of law. Therefore, if insurance and contracting the



The ANM still continues to be the only worker for delivery of primary

health care in rural areas in the public sector. She is presently working

in isolation without a team and with no support or supervision from

either the lady health visitor (LHV) or the Medical Officer. She is

overloaded with too many functions and activities to be delivered at

too many places to too many groups of clienteles. She is required to

deliver health services, travel, educate communities, counsel clients

and mobilize communities. She has to fill in several registers and submit

several reports.The mean number of years of gap between her

obtaining qualification and joining service is 4.2 years. Few subcentres

operate from government-owned buildings which are poorly

maintained and many are in rented buildings. The subcentre is a small

area and cannot accommodate an examination or labour table, and

the supplies are inadequate, irregular and erratic. About 40%-62%

ANMs do not live at headquarters, the most common reason for their

non-availability being security concerns. In about half the cases, the

subcentre, are located far from the village.

Source: Rangarao, 2003, Mohan et al. 2003

The ANM – first interface with the community

Box 4

private sector are to be the new ways of expanding accessand financing health, then it is essential that values of pro-bity, nurturing of informed consumers and wider participa-tion through good governance be ensured. Consumer forums,patient management committees, village health commit-tees, patients /citizens' charter, Transparency Act, right toinformation, imparting of value systems and training in man-agement practices, e-governance, redressal systems, etc. aresome of the instruments that need to be employed by the gov-ernment for counter-checking malpractice.

Lack of Discipline and Work Ethic

In India, government employees often explain the omis-sions or commissions on ‘lack of political will'. It is however,a fact that more often than not, there is large-scale abdica-tion of responsibility at the field levels, say for example whena head of the department or a CMO does not undertake fieldvisits, conduct review meetings, monitor the implementa-tion of various activities, attend office on time and checkattendance registers, listen to grievances, fill vacancies, pro-mote people, punish the wrong, reward the good, then thereis abdication of duty. When the CMO ‘allows' doctors andother functionaries to absent themselves from duty, then itis collusion. No amount of funding or administrative reformscan help till there is an overall institutional discipline enforcedat all levels and pride for good work instilled. Creating suchan environment again carries the implication of having sys-tems and tools that facilitate its emergence.

Use of IT for Better Decision-Making

Effective leadership rests on access to organized informa-tion which is increasingly becoming possible due to e-gov-ernance. Information about health inputs and outcomes,achievement of targets and goals are necessary for formu-lating policies and monitoring activities, be they related totechnology, human resources or infrastructure. Since qualitymonitoring based on performance indicators on a concurrentbasis is fundamental to curbing errant behaviour, the needfor the use of IT cannot be overstated. IT should be used forrecord maintenance, monitoring supply and inventory con-trol, tracking events and disseminating information to con-sumers. This would place a great amount of power in the handsof the government to guide, monitor and correct. Such dataanalysis also reduces subjectivism in transfer policies andpersonnel development, and ensures transparency in all trans-actions, the only check to abuse of discretionary power. Besides,even for patient care through the use of telemedicine, or estab-lishing call centres for giving instant advice on coping witha small emergency or advising which hospital to check intoetc. technology has the solution. Such a system develop-ment will become even more important with the govern-ment shifting its role as a financier of services rather than aprovider; as a regulator of providers; and as the final protec-tor of patient and consumer rights to medical practices thatare safe and appropriate.

Urgent need for infusion of new skills

What emerges from the recounting of the several areas ofmanagement failure particularly at the point of service is theneed to institute a class I All India cadre of Public Health Man-agers-directly recruited and trained in public health and postedat district levels, like the IAS officers. Over a period of timethese young recruits will become the backbone for providingleadership in the public health area. Such persons need notnecessarily be doctors-they could be from a wide variety ofrelated disciplines such as a PG in microbiology etc but pos-sess a Masters in Public Health. In such a system, those keento specialize can gradually be veered to work in the hospitalsand be provided career opportunities to work in teaching hos-pitals and super specialize etc. Such options for human resourcemanagement will be critical for steering the country fromout of the veritable mess we are in presently.

Dysfunctional structure-the role of the State

Though health is a State subject, the Central Governmenthas certain powers and responsibilities related to the controlof infectious diseases, family planning, education, drugs andresearch. Therefore, the departments dealing with healthand family welfare, at the Central and State levels are largein terms of the human resources employed and the widespan of work covered. At both levels, there are several direc-torates headed by doctors and technical units dealing withthe myriad issues in the health sector. For discharging theirmultiple functions of provider, regulator, facilitator, educa-tor and promoter, the departments employ a large numberof technical people-doctors, nurses, paramedical staff, etc.for running hospitals, dispensaries, health centres, medicalcolleges, nursing schools, and public health laboratories, forinspecting the quality of food and pharmaceutical products,for providing information on public health issues, productionof vaccines, etc.

Structurally, the administrative units do not take into theirpurview the functioning of the private sector, which is seenas an independent, autonomous entity. This disassociation isin part due to the fact that various ministries administermatters that directly effect health outcomes and have nomechanism to ensure coordination among them. For exam-ple, in the Central Government, the pharmaceutical industryis under the Ministry of Chemicals, policies related to importor export of drugs and technology are the responsibility ofthe Ministry of Commerce, drug regulation is under the Min-istry of Health, programmes related to nutrition are part ofthe Department of Women & Child Welfare, while water andsanitation is looked after by the Ministry of Rural Develop-ment, research in medical diagnostics or vaccines by the Depart-ment of Biotechnology, health insurance by the Ministry ofFinance, etc. Such intense fragmentation across departmentsand States is the single most important factor that confinesthe Ministry of Health to narrowly focus on the implemen-tation of budgeted programmes and activities.

The second structural mismatch is the fragmentation of



the Ministry itself: into the Departments of Health, FamilyWelfare and AYUSH. Such fragmentation that took place inthe 1990s had negative downstream effects down to the imple-mentation level, making interprogramme integration prob-lematic, diluting the technical capacity to think holisticallyand duplicating resource use. For example, the Reproductiveand Child Health (RCH) programme rarely addresses HIV/AIDS,malaria or tuberculosis (TB). Likewise, the programme formalaria control has no indicator focusing on pregnant women;or nutritional deficiencies in the child health programmes.

In addition to the inadequate technical oversight, the depart-ments also function more like ‘casualty wards' where man-aging themselves rather than the system has taken centre stage(India Health Report 2003). The Department of Health, forexample, spends over three-quarters of the time addressingVIP claims under the Central Government Health Scheme(CGHS); sanctioning medical colleges; procuring medical drugsand supplies, and transfering doctors and court cases. Lastly,the problem of governance, whether at the Centre or States,has also been compounded with the frequent transfers of min-isters and officers. During 1998-2003, there were five minis-ters in the Central Government and as many Secretaries.

Restructuring of the AdministrativeDepartments

The issues raised above have been felt for a long time. TheMinistry of Health itself commissioned studies to restructureits organization to suit the emerging challenges. The threereports: Administrative College of India (1986); the Bajaj Com-mittee (1996) and the Center for Policy Research (2000) madesome important recommendations which are waiting to beimplemented: � Constitute Hospital Committees and delegate administra-

tion to them; �Outsource and decentralize promotional and publicity func-

tions; � Convert the CGHS to an autonomous board;� Constitute an Advisory Body to advise the ministry on pol-

icy issues; �Decentralize planning and programme formulation to States,

confining the Centre to monitoring adherence to nationalpolicy goals and providing technical support;

� Outsource procurement to an independent body;� Establish a Federal Drug Authority and a Commission for

medical education;� Transfer all Delhi-based hospitals to the Delhi Government

and make the Central hospitals autonomous;� Merge all the three departments;� Create a Indian Medical Service such as the Indian Admin-

istrative Service (IAS);� Establish an institutional mechanism for interdepartmen-

tal coordination; � Establish a manpower planning cell in the ministry.

Implementation of the above recommendations would ‘free'the Ministry of Health at the Central and State levels to address

the more important issues of governing the health system asa whole. In other words, the Ministry of Health is not onlyexpected to be concerned with the implementation of its pro-grammes but the functioning of the health system compris-ing both the public and private sector, by diligent oversightsafeguarding the interests of the public in general and patientsin particular. Such a change in understanding of the func-tional responsibilities would not only require space in termsof time but also capabilities and skills to address such a role.

Organizational structures reflect the objectives and aimsof a policy. For example, since RCH objectives emerged as aconsequence of the failure of a family planning strategy, itwas added on to the Family Planning Programme and renamedas Family Welfare (FW), explaining the anomalous positionof the DGHS who does not have any role in the technicalaspects of the RCH programme. In the districts, such disas-sociation of FW from the technical head, namely the Direc-tor of Health Services, has had a negative impact on thetechnical quality of the program. In States where the HealthDepartment is divided into Health and FW, implementationof the FW programmes has been problematic due to non-alignment between authority and responsibility. Due to thesefactors, recently, the two departments have been merged atthe Centre. While this is a positive step, there is still need torestructure the set-up on a functional basis all through thechain.

Part IIICase for systemic reforms: RestructuringInstitutional Frameworks

The process for systemic reform will need to start from theCentral Ministry of Health, looking at the big picture- set-ting standards and laying down rules and regulations to befollowed by all stakeholders; mobilizing resources; providingleadership based on its knowledge and technical superiority;and facilitating and steering the health system to ensurethat the goals of equity, efficiency and quality are met.

Such a role would require the Central Ministry to restruc-ture its work allocation based on functional homogeneity.The Ministry should also shift from micromanagement bydivesting and delegating powers and authority to functionalunits. There is also an urgent need to establish new institu-tions, such as an autonomous institute for health informa-tion and disease surveillance, a food and drugs authority; asocial health insurance corporation to take care of govern-ment employees and the labour in the organized sector bymerging the CGHS and the Employees State Insurance Scheme(ESIS); enable the Indian Council of Medical Research (ICMR)to have more autonomy (such as the National Institutes ofHealth, USA) by generating its own resources; and outsourc-ing all procurement work to professional bodies. The man-power and time that would be available with the removal ofthis historical burden of functions would enable the Ministryto discharge its stewardship functions which require layingdown standards on health infrastructure and quality, classi-fication of diseases, costs and norms for monitoring utiliza-



tion levels, carrying out research to evaluate the cost-effec-tiveness of the various interventions being implemented, train-ing, etc.

The functions listed under the stewardship role are notsimple, and entail mobilizing multidisciplinary groups andcollecting and collating evidence for revising existing policyor formulating a new one. Standard setting is a tedious processand has cost implications. For example, setting a standard toinclude five ultrasound tests for an antenatal protocol wouldhave substantial financial implications, besides driving invest-ment to expand availability of this technology, though thereis no evidence to establish its efficacy in assuring better out-comes of pregnancy. Likewise, it is through research that long-term consequences of policies need to be studied before tak-ing decisions. For example, India's hasty decision to relax vigilin the 1970s and disbanding the malaria programme resultedin its resurgence in a form more serious and also more expen-sive. Such decisions therefore need inputs from public healthspecialists as well as economists to state which interventionswork and which do not, and what policies should be adoptedand why. If public policies fall short it is because such expert-ise is sadly lacking and in short supply in the country. Thus,good governance is not only dependent on political com-mitment but also having the appropriate tools, instrumentsand information. Bad policies need not only be the result ofcareless oversight or narrow sectional interests, but also dueto lack of evidence and information.

In addition to the above, the administrative departmentsof health, including those at State levels, need to achievegreater efficiency in reference to some aspects described below.

Regulation in the health sector: accreditation of facilities

The role of the government in the health sector is to lookafter patients' welfare. Canada and the US have some scoresof regulations on or related to health. Drawing up legislationin a sector like health is complex and requires an understandingof the incentives or disincentives such a legislation may haveon human behaviour and a balanced approach. For example,if the legislation is too inflexible and specific, putting all riskson the provider, then it may result in mindless litigation,increasing defensive medicine and higher costs for the patient,endanger the patient-doctor relationship which should bebased on trust and entail harassment and outright corrup-tion at the hands of the bureaucracy. If, on the other hand,it is too considerate to provider concerns, the patient mayend up getting shortchanged. Besides, it is the enforcementof the laws that is more important. In other countries, inspec-tors and assessors sent to evaluate provider facilities for accred-itation or licensing are trained, so that at all times the focusis on achieving the objective of increasing awareness andcreating a sense of accountability among providers regard-ing the quality of patient care, and not the blind and mind-less application of a standard or a rule. Thus, supervisionrequires to be supportive, not prescriptive or fault-finding,as the objective is not to drive away the providers but to per-

suade and convince them of the need to adhere to quality andpatient safety. This calls for a different mindset to be culti-vated through intensive training programmes and perform-ance monitoring systems. Supportive supervision is a new skillthat needs to be nurtured in the government sector.

The key challenge to governance is the enforcement ofregulations related to the ‘quack' or the unqualified practi-tioner in the villages. In a setting where the public healthsystem does not function and the private sector is too expen-sive, it is this quack who enjoys social consent. Rationalarguments of quality or harmful practices, lack of qualifica-tion, etc. do not matter as, for the people, the quack is ableto provide instant relief to a need at affordable cost. How thendoes the Government achieve its norms for quality and stan-dards of patient care while allowing this clearly illegal andperhaps harmful practice to continue? Good governance wouldrequire a political will to resolutely enforce discipline and makethe public health system work, besides educating the peopleon the rational use of medical practices or drug use.

Devolution of authority-The district societies: A mechanism for betterutilization of funds

A major problem being faced by the Department of Healthwas the untimely release of funds. Routinely, Central assis-tance meant for specific programmes would be diverted bythe State finance departments for tiding over their ways andmeans position, resulting in delayed release of funds, stallingthe implementation of health programme activities. There-fore, under the National Programme for the Control of Blind-ness, district societies for blindness control programmeswere first constituted during the early 1990s. Under thisarrangement funds were directly released to the district soci-eties. This mechanism was subsequently used by all pro-grammes resulting in the constitution of over 4-5 societies,one each for TB, Blindness, Malaria, RCH, and Leprosy. Theexperience has been a positive one as it has enabled betterabsorption of funds and quicker implementation. The expe-rience of district societies is now being used to integrate theminto District Health Societies so as to facilitate district-levelhealth planning and monitoring activities to achieve healthgoals.

A review conducted on the functioning of these differentsocieties in the Pune district of Maharashtra brought forthsome interesting suggestions from programme officers: � Develop capacity for better management through train-

ing; � Establish more rigorous monitoring and programme review

systems to improve outcomes and ensure cost-effective uti-lization of funds;

� Standardize reporting and auditing formats; and � Sensitize officers on programme goals and objectives, and

increase the involvement of civil society to reduce the temp-tation to misuse or misallocate funds.Based on the above, training in data analysis and planning

processes, developing indicators for performance review and



monitoring for corrective action will need to be accordedpriority focus. The societies also need better expertise, per-sons trained in health economics, financial planning, statis-tics and data analysis, epidemiology etc. In the absence ofsuch expertise and evidence-based planning, the tendency isto merely repeat what was being done earlier, nullifying thebenefits of a bottom-up planning concept.

Resources are not only financial. It is the government'sresponsibility to monitor the availability of human resourcesas well. What skills are needed, what are being produced, whereand by whom are they being utilized, where are they con-centrated, etc. are the sort of issues that should attract pri-ority attention, as 5-8 years are needed before the requiredhuman resources are available. Past neglect of human resourcesis the cause for today's imbalanced skills mix, acute shortageof trained nurses. This function will gain even greater impor-tance in future years as with the General Agreement on Tradein Services (GATS), more professionals from India will be ableto find employment abroad. The government needs to estab-lish mechanisms to know the migration flows of skill and iden-tify areas of shortage so that corrective action can be takenin advance.

Local bodies

In the health sector in India, decentralization has to beviewed, not only in the context of devolving authority andpower to States by the Centre, to districts and States but tothe multilayered local bodies as well. Such devolution ofauthority has taken place only in Kerala. Kerala has investedboth time and resources in systematically focusing on build-ing capacity for governance among elected leaders. Leader-ship and governance means having the ability to plan, budget,implement, manage, monitor, review and accept responsibil-ity for the decisions taken. The strategy of the ‘big bang'approach adopted in Kerala where, in one sweep, functions,powers and responsibilities were transferred rather than theusual cautious approach, of training and building capacitybefore delegating responsibility, has proved to be successfulwhen compared to the experience of other States where devo-lution has been incremental, halting and sporadic.

Devolution of powers has, however, not been easy. TheKerala experience shows that despite the transfer of some pro-portion of the budgets and bringing all-district level institu-tions under the control of the local bodies, the benefits interms of health indicators have not really been visible (Vijayanan-dan 2003). This is largely because of the lack of technical guid-ance at the panchayat level, lack of standardization of facil-ities laying down clearly the functions, duties, responsibili-ties and outcomes of health personnel working in facilitieslocated at different levels, lack of clarity and clear delin-eation of what services ought to be available where, makingit difficult for the local bodies to understand what exactlyshould be their priorities and areas of focus. Lack of integra-tion between different systems of medicine, ego problemsbetween the highly educated doctor, senior in rank, to func-tionaries of the local government, dual control, multiplicity

of bodies handling health budgets such as the chief medicalofficer (CMO), hospital superintendent, zila parishad, districtsocieties for each national programme, hospital developmentcommittees, etc. are other reasons that were found to havecomplicated matters. Kerala is therefore now working towardsevolving minimum standards of care and conduct, a citizens'charter and community-based monitoring of health pro-grammes.

Decentralization to local bodies has been under consider-ation for several years but was never implemented in true spiritdue to various reasons. The attitude towards the involve-ment of local bodies has nearly always been to sensitize therepresentatives and use them in an advisory capacity or forexecution of government works under the Rural DevelopmentProgramme. In the health sector, utilization of the local bod-ies as agents of change or in social mobilization has been min-imal and perfunctory. Experience shows that unless the localbodies are provided funds, specific responsibilities and pow-ers, the benefits of decentralized systems cannot be fully real-ized.

In this context, it would be useful to keep in mind theinternational experience in fiscal decentralization as they pro-vide a few lessons to be learnt based on certain principles(Sethi 2004). For fiscal decentralization, all aspects and com-ponents need to be addressed such as:� Assignment of expenditure responsibility to local govern-

ments to be followed by revenue responsibilities;� Availability of a strong state ability to monitor and evalu-

ate the intergovernmental fiscal system;� Devolution of powers and responsibilities in keeping with

capabilities;� Linking of revenue-raising and expenditure decisions;�The intergovernmental system should be designed to match

a set of clearly specified objectives, kept simple and flexi-ble, while at the same time be subject to the discipline ofbudget constraints.Applying these principles will mean having a clear-cut delin-

eation of duties and functions to be carried out by the localbodies at different levels vis-à-vis the government depart-mental hierarchies; the financial implications of those func-tions and systems for utilization and reporting; and finallythe kind of authority, powers, or control they have on thefunctionaries responsible for discharging those duties. Suchdelineation needs to be based on clear government orders orlegislation as the case may be and backed by intensive train-ing and guidelines provided in simple, easy-to-understandformats. Without such a systems approach merely ‘orienting'locally elected representatives to be ‘involved' in healthactivities is as valuable as the paper on which it is written.

Given the vastness and diversity, India will find it difficultto reverse the trend on communicable diseases such as malariaand TB unless the local bodies and the wider community arealso fully involved. However, such involvement needs to beformalized. For example, the local bodies should be maderesponsible and accountable for certain health actions, forexample, registering births and deaths, carrying out all anti-malarial activities such as plugging the breeding grounds of



mosquitoes, etc. In fact, later when social health insurancepicks up, it will be necessary to have such a capability avail-able at the local level for making the health insurance schemefunction at minimal cost. Wider participation of the com-munities through village health committees working in coor-dination with management committees at higher-level facil-ities is the only way the health system can be made moreaccountable to the people they are meant to serve. More inclu-sive approaches and greater democratization is essential ifhealth gains are to be achieved.

The initiatives would remain platitudes unless there isclose monitoring by the State and provisioning of technicaladvice. This would require having a team at primary healthcentres (PHCs) and community health centres (CHCs) towork exclusively on the development of the community-basedstrategies-the village health workers, village health teams,local bodies, etc. In the absence of such administrative restruc-turing to guide, facilitate and supervise the development ofthe demand side of the health system, decentralization maynot really go beyond tokenism.

Conclusion

Technological advances, investment and good policies can beturned to naught in the presence of a system lacking in lead-ership, direction and a core sense of integrity pervading alllevels of health care. Unless all stakeholders are motivated bya set of values-of compassion and human concern for the sickand ill, of not accepting a system which allows people to bedenied care only because of circumstances beyond their con-trol, of a minimal sense of equality and dignity among all-the health system will continue to reflect the cement and mor-tar issues of the expanding medical and drug industry, whichcan, in the absence of the guiding hand of the state, degradehuman suffering into an opportunity for making profits. Itthen becomes critical to define the role of the State as thecurrent utilitarian liberal approach of the health sector offersno acceptable solution. The issue is broader and needs to beexamined within the context of the principles that underliethe concept of social contract of Rousseau or sense of justiceof Rawls. If these principles enshrined in our Constitution areadhered to, then the State will need to intervene both intel-ligently and firmly.



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References



Annexure I

Utilisation and Expenditure Pattern of Health Services in India

% utilisation of PHC/CHC % utilisation of % Untreated Ailments Average total Average total for OP care private facilities for OP (out of total number expenditure for treatment expenditure per

(out of total OP) (out of total OP) of ailments) per ailment hospitalised case (out-patient) (in Rs.)* (in Rs.)*

1 2 3 4 5

Rural Urban Rural Urban Rural Urban

India 6.4 82.0 17.3 9.3 144 175 3202 3921

Andhra Pr. 5.7 85.2 25.5 15 116 143 6428 4886

Assam 27.13(for north-east) 58.1 (for north-east) 44 36.4 83 110 1945 3790

Bihar 2.0 92.1 21.9 15.5 220 176 3860 3724

Gujarat 9.9 77.4 8 3.5 144 211 2663 3327

Haryana 5.1 85.7 3 1.6 183 402 3224 6537

Karnataka 11.0 77.9 22.3 8.6 91 155 2997 3593

Kerala 5.4 69.0 11.7 10.8 119 108 2293 1927

Madhya Pradesh 8.9 75.1 16.3 6.7 129 351 2191 2774

Maharashtra 6.4 87.0 11.4 7.6 144 170 3089 3997

Orissa 18.4 58.4 32.3 13.4 99 117 1641 3868

Punjab 1.8 92.2 1 3.5 173 155 6171 5712

Rajasthan 10.2 58.2 10.2 10.4 172 176 3971 3149

Tamil Nadu 7.2 70.0 22.4 8 79 117 4333 3934

Uttar Pr. 1.5 94.0 9.4 6.5 202 212 4521 5896

West Bengal 4.3 86.3 19.9 10.1 105 124 4303 3217

Note: 1 - Total OP for a reference period of 15 days: 375.3 lakh, 2 - Total OP for a reference period of 15 days: 375.3 lakh, 3 - Total number of ailments (rural): 408 lakh; Total number of ailments (urban): 154.5 lakh4 and 5 - Total expenditure for outpatients is for the reference period of 15 days and for hospitalisation is for a reference period of 365 days. Total expenditure includes medical expenditure and all expenses other thanmedical expense incurred by the household for availing the treatment. SOURCE: NSSO, 52nd Round; Mahal et al. 2002



Annexure II

Status of health infrastructure and outcome

Rural Number of Number of Percentage Percentage Safe Full % of Full Institut- IMR U5population PHCs/CHCs ANM/nurse- of CHCs of CHCs delivery immun- children ANC ional (2002) MR

(2001) per midwives with inadequately ization under 3 deliveries100,000 per obstetrics/ equipped in coverage years of

population 100,000 gynae- infrastr- (%) age severely population cology ucture malnourished

(below 3SD)

Well performing States

Kerala 23,574,449 4.4 31.0 100.0 21 96.5 91 4.7 64.3 96.4 10 18.8

Tamil Nadu 34,921,681 4.3 30.7 100.0 61 80.0 92 10.6 20.0 76.0 44 63.3

Andhra Pradesh 55,401,067 2.9 21.5 94.7 38 67.9 72 10.3 35.2 56.0 62 85.5

Maharashtra 55,777,647 4.2 23.5 - 3 60.8 85 17.6 23.8 53.0 45 58.1

Karnataka 34,889,033 5.5 32.2 71.9 19 62.0 81 16.5 29.5 52.9 55 69.8

Moderate performing States

Gujarat 31,740,767 3.9 26.2 63.2 18 59.1 68 16.2 22.1 51.1 60 85.1

West Bengal 57,748,946 2.4 19.5 - 20 42.3 78 16.3 11.7 40.2 49 67.6

Punjab 16,096,488 3.7 28.9 33.3 43 61.3 74 8.8 13.6 37.7 51 72.1

Haryana 15,029,260 3.1 14.6 61.1 20 44.1 56 10.1 9.9 28.5 62 76.8

Poor performing States

Rajasthan 43,292,813 4.5 48.5 62.0 25 37.7 20 20.8 3.6 26.3 78 114.9

Orissa 31,287,422 4.8 23.4 - 79 36.9 56 20.7 11.3 25.9 87 104.4

Madhya Pradesh 44,380,878 4.6 25.7 26.4 74 32.1 77 24.3 5.6 20.5 85 137.6

Uttar Pradesh 131,658,339 3.1 17.8 41.1 21 25.8 27 21.9 3.9 17.9 80 122.5

Assam 23,216,288 3.1 26.5 80.0 75 20.5 57 13.3 13.8 70 89.5

Bihar 74,316,709 3.2 10.1 52.9 - 17.5 13 25.5 4.5 13.3 61 105.1

India Census, Rural Rural Facility Facility MICS, CES-02, NFHS RCH MICS SRS, NFHS

2001 Health Health Survey, Survey, 2000 UNICEF -2 -2 -2000 2004 -2

Statistics, Statistics, 2004 1999

2002 2002

PHC: primary health care; CHC: community health care; ANM: auxiliary nurse-midwife; ANC: antenatal care; U5MR: under-five mortality rate; NFHS: National Family Health Survey; RCH: Reproductive and Child Health;SRS: Sample Registration Survey



Annexure III

Current Status of the Goals Laid Down in The National Health Policy of 1983

1. Indicators Status in 1983 Goals set for 2000 by NHP 1983 Current status

MMR 4-5 (1976) Below 2 4.1 (1998, SRS)

IMR 125 (1978) Below 60 63 (MoHFW, 2002)

Leprosy 20 (% of disease arrested 80(% of disease arrested cases out of those detected) cases out of those detected)

Tuberculosis (% of disease arrested 50 90 86cases out of those detected)

Blindness (%) 1.4 0.3 1.03(M0HFW, 2003)

Immunisation status

TT (pregnant women) 20 100 60.3 (MICS-2000)

TT (school children) 20 100

DPT (children below 3 years) 25 85 46.6 (MICS-2000)

Polio (infants) 5 85 58.9 (MICS-2000)

BCG (infants) 65 85 67.7 (MICS-2000)

DT (new school entrants 5-6 years) 20 85

Typhoid (new school entrants 5-6 years) 2 85

Pregnant mothers receiving ante-natal care (%) 40-50 100 62% (MICS-2000)

Deliveries by trained birth attendants (%) 30-35 100 42.5% ( Deliveries by Skilled birth attendant - MICS-2000)

SOURCE: NHP, 1983; MQHFW various years; SRS, 1998We could have saved 14.3 lakh infants and 8 lakh mothers, if we had achieved the IMR and MMR goals set by NHP 1983.



Annexure IV

Implementation of National Health Policy, 1983

2. Strategic interventions as per NHP 1983 Current status

Universal, comprehensive primary health care services Not Done

Integration for all plans for health and human development i.e. agriculture, food production, water, sanitation, housing, education, Not Donedrugs and pharmaceutical, prevention of food adulteration, conservation of environment.

To formulate a National Medical and Health Education Policy Policy brought out in 2000

Primary health care system to be given importance and to be decentralized. Achieve a well-dispersed network of comprehensive care, Not donetransfer of knowledge, simple skills and technologies to health volunteers, use of inexpensive interventions, and more community participation.

The decentralization of services to be linked to a well worked out referral system. Not done

Establish nation-wide chain of sanitary-cum-epidemiological stations at the primary or secondary levels depending on local situations. Not done - beginning made recently under the Disease Surveillance Project funded by the World Bank, 2004

Location of curative centres should be related to the population they serve keeping in view, densities, distances, topography and Not donetransport connections

Establish a 'Health Team' approach and to phase out the system of private practice of government doctors Not done

Dovetailing of the functioning of the practitioners of various systems of medicines Not done

Device State-wise health insurance schemes Not done

SOURCES: NSSO, 52nd Round; Mahal et al. 2002NOTE: The total OP for a reference period of 15 days: 375.3 lakh. The total number of ailments (rural) is 408 lakh. The total number of ailments (urban) is 154.5 lakh.Total expenditure for outpatient is for the referenceperiod of 15 days and for hospitalization is for a reference period of 365 days. Total expenditure includes medical expenditure and all expenses other than medical expense incurred by the household for availing thetreatment.

UMAN RESOURCES ARE CRITICAL FOR EFFECTIVE IMPLEMENTATION OF HEALTHprogrammes and delivery of quality health care to achieve the national health policygoals in India. The availability of an adequate number of health personnel to effec-tively and efficiently manage and implement health programmes cannot be overem-phasized. However, numbers alone may not necessarily lead to the desired changesin the health status and outcomes. It needs high levels of concern, commitment andcompetence among the health personnel responsible for the management and deliv-ery of health care, especially health care providers at the grassroots level. Humanresource needs have been increasing, with new health programmes being added tothe package of health services over the past few decades, along with the growth ofhealth infrastructure and expanding scope of the health services. Several new healthprogrammes have been introduced and the strategies of existing programmes havebeen revised. These changes in health services and strategies have led to an increasedneed for developing new competencies and skills among health personnel, in addi-tion to the increasing need for more human resources at various levels. There hasbeen a phenomenal growth in human resources in the health sector, especially periph-eral health functionaries and supervisors, who are directly responsible for implementingthe interventions aiming at reducing maternal mortality, infant and child mortality,as well as reducing morbidity and mortality due to communicable diseases.

There have been major gains in India's health status since Independence. Lifeexpectancy has gone up from 36 years in 1951 to 64 years in 2000. The infant mor-tality rate (IMR) has come down from 146 in 1951 to 70 in 1999. The crude birth ratehas been reduced from 40.8 in 1951 to 26.1 in 1999, and crude death rate from 25to 8.7 during the same period. One of the major reasons for these gains has been thedevelopment of an impressively vast, three-tiered system of rural health infrastruc-ture, with a subcentre for 5000 population, a PHC for 30,000 population, and a CHCfor about 100,000 population. Immunization for the control of communicable dis-eases has made a major contribution to these gains; success stories include smallpoxeradication, the near elimination of leprosy, and the extraordinary social mobiliza-tion for polio eradication. Over the past few decades, the support of UN agencies andother multilateral agencies contributed to Indian health system significantly. How-ever, their focus and initiatives were limited to a select few areas:

� Transition from the so-called 'Family Planning' to 'Reproductive Health' strategy� Targeting a few communicable diseases (e.g. polio and leprosy) for eradication� Controlling diseases such as malaria, tuberculosis (TB), HIV/AIDS� Strengthening the State-level health delivery system (9 States)� Facilitating the health sector reform process� Prioritizing health interventions according to need and disease burden

Achievements notwithstanding, much more improvement is required in the healthstatus of Indians. This becomes evident when one focuses on the progress made inthe past decade. The problem of major communicable diseases remains unsolved andthere is no significant progress in controlling TB, water-borne diseases and respira-tory infections. Concurrently, epidemiological transition has set in and the burden ofnon-communicable diseases is increasing. Most of the health outcomes remainedstagnant during the past decade while new challenges, such as HIV/AIDS, have sur-faced to further stress the overstretched health care system. The situation in many

Training for effective delivery of health services

H


S E C T I O N I I

S.D. GUPTA, N. RAVICHANDRAN,DHIRENDRA KUMAR INDIAN INSTITUTE OF HEALTH

MANAGEMENT RESEARCH1, PRABHU DAYAL MARG, NEAR

SANGANER AIRPORTJAIPUR 302011, INDIA

E-MAIL: [email protected]

Indian States is grave. Several States lag behind with respectto key indicators at the national level, especially regardingmaternal mortality ratio (MMR) and IMR. It is also to benoted that there has been no significant increase in publicexpenditure on health in recent years. The per capita publicinvestment on health is one of the lowest in the world.

The continuing gaps in the health status of the people maybe attributed to several factors, mainly related to systemicissues, such as poor access and availability, inequity of dis-tribution of health care, poor financing and management ofthe health systems. The health system's performance is seri-ously affected by poor human resource development, espe-cially the competence and skills.

This paper focuses mainly on the issues related to humanresource development with a focus on training. The currentstatus of competency and skills raises several questions. Dohealth care givers at the peripheral level lack the competencyand skills to implement interventions correctly? Does thesystem have the potentiality to build the capacity of thesehealth functionaries? Is the quality of training appropriate?Is there a preparedness embedded in the system to developthe requisite skills in providing health services effectively?

Approach and methodology

We adopted systems framework approach to analyse andunderstand the various factors and constraints in trainingfor capacity building and skills development in the health sec-tor. The systems framework has typically three dimensions-inputs, process and outcomes, and a review and analysis oftraining has been undertaken in each of these dimensions(Fig. 1).

A multipronged procedure was used to collect data. A triagein the form of a combination of asking questions, makingobservations and reviewing relevant records and reports wasadopted. As the demographic transition is under way in mostof the States in India, the case of Andhra Pradesh and Rajasthanhave been of great interest. The level of socioeconomic devel-opment is not high enough to justify the kind of mortality

decline and behaviour changes in health, nutrition and devel-opment that States have been experiencing. The differencesand differentials in population health and development pro-grammes prompted our attention to these States for the study.One district in each State, Khammam in Andhra Pradesh, andUdaipur in Rajasthan were identified for detailed discussionand fieldwork.

A step-wise approach was adopted. The following were mainsteps:

Step I: Review of training documents and records

Published material and policy documents of the Govern-ment were reviewed. The materials available at the State Insti-tutes of Health and Family Welfare (SIHFWs) and other insti-tutions of the two districts were referred to and reviewed.

Step II: Rapid assessment and field visit to the SIHFW

The SIHFWs of Andhra Pradesh and Rajasthan were visited.The performances of the regional Health and Family WelfareTraining Centres (HFWTC) and District Training Centres (DTC)were reviewed. The PHCs of two districts were surveyed. Thefollowing procedure was used to undertake rapid assessment:

� Personal interview with health functionaries (structuredquestionnaires were developed to record the informationfrom the functionaries available at the health centre)

� Group discussions with health personnel using checklists� Record/document scrutiny using checklists� Observation

All existing relevant documents and reports were consultedand field visits made to obtain first-hand knowledge of issues,problems and concerns. Deliberations were held at the national,state, district and block levels with current and former policy-makers, health administrators, training coordinators, execu-tives of training institutes and leading researchers. Interviews


SECTION II Training for effective delivery of health services

Fig. 1

The systems framework ProcessIdentification of training load Training needs assessment Training approaches Persons who attended thetraining Post-training follow-up Faculty development andgrowth Type of training conducted Training in quality assessment Training in impact assessment Enabling environment

OutputPersons trained and able toachieve the goal Reductionin maternal and childmorbidity and mortalityImpact assessment

InputInfrastructure InstitutionManpower (Trainingfaculty/trainees) Trainingmaterial and aids Financialresources

and group discussions with important officials of variousmultisectoral programmes with RCH components were con-ducted at the levels of the PHC, Mandal PHC and District withselected administrators, project officers, district medical andhealth officers and medical officers.

In the process, nearly 150 individuals-programme func-tionaries, administrators, training coordinators, trainers, proj-ect officers, civil surgeons, medical officers, pharmacists, aux-iliary nurse-midwives (ANMs), multipurpose health workers(MPHWs), supervisors, laboratory technicians and others-wereengaged in lengthy sessions.

The team members collated the relevant information gen-erated in the field and the documents collected from the Stateheadquarters in Jaipur and Hyderabad for finalizing the report.There is ambivalence, confusion and differences in points ofview on various facets of training. However, the delibera-tions were guided by the utmost objectivity, avoiding any biasin our analysis and keeping in view the overall interest of theprogramme.

The following health functionaries were interviewed to assessthe perceived knowledge of their skills and actual gaps in theirknowledge (Table 1). The effort was more on eliciting qual-

itative information rather than being distracted or overwhelmedby magical statistical significance.

Training policy, infrastructure and system

Training policy

Despite increasing realization of the importance of trainingin human resource development, no serious efforts havebeen made to develop an effective and comprehensive train-ing policy at the National and State levels in the health sec-tor. A training policy is needed that identifies priorities andtraining needs, types of training, processes and mechanisms,training institutions and cadre, quality assurance, and mon-itoring and evaluation of effectiveness. The States had nosuch training policy, mainly due to the low priority assignedto training and a wrong perception of training being a time-and money-wasting intervention that has failed to enhanceperformance and improve effectiveness of health care serv-ices in achieving the desired goals of reducing mortality, espe-cially maternal and infant mortality.

However, Rajasthan has made efforts to develop state train-ing policies, although the implementation of these remainsquestionable. The training policy has been at the draft stagefor the past eight years. The draft training policy could notsee the logical end of acceptance and approval by the Gov-ernment. Andhra Pradesh did not even start initiatives in thisdirection. The States do not have a manpower policy ortraining policy. The manpower planning and human resourcedevelopment process is ad hoc and generally follows thenational norms based on population ratio.

Training infrastructure and system

There is no separate manpower planning division in the StateDirectorate of Medical and Health Services in the study stateof Rajasthan. However, Andhra Pradesh had a system in place.Both the States have an elaborate training infrastructure,but there is no well-functioning training system. There is nowa vast training infrastructure in the States with significantgrowth in training capacity. There are well-established train-ing institutions at various levels. These institutions mainlyinclude the State Institutes of Health and Family Welfare(SIHFW), Health and Family Welfare Training Centres (HFWTC),District Training Centres (DTC) and ANM Training Centres(ANMTC). There are also some other types of training insti-tutions in the states in addition to these.

State Institutes of Health and Family Welfare

These were envisaged as state-level institutes that would pro-vide leadership to all other training institutions in the respec-tive States. The administrative and technical control of alltraining institutions in the State would be vested with the SIHFW,which would perform a higher role by providing training of train-ers, coordinating the entire training network and system, andorganizing in-service training for senior health professionals.


Training for effective delivery of health services SECTION II

Table 1

Distribution of health functionariesinterviewed (in numbers)

Health functionaries Rajasthan Andhra Pradesh

At PHCs

Doctors 17 6

Clinical nurse — 5

ANMs 20 22

MPHW (M) — 7

Staff nurse 8 4

Laboratory technician 8 4

Pharmacist 4 4

Supervisor 8 6

At Mandal PHC

Doctors 2

ANMs 2

Staff nurse 1

Laboratory technician 1

Pharmacist 1

Supervisor 2

At District Level

Doctors 2 2

Staff nurses 4 3

Laboratory technician 2 2

CMHO 1 1

At private institution/programme personnel

Project officer of District —

Training Team cum District 1

Immunization Officer

Senior assistant (clerical) — 2

NGOs/Institutes (course coordinators) 12 16

In Rajasthan, the SIHFW has been created under IPP-IX toensure autonomy and flexibility. While the SIHFW is expectedto play a crucial role in planning, designing and coordinatingtraining in the State, it is in a pathetic condition. There hasbeen no regular director for about four years. There is no regu-lar faculty available and most of the faculty positions are lyingvacant. There is physical infrastructure but it is yet to be devel-oped to the desired level. The SIHFW did not have its own fieldpractice area for hands-on practical training and for undertak-ing operational research in the health systems as well as train-ing interventions. As such, there is no training budget in theState and for the Institute. Funding from the World Bank hascome to an end, thus bringing uncertainty in staff salary andcontinuation of training programmes. There was no trainingsoftware development activity, such as designing new trainingprogrammes and curricula, developing materials and new train-ing pedagogy. The present situation of the premier training insti-tute reflects not only its apathy to training but also the level ofpriority accorded to capacity development in the State.

In contrast, the Andhra Pradesh SIHFW has established itselfas a national-level institution, named the Indian Institute ofHealth and Family Welfare (IIHFW) and has made an effec-tive contribution to the capacity-building process in the State.While it has developed an excellent training infrastructure andtrainers/faculty, it has also developed training software. Fur-ther, the AP SIHFW is financially self-sustaining through gen-erating revenue from operational research, projects and pro-gramme evaluation and consultancy.

With some exceptions, the SIHFWs in most States in Indiahave not performed well, to the disappointment of policy-makers, administrators, programme managers and fundingorganizations. These institutions are not prepared to under-take quality training and overall human resource develop-ment. The SIHFWs are struggling for funds; leadership is notregular; qualified and experienced faculty is not available;no training of trainers is conducted; and they are not involvedin and entrusted with the planning and development processfor the training of health personnel.

Health and Family Welfare Training Centres

HFWTCs were established as per the standard norms of the Min-istry of Health and Family Welfare, Government of India. Thesewould conduct in-service training of medical officers and train-ers of DTCs. These HFWTCs have their own field practice areasbut scarcely visit and utilize them for training in the field. TheHFWTCs suffer from gaps in infrastructure, training equipmentand aids, training material, and lack of qualified and experi-enced trainers. The libraries are ill-equipped and are virtuallynon-functional. However, the HFWTCs are not starved of funds.Funding is done by the Government of India.

District Training Centres

The DTCs are responsible for organizing regular in-servicetraining programmes for health workers as well as basictraining programmes. Each DTC is responsible, on an aver-

age, for two districts. These DTCs work under the supervisionand control of the SIHFW. Though DTCs have their own build-ing, these are used for other purposes. A large part of theDTC building houses the CMHO offices or stores and ware-houses. They suffer from the chronic problems of lack of effec-tive trainers, training software and equipment. The situationis better in Andhra Pradesh.

ANMTCs conduct basic training for ANMs/Health Workers(female). They still follow the old curriculum prescribed bythe Nursing Council of India. Efforts to revise the curriculumto meet the changing training needs have failed so far. Thephysical condition of the ANMTC buildings is pathetic andhostel facilities are severely limited. Training is usually con-ducted in district hospitals, and community-based trainingof ANMs is neglected. Skills to implement interventions thatwould reduce maternal and infant mortality are lacking.

Training process

The training processes are not streamlined and systematic.The process of organizing a training programme is as follows:Decisions are taken to provide training under the funded proj-ect or programme; training plans are laid down in the form oftraining load for various categories of health personnel andtypes of training, keeping in view the target number; and thecalendar is prepared for conducting training. The first trainingcourse has to start without delay. The syllabus is developed ina hurry by the faculty. Opinion may be taken from other resourcepersons, which ensures that the subject 'gets covered'. A cur-riculum is finalized and resource persons may be identified.

Circulars are issued to the district officials to nominate staffof the particular category (generally the circulars are not receivedin time and information often reaches the prospective partic-ipant after the start of the programme, resulting in their join-ing the programme late) (Box 1). Circulars generally containinstructions to nominate participants without explaining thepurpose, objectives and contents of the programme. No cri-teria for selection are mentioned. Hence, anyone is nominated.

Box 1 shows that some directives are simply too ambitiousin their goal, and are often not feasible for field implementa-tion. As observed in various Government orders/reports, lackof implementation of the existing directives-from record-keep-ing to motivation, service delivery, training, supervision,monitoring and evaluation-makes many strategies and plan-ning exercises redundant as far as actual operations are con-cerned. In the absence of clear-cut mechanisms for efficientexecution, one would be doubtful whether new strategies, ifany, would produce better results than their predecessors. Foroperational purposes, it would be important to distinguishbetween problems at the policy level and those purely at theexecution level and, with respect to the latter, intra-, as againstinterdepartmental/directorate levels. Issues of policy order doneed the attention of State Administrators/policy-makersand perhaps it is time-consuming to solve. Interdepartmen-tal/directorate coordination can, however, be worked outreasonably fast through clearly established mechanisms. As faras interdepartmental/directorate problems are concerned, there



is no acceptable reason why they should be allowed to remainunanswered and no initiatives taken to provide need-basedtraining/human resources development.

Generally the number of participants is low, some fail toreport for various reasons. The method of 'training' is mostlydominated by lectures by the faculty or resource personswith little respect to continuum of the theme and the over-all perspective of the programme (Box 2). Random simula-tion exercises are developed and used. Group work, which isnow a commonly used approach, is unstructured and unguided,and is used as a time filler. The focus is on knowledge ratherthan on competencies for action. Trainers feel that the par-ticipants will at least be 'exposed' to the subject or 'ori-ented'. The programme is over within the stipulated timeperiod. The new batch arrives and the same process is repeated.

The above paragraphs succinctly summarize the wholeprocess of training, and the implicit assumption that gener-ating knowledge rather than building competencies mayempower the health care provider to deliver services effec-tively. There is no effort to build an appropriate trainingenvironment that is conducive to learning, raising concernsand enhancing the commitment of health personnel. At theend, there is no behaviour change and participants leave fortheir respective places of work with the perception that itwas yet another training of no use to them. There is no mon-itoring and follow-up to assess change in performance andeffectiveness of the programme. The training programmes are

overwhelmed with the assumptions that participants' acqui-sition of knowledge means greater competence; learning isa simple function of the capacity of participants to take inand the ability of trainers to teach; and individual improve-ment leads to improvement in the organization.

Views on public-private partnership in training

Private institutions involved in providing training to healthprofessionals and health care providers were contacted fortheir views on partnership between them and government



For instance: A government directive No… states to CM & HO, AP,

'…. It decided that under IPP (VI), we would like to train 30 ANMs

and MPHWs in the forthcoming Integrated Skill Development

Programmes at Hyderabad. Please nominate the staff within 10 days

of this notice'.

Counter-discussion with higher authority at the district level,

revealed that

'…we have received the letter (directives) only yesterday… that

means, we have literarily five days left to nominate the staff…

Secondly, it is not at all possible to send 30 staff from the district at

one point of time… We would be sending only 4 or 5 staff for

training. Now we need training on dengue fever related issues as

126 cases were registered in the last two months… This is what is

happening'.

Interaction with the authority who issued the directives to district

officials revealed the following

:'...they (district officials) always say like that only…. They don't do

the job and facilitate the process in time...'

When a researcher posed a question to the authority, 'Why did you

send the directive to district officials in the last minute to nominate

the staff?' the authority replied,

'...as per the government order, I directed…. And now fund is

available and the Government wanted to initiate the training

programme…'

How training processes are carried out

Box 1

All those who expressed the need for training stated that the training

programme should be practice-oriented. In other words, training

should be provided with hands-on experience. More than four-fifths

of the respondents emphasized the skills development aspects of

training.

One suggestion came from the participants:

'As the needs of each category of health and non-health

functionaries are different, exclusive modules could be produced

catering to each category.

'A supervisor strengthens the above case-notes by adding,

'…complicated issues like conducting deliveries, high-risk

pregnancies, concepts like supportive supervision, syndromic case

managements, etc. which are to be highlighted in skills training can

easily be understood and put to practice if they are taught with the

help of video films and hands-on experience with field exposure.

'In contrast, most of the doctors do not like training or orientation or

refresher training, as they are aware of all aspects. Laboratory

technicians and pharmacists do not know whether they will be

upgraded or not due to their specified nature of jobs. For instance, a

laboratory technician said,

'I have completed 17 years as malaria lab technician and am able to

diagnosis diseases (100%) successfully. I do not want to learn further

as I have specialized.

'Another laboratory technician added,

'Even if we learn, our profile will not change now because it is too

late.

‘A pharmacist echoed,

'I learnt all aspects during my Diploma in Pharmacy Course and that

is sufficient to handle the amount of the job I have at the PHC.

'This reflects that in general no need-based study has been

conducted to organize refresher-training programmes. This further

reinforces the need to strengthen training materials to improve the

quality and maintain the uniformity and quality of training activities

across PHCs. Review of records with the DM&HO office indicated

that in a majority of the cases staff stayed in a particular PHC for

more than a decade without any change in their job profile.

It was observed that the level of participation of staff was not equal

in the PHCs. Generally, just one or two were active and took a lead

role in providing services, meeting the targets and getting involved

in various issues. Most played a passive role. More than two-thirds

participants belonged to this latter category.

Box 2

institutions for organizing training and capacity-building pro-grammes. Institutional heads, course coordinators and otherrelated officials in 16 institutions in AP and 10 in Rajasthanwere interviewed. They unanimously stated that there wasno organic link between private and government institutionsfor training. No systematic and innovative efforts have beenmade to understand the training needs of the clients. Theystated that:

� The training programme at public health institutions is lastleg work.

�Delay in nomination which further delayed the programme.

One of the private institutions interviewed added, 'At theyear end, the PHS requests us to conduct a training programmefor about 9500 PHC staff within a two-month time period.'

In addition to these, often due to paucity of funds, theGovernment pruned down the budget and reduced the totalduration of training modules. The whole exercise of revisitingthe list of topics, duration, and categories was redone afterseveral rounds of discussions. This resulted in considerable lossof time and slackened the progress of the project. Because ofthese reasons, formal processes that solicit and identify thegaps between the current and required outputs were not workedout. Due to these, the following issues were not addressed atall (i) whether training is relevant, (ii) whether training will makea difference, (iii) whether focusing training needs of organi-zational problems should be done along with skills develop-ment issues, and (iv) whether an improved role should be linkedwith training goals and the bottom line.

A private training institute stated categorically that '…westopped doing training programmes for the Government ofAP due to its attitudes in reducing funds, last minute patch-work and using pressure tactics on us…'

Perceived knowledge and training needs

Are the training programmes designed to address the com-petency needs required to perform specific tasks? An analy-sis of the knowledge and training needs perceived by the keyfunctionaries was highly revealing. A questionnaire was admin-istered to all health care personnel to assess their knowledgeon health and diseases of public health importance, their role,and related aspects. It revealed that the level of knowledgeregarding national health programmes such as immunizationwas almost 100%. However, their knowledge of the othernational programmes such as TB control, AIDS control, malariaeradication, leprosy eradication and others was very limited.Only medical officers had knowledge of these aspects. TheANMs and male MPWs, who are entrusted with the imple-mentation of health programmes at the subcentre and vil-lage levels, did not posses adequate knowledge of nationalprogrammes that have been executed in their areas. Almostall pharmacists and laboratory technicians were not aware ofthe national programmes.

Even knowledge of the basic antenatal care process was lim-ited. Though medical officers and ANMs described the process

correctly, the majority of supervisors (LHVs) could not (Box3). Only 60% of the ANMs and supervisors were confident oftheir skills in screening risk factors during pregnancy. Fur-thermore, interaction with health functionaries revealed thatonly doctors had adequate skills in recording blood pressure,while none of ANMs and LHVs had skills in measuring bloodpressure, which is a very important procedure for assessmentof risk (Table 2).

Further, the majority of the PHC staff was not aware oftheir job responsibilities as compared to their counterpartswho are at Mandal PHCs and District Hospitals.

A further analysis of skills specifically needed to avert mater-nal and child deaths was also undertaken with key staff mem-bers. The skills needed and the current levels of knowledgeare presented in the following matrix.

Table 2 shows the main causes of maternal deaths and essen-tial interventions to avert these. The next column shows thecurrent levels of skills to undertake the recommended inter-ventions. It clearly shows that the ANMs and LHVs did not pos-sess these skills. How can one expect reduction in the mater-nal mortality rates in the country? ANMs and LHVs are expectedto learn these skills during their nursing training. Given thequality of nursing training on the one hand and the pooremphasis on community-based obstetrics during the courseon the other, one cannot expect them to perform. Practicallyno in-service training of these health care providers is con-ducted to develop their clinical skills (Box 4). The effective-ness of the recent in-service clinical training of ANMs and LHVsunder the RCH Programme is questionable as no serious effortswere made to give on hands-on clinical practice.

A similar analysis of skills was undertaken with respect toneonatal mortality, which accounts for almost two-thirds ofinfant mortality (Tables 3a and 3b). The causes of neonataldeath and required interventions are well known. Neonataldeath is closely associated with the obstetric process; therefore,it would require effective obstetric skills among ANMs and LHVs.



Almost all ANMs who participated in the study revealed that

'…The training modules should be pre-tested in tune with each

category of the staff job responsibilities and field situations. At the

same time, the training approaches which failed to produce

satisfactory results should be dropped...

'Interestingly, MPHWs (male) who are in less number, said,

'The training module for male health workers should be aimed at

increasing male participation in family welfare programmes…

'The above case studies reflect that the training modules should be

based on actual field situations, and location and characters should,

as far as possible, be close to the actual nature to project ground

realities and objectivity. The training coordinator should involve the

concerned trainer or expert team members at every stage of

preparation and editing of training materials and during the training

programme and review the material on a time-to-time basis. Based

on the suggestion, the changes should be incorporated in the next

training session itself.

Box 3

Furthermore, for improving neonatal outcomes, these func-tionaries are expected to possess skills of essential newborncare. Birth asphyxia and birth injuries are very important causes

of neonatal death, which can easily beavoided by efficient obstetric care and sub-sequent newborn care including aspirationof mucus and amniotic fluid. Simple inter-ventions are available for acute respiratoryinfection (ARI), diarrhoea and neonataltetanus. However, health functionaries andsupervisors had limited skills in preventionand management. Hypothermia, an impor-tant cause of neonatal death, was not con-sidered a priority by these functionaries.

These findings are not new and this isnot the first time they have been reported.The need for training was positively per-ceived by all the members interviewed,irrespective of their titles and level of func-tioning. They stated that the idea of train-ing is good and expressed the need fortraining in essential and emergency obstet-ric care and essential newborn care. Needfor training was also identified for com-municable and infectious diseases, diag-nosis of syndrome-based diseases, sani-tation and control of epidemics, meth-ods and measures of eliciting cooperationand coordination of the community, andsexually transmitted infection (STI) andHIV/AIDS counselling and their first-aidtreatment. These findings also underscorethe need for enhancing communicationskills.

All those who expressed the need fortraining stated that the training programmeshould be practice-oriented. In other words,training should be provided with hands-on experience with field exposure. The

majority of respondents emphasized the skills developmentaspects of training.



Table 2

Perceived knowledge about skills and actual gap

Area Staff interviewed Perceived awareness (%)AP Rajasthan

National Programme on Women Doctors 50 47and Child ANM 5 10

Malaria, TB, AIDS and MPHW/LHV (M &F) 16 25leprosy, etc. Staff nurse 37 13

LT/Pharmacist 10 8

Maternal Health Doctors 93 94Enumerate the process correctly ANM 94 90for providing ANC MPHW/LHV (M &F) 72 62

Staff nurse 100 87LT/Pharmacist 25 —

What do you do in ANC?

Screen for risk factors and Doctors 100 100medical conditions ANM 55 60

MPHW/LHV (M &F) 72 62Staff nurse 100 100

Record BP* Doctors 86 88ANM 55 0MPHW/LHV (M &F) 0 0Staff nurse 100 100

Weight and height Doctors 64 80ANM 67 0MPHW/LHV (M &F) 32 0Staff nurse 100 100

Screen for anaemia Doctors 71 88ANM 55 70MPHW/LHV (M &F) 0 75Staff nurse 100 87

Give tetanus toxoid Doctors 100 100ANM 100 100MPHW/LHV (M &F) 0 0Staff nurse 100 100

Provide education for nutrition Doctors 43 70ANM 67 90MPHW/LHV (M &F) 68 87Staff nurse 62 87

*Only weight taken

It was observed that the greatest problem for the MPHW (F) in Khammam was that while the approach lacked good communication abilities that are

essential for dialogue delivery, the professional trainer lacked the required technical skills such as explaining complicated delivery.

The researcher asked the Trainer a question,

Researcher: 'What are the measures to be taken for a pregnant woman with malaria?

' Trainer: 'I suggest that not medicines should be given; please refer the pregnant woman immediately the to PHC.

'Researcher: 'As I am coming from a non-medical background, (to a pregnant woman with severe malaria and not able to move from her village) what

type of first-aid measures would be given?

'Trainer: 'Give a paracetamol tablet and better refer her to a nearby medical centre and not take risk.

'This question was specifically asked by the researcher during his visit to the MPHW (F) training at Khammam district, AP as there were 13 pregnant

women who had died due to malaria in September 2004.

The investigation reports of CM & HO regarding these 13 deaths said that these were due to '…the negligence of PHC and District Hospital…

'This revealed that the technical training sessions are conducted without the concerned specialist/expert who can provide better suggestions (than the

trainer) to improve the services.

Box 4

Constraints in training for betterperformance

The review process revealed glaring inadequacies in the humanresource development process and training of the healthpersonnel. Some salient observations are summarized here:

� Training institutions and training have received a low pri-ority. There is a generalized apathy towards training andcapacity building. Training is not recognized as an inter-vention to improve performance. Owing to lack of nomi-nations, programmes are frequently cancelled.

�The function of training is seen in isolation. There is no proper



Table 3a

Maternal deaths: Select causes, main interventions and skill levels

Causes of maternal death Interventions Current levels of skills of ANMs and LHVs

Antepartum haemorrhage (APH) � Early identification of bleeding during pregnancy � Poor knowledge of APH�Counselling � Poor APH management skills�Continued risk assessment�Referral

Postpartum haemorrhage (PPH) � Prevent and treat anaemia in pregnancy � Poor knowledge of PPH(prophylactic and therapeutic) � Poor skills to diagnose and manage � Early identification and risk assessment PPH including manual removal of � Skilled attendant at birth placenta�Manual removal of placenta � Poor skills of blood/IV transfusion � Prevent/treat bleeding with appropriate drugs �Replace fluid loss by IV drip/transfusion, if severe� Early referral and transport

Puerperal sepsis � Skills in aseptic delivery � Poor knowledge of puerperal sepsis �Clean practices during delivery and its management�Administration of antibiotics

Pregnancy-induced hypertension � Early identification of risk in pregnancy � Poor knowledge of PIH(PIH)Eclampsia/toxaemia �Counselling � Poor counselling skills

� Treat eclampsia with appropriate anticonvulsive drugs � Poor management skills�Urgent delivery-Caesarean section if needed

Obstructed labour � Pelvic assessment � Poor pelvic assessment�Referral � Poor management skills of �Assisted delivery or caesarean section as per indications obstructed labour

Complications of abortion � Identify and diagnose complications � Poor knowledge and skills in � Treat sepsis-antibiotics managing complications� Fluid replacement if necessary�Referral

Table 3b

Infant (neonatal) deaths: Select causes, main interventions and skill levels

Cause of death Interventions Current levels of skills of ANMs and LHVs

Birth asphyxia � Safe delivery practices � Inadequate skills for obstetric care� Proper newborn care � Lack of skills in newborn care

Birth injury � Safe delivery practices � Inadequate skills for obstetric care�Newborn care � Lack of skills in newborn care

Prematurity � Proper antenatal care � Inadequate skills to assess foetal� Supplementary nutrition (IFA) � growth� Proper newborn Care � Inadequate newborn care skills

Congenital malformation � Proper counseling � Poor counselling skills� Screening during ANC � Inadequate newborn care skills�Newborn care

Neonatal jaundice � Proper newborn care � Inadequate newborn care skills

Neonatal tetanus �Aseptic delivery � Inadequate skills in aseptic delivery� TT immunization of mother

ARI-pneumonia � Proper management of ARI � Poor diagnostic and assessment skills for severity of ARI

Diarrhoea � Proper diarrhoea management � Poor assessment skills for severity of diarrhoea

IFA: iron-folic acid; TT: tetanus toxoid; ANC: antenatal care; ARI acute respiratory infection

planning and implementation of training programmes. In thedevelopment of training programmes, the training needs andexpectations of participants are not considered. Most of theprogrammes are lecture-based and didactic in nature. Thereis no focus on practical skills development. Even in clinicalskills development programmes for ANMs and LHVs, scantattention was paid to giving practice to the participants.

� The morale of trainers is low. There is no training cadre inthe States. There is no system for appointing trainers. Nor-mally, persons are posted or deputed to training institutionsas trainers rather than regularly selected. There is no careerstream in training. There are no facilities for regular pro-fessional development of trainers.

� The SIHFWs, HFWTCs and DTCs are poorly equipped withhostels, training infrastructure and libraries. The physicalfacilities at ANMTCs are appalling.

�Various training programmes are offered under various Pro-grammes and a health worker is nominated more thanonce to attend different training programmes. The multi-plicity of training was a constraint in work performance.

� Incompetent trainers and lack of technical guidance to train-ing institutions has resulted in poor quality training, thuslowering the credibility of training institutions.

� Trainers of various training centres feel that there are no for-mal linkages among these institutions and they feel left out.

� There are financial constraints. The payment of TA/DA toparticipants, procedures/facilities for inviting guest fac-ulty and lack of funds for developing good- quality train-ing material are major problems.

� Training is not taken seriously by the trainees as it has norelationship with career development of health profession-als. The current appraisal system does not take into accountthe training received in placement or promotion.

� There is no system of nomination for training. It is highlycentralized and, more often than not, based upon personalfancy or preference of the concerned officers.

�There are no norms for in-service training. Some health per-sonnel attend training programmes frequently irrespectiveof their utility in their job.

� The training is not seen as an intervention for improvedjob performance by most trainers. This is because there is amismatch between organizational and personal goals.

� The need for management training is seldom felt by func-tionaries and health administrators. It is thrust upon them.

� There is no linkage between service providers and trainers.Training is viewed as a constraint in achieving programmeobjectives rather than facilitating them.

� There is no training or personnel information system in theStates. As result, there is no proper planning.

�There is no thinking on operational research in training insti-tutions.

Way to go in the future

Over the past five decades, the emphasis has been more onthe quantity, and the quality of human resources has takena back seat. As a result, the indicators of access and avail-

ability of health manpower have improved, but the produc-tivity and performance have remained poor. There is a needto reposition training, which should be accorded a high pri-ority. There is a need for rethinking. Is it a knowledge-build-ing process or skills development intervention for better per-formance, or both? The experience of the previous decadessuggests that current training approaches have not yieldedthe desired changes in health status or performance of theorganization. There is a need for better workforce manage-ment and improving the working conditions to enhance poten-tial and improve performance. Training should be seen as apart of the overall process of human development. There is aneed to consider changing the current training paradigm fromknowledge- and competence-building to organizational trans-formation. The time has come to seriously consider trainingas an intervention. While training should emphasize skillsdevelopment to perform tasks effectively, training designsshould be re-oriented to ensure a change in the attitude andmindset of health care providers at all levels to achieve highorganizational and professional commitment.

Develop HRD and training policy

There is an urgent need to develop a health manpower pol-icy at the national level as well as in the States, clearly stat-ing the priorities, future projections of manpower needs indifferent categories, policies for recruitment, transfer and pro-motions of the health cadres. The health manpower policyshould also consider the creation of a public health cadre. Theemphasis should be on creating a climate for independentand interdependent work rather than dependency. Adequatesalary, good working conditions, job security, physical facil-ities, good human relations and the quality of supervisioncontribute to job satisfaction of the employees. Factors suchas recognition of work done, opportunity for growth, natureof work, responsibility and the challenges of the task havebeen found to play an important role in creating motivationto work. These need to be considered to improve employeeproductivity.

The roles and responsibilities at each level, from the Direc-torate to the subcentre level, should be clearly identified anddocumented. This is necessary for enhancing accountabilityand achieving the desired goals and outcomes.

A clear training policy should be developed and implemented.The training policy should identify:

� Priorities and training needs� Types of training� Criteria for nomination for training� Mechanism for linking training with promotion� Mechanism of integration of various training activities� Management of training institutions� Training cadres, especially for trainers� System for quality assurance in training� Mechanism for monitoring and evaluation of training� Support to the health system

Emphasis should be given to develop an effective and



functional training system, a system that works. Some theguiding principles include: � Decentralization of planning, monitoring, evaluation and

decision-making� Autonomy to all training institutions� Accountability in terms of training effectiveness and effi-

cient utilization of resources� Synergy with the client system�Linking the training function with HRD, especially the career

system� Openness to continuous feedback, new ideas and devel-

opments

Strategy for improving training

The following key strategies are suggested to strengthen training:

Strengthen training institutions

Strengthening of the training institutions is quintessentialto enhance the effectiveness of training. The SIHFWs shouldbe seen as apex training institutions for planning, develop-ment and research. These institutes should be adequately sup-ported for infrastructure and faculty development. Contin-ued funding of SIHFWs should be ensured. SIHFWs shouldalso be entrusted with coordination and control of other train-ing institutions. These training institutions should developclose collaborative linkages with district hospitals and the dis-trict health administration.

Identify trainers and build their capacity

Qualified and experienced trainers are critical for quality train-ing. A system of identification and recruitment of the facultyfor training institutions should be developed. A search shouldbe conducted to identify health professionals who are inter-ested in training and wish to take it up as a career. They shouldbe given good trainers' training and exposure to the trainingprocess. Additional financial incentives should be consideredand career development opportunities should be created fortrainers. A regular programme for training of trainers andrefresher courses should be organized.

Develop and design need-based training programmes

Designing appropriate curricula and pedagogy for trainingare prerequisites for addressing the competency needs ofhealth care providers. A needs assessment as perceived andexpressed by the health care providers should be undertakenvis-à-vis programme goals and objectives and interventionsthereof. Brainstorming sessions with trainees and programmemanagers may be carried out to identify needs. Further, eval-uation of training programmes and participants' feedbackwould be very useful to improve the programme design.Practical sessions and hands-on experience would be veryuseful for improving skills.

An elaborate training strategy and curriculum have beendeveloped (and implemented!) for orientation of staff at var-ious levels of the health system. These include managerial aswell as clinical training. Medical officers, LHVs and ANMsundergo a three-day to one-week clinical training programmein district hospitals or medical college hospitals. The durationof clinical skills training is abysmally small and little effort ismade to provide hands-on practical skills development oppor-tunities. There is a need to re-design these training programmesfor a longer duration focusing on clinical skills development.The trainees may be attached to hospitals for the appropriatetime duration with clear objectives and tasks to be achieved.

Develop learning resource materials

Availability of appropriate learning material (course mate-rial) is crucial. The training institute should develop the req-uisite training material and its uniformity should be ensured.Several training manuals have been developed which can beupdated and modified. Unfortunately, the modules are notupdated and adapted to the needs. Further, such material isnot available to the participants.

Develop alternate training approaches

Distance leaning programmes should be designed for ongo-ing training programmes for various categories of healthpersonnel with an accountability system and compulsoryrequirement. Recent developments in the IT sector must beharnessed.

Recent developments in the use of satellite technology mustbe explored to deliver training programmes uniformly withhigh quality in a very short time. Pilot projects (GRAMSAT)undertaken in collaboration with Indian Space Research Orga-nization (ISRO) have been found to be very successful inconducting training programmes effectively. More recently,ISRO has launched EDUSAT for education and training. Appli-cation of these technologies in developing training programmesin health care will prove to be cost-effective and have a highlevel of efficiency without displacing health personnel fromtheir workplace.

Develop a functional field practice area

The SIHFW and HFWTC should develop a field practice areafor the purposes of demonstration and exposure to field sit-uations. These field practice areas could be used for testingnew interventions and conducting operations research. It wouldneed designated staff and required mobility. At present, fieldpractice areas are adopted by the HFWTCs but these are non-functional and practically redundant for various reasons.

Develop monitoring and evaluation systems

Training should be accountable. A regular monitoring sys-tem should be developed and critical indicators should beidentified with emphasis on measuring training effective-



ness in terms of performance and improved programme imple-mentation. There should be a mechanism for regular inter-action with the trainees, and providing feedback to them.

System's support for training

Training cannot be seen as a part of the overall system. Thereis a need to improve the working conditions of health work-ers and the facilities where services are delivered.

Continuous supervisory support is critical for improving theperformance and quality of services. While supervision shouldbe regular with a feedback system, the supervisory skills andmechanisms must be strengthened.

There should be serious thinking on absenteeism and appro-priate interventions may be considered. One of the most impor-tant interventions is to increase the motivation levels and helpdevelop ownership and accountability through effective ODinterventions. Efforts should also be made to analyse thereasons for absenteeism and low performance.

Estimated cost

Training is a highly resource-intensive activity, though thecosts are apparently not visible and realized. It would alwaysbe difficult, if not impossible, to justify the cost of trainingvis-à-vis results achieved. Generally, the visible part is the directcost, i.e. cost incurred in developing, designing and imple-menting training programmes. The hidden costs such asparticipants' time away from work and salaries for those

days are taken into account.However, costing of a training programme is not without

risk of being overestimated or underestimated. The scale oftraining, levels of the participants and duration of trainingdetermine the overall cost. The cost may be divided into twomajor heads: fixed cost, which would include money spenton programme development, faculty, venue, administrationand logistics; and variable cost, which would include moneyspent on course material, lodging and boarding, and travel.

A typical one-week programme for 20 mid-level profes-sionals would cost about Rs 200,000 with the additional travelcost of Rs 50,000 within the State. This cost would meet theprogramme development cost, administration, logistics, boardand lodging, course material and instructions. About 50% ofthis is the fixed cost and the remaining is the variable cost.The proportion of the fixed cost would decrease with anincreasing number of course participants.

Similarly, the cost of a one-week programme for 20 healthcare providers (at the district level) would cost about Rs 50,000-60,000, all expenses inclusive.

A detailed costing of strengthening training infrastruc-ture, faculty development, distance learning programmeand satellite-based programme needs to be done after exten-sive review of the system.

The cost estimates provided are based on the norms pro-posed under various training programmes for donor-assistedprojects. However, it would need a detailed costing studyand resource-mapping exercise to arrive at an appropriateestimate.



Overview of the Indian Systems of Medicine

NDIA HAS A RICH AND LIVING TRADITION OF HEALING. AS EARLY AS CIRCA 4000 BC, Sushrut, the father of surgery, stressed the need to integrate theory andpractice. 'What is observed and demonstrated directly in practice and what is intu-ited by Shastra have to be mutually and judiciously integrated for the growth of knowl-edge.'1 India's strength has been this attitude of continuous creative assimilation ofpractical knowledge.

Vision of Health: Bharatiya Ayurvidya

For millennia, as per the Indian ethos, the major concerns and activities of life arefour purusharthas-dharma, artha, kama and moksha, in that order.2 Dharma impliesliving ethically each day, fulfilling one's responsibilities and having faith. Artha implieswealth, in the true sense of prosperity and not mere money or currency notes. Karmacovers fulfilment of desires, within the framework of dharma. Moksha implies free-dom that transcends consciousness, the cramping identification with mere name-form.3 Knowledge that liberates the individual is called vidya. Vidya has two cate-gories: apara and para, the knowledge essential for work, wealth and wishes on theone hand and wisdom and faith, leading to enlightenment and liberation, on theother. In a way, Ayurveda was a bridge between these two domains of knowledge.

Ayurveda was defined uniquely by Charaka:4

'Wherein the beneficial and adverse influences leading, respectively, to happiness andmisery and to life healthy or ill are described, besides the respective helpful and harmful meas-ures are described and quantified that system is called Ayurveda.' It is an integral vision that, retains fidelity to the fundamental principles of gunas, doshas, dhatus and malas.5

The evidence-based practices and products of other Indian systems of medicine(ISM)-Siddha, Unani, Yoga, Homeopathy, etc.-also offer unique opportunities tofulfil unmet medical needs. The Unani system of medicine has been active in Indiafor hundreds of years. Handbooks of simple Unani remedies for common ailmentshave been published by the Council and can easily be referred to for integrative med-icine. Yoga in daily life offers advantages of health, equanimity and longevity, whichare tangible, safe and economically viable.

Global and Local Attitudes to Indian Systems of Medicine

The spectrum of global attitudes to ISM varies from derisive ridicule to uncondi-tional reverence.6 At one extreme, there is an organized tirade against Ayurveda ascomprising toxic metal therapy7 and, at the other, a fundamentalism raising Ayurvedato a religious dogma, capable of solving all health problems. Instead of these fixedstances, we need a balanced, scientifically open and curiosity-driven mindset.8

Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy(AYUSH): Current Status

The current official status of ISM needs a quantum jump in terms of (i) the quality ofprofessionals, (ii) academic excellence in teaching, (iii) path-breaking research, and(iv) development of high performance in clinical services.

Effective Integration of Indian Systemsof Medicine in Health Care Delivery:People's Participation, Access andChoice in a Pluralistic Democracy

I


S E C T I O N I I

ASHOK D.B.VAIDYAE-MAIL:

[email protected]

Several reports exist on the manpower, number of col-leges, hospitals and dispensaries, specializations, etc. inAyurveda, Siddha, etc. As per the provisional State-wise dis-tribution provided by the Department of ISM and H,9 thereare more practitioners of Ayurveda, Yoga and Naturopa-thy, Unani, Siddha and Homeopathy (AYUSH) than of allopa-thy in India. This widespread resource needs to be strength-ened, retrained and effectively utilized in the national healthcare delivery system.

Table 1 shows the profile of Ayurveda, Unani, Siddha,Yoga, Naturopathy and Homeopathy as per the Departmentof AYUSH Annual Report (2003-04).

The number of practitioners of Ayurveda and Homeopathyare far more than those of Unani, Siddha and Naturopathy.This is obviously due to a much smaller number of educa-tional facilities for these three ISM (Figs 1 and 2). It is rec-ommended that a task force be urgently commissioned toestablish more educational institutions for the Naturopathy,Unani and Siddha systems, with appropriate learning mod-ules of integrative medicine (IM) useful for primary healthcare (PHC), including emergency obstetrics. Currently, ISM incorporate several diag-

nostic and other modalities of modernmedicine (MM), a practice that needs tobe encouraged. Ayurveda teaching hos-pitals must have excellent diagnostic facil-ities, including imaging and endoscopy.Operation theatres and obstetric units mustbe well equipped and functional. All ISMpractitioners need in-depth training inemergency obstetrics and first-aid care, aswell as in cardiopulmonary resuscitation.Life-saving drugs, of any system, mustbe understood and their rational usagetaught to all practitioners.

Strategy, Role and Knowledge Skills forIntegration

Integrative medicine: Definition and scope

A suggestion gaining ground is for medical courses to includeYoga and the ISM so that students are able to get the best ofall aspects of medical knowledge. Another proposal beforethe Government is to have a medical facility combining west-ern medicine and ISM to provide comprehensive medical treat-ment as it is not possible to open hospitals having facilitiesfor only traditional medicine (TM).10 Similarly, the WorldHealth Organization (WHO) has been emphasizing that inclu-sion of TM in health care would have a positive impact. Itwould be particularly so if the practitioners of TM are alsotrained in certain key elements of allopathy and vice versa.

IM is a new paradigm in health care that focuses on thesynergy and deployment of the best aspects of diverse sys-tems of medicine, in the best interest of the patients and thecommunity. Attention to clinical evidence, long-term usage


SECTION II Effective Integration of Indian Systems of Medicine in Health Care Delivery

Table 1

Manpower and institutional profile of AYUSH in India

Facilities Ayurveda Unani Siddha Yoga Naturopathy Homeopathy

Registered medical practitioners 432,625 42,833 17,550 0 532 201,484

Dispensaries 13,925 881 399 70 52 5,398

Hospitals 2,253 255 276 8 17 290

Bed strength 43,803 5,031 2,386 115 922 14,087

Teaching institutions (undergraduate) 209 36 6 - 8 180

Upgraded postgraduate departments 59 8 2 - - 27

Specialization/ postgraduation 16 7 6 - - 3

Fig 1

Registered medical practitioners of AYUSH in India (number)

Fig 2

Fig. 2. Medical education facilities for ISM in India (number)

and safety, accessibility, economic considerations and culturecompatibility constitute the key elements of IM. Fulder statedthat the line separating TM and MM has become fuzzy. Theblending of TM-MM is more active.11

The scope of IM in the promotion of health and prevention ofdiseases is immense. Particularly for chronic and degenerativediseases, ISM have much to offer to MM. At all levels of healthcare-the home, school, community, dispensaries, nursing homesand hospitals-the integrative elements of ISM have to be iden-tified, procured and deployed. Table 2 lists some of the com-mon conditions wherein ISM can play a significant role.12 Thislist is by no means complete. There is an urgent need to carryout Ayurvedic pharmacoepidemiological studies to identify drugand non-drug modalities widely used in the field.13 Studies havebeen initiated for diabetes mellitus14 and arthritis.15

Horizons and Deliverables: Programmes and Performance

The process of integration of ISM in national health care canbe strategically perceived at three horizons:

Horizon I: Ayurvedic/Unani (ISM) physicians have to beincorporated into all PHC teams, with adequate therapeuticresources at their disposal. They should be trained in basicPHC skills and emergency obstetrics (Desai, Sadhana, FOGSI,2005). [Au? Pls provide the complete ref]

Horizon II: All municipal and district-level hospitals wouldhave full-fledged ISM outpatient departments (OPDs) andwards, panchakarma and dispensaries with adequate resources.The hospital management should be sensitized and trainedto give due importance to ISM in patient care.

Horizon III: Tertiary medical centres should have advancedISM centres, incorporating education, research and sophisti-cated services. Private-public partnerships will have to beencouraged. IT-80 G and charitable status will be granted tohospitals depending on the size of the infrastructure and usageof ISM, defined on a case-by-case basis, such as general hos-pitals, specialty hospitals, etc.

The deliverables for each horizon will have to be congru-ent with the goals envisaged. Table 3 lists the deliverablesunder each horizon.

The programmes for the integration of ISM in health carewill have to be drawn up at the grassroots level based on amodel and then worked upwards. People's participation isvital for the process of integration to succeed. Health beinga State subject, there is an urgent need to appoint a Direc-tor of Integrative Medicine (DIM) in each State, empow-ered with resources, personnel and reporting relationships(directly to the Chief Minister [CM]). As statewide needs aredifferent and will have to be differentiated even further atthe district levels, the DIM will have a Board of IM (BIM) todraw up the programme, with projects according to hori-zon priorities. Budgetary needs and resource-raising haveto be the responsibility of the BIM, with a sizeable butaccountable allocation from the Central Government. Thecurrent allocation of Rs 150 crore to the Department ofAYUSH is miniscule and has to be raised at least ten-fold,as soon as possible, to assist the DIM. States will also haveto evolve public-private resources.


Effective Integration of Indian Systems of Medicine in Health Care Delivery SECTION II

Table 2

Scope of Indian systems of medicine

Acute Subacute Chronic

Wounds and burns Eczema Diabetes

Sprains/swellings Indigestion Arthritis

Pyrexia Menorrhagia Asthma

Colds and influenza Sinusitis Cancer

Diarrhoea Constipation Parkinson disease

Conjunctivitis Herpes Irritable bowel

syndrome

Malaria Splenomegaly Acid peptic disease

Urticaria Urinary infection Memory-cognition

Dysmenorrhoea Leucorrhoea Chronic fatigue

Table 3

Deliverables as per horizons

Horizon I Horizon II Horizon III

� Knowledge, attitudes, practices survey: PHC/ISM � Local self-government health officials: ISM �Centres of excellence and model spread

� PHC learning internship �Ambulant ISM care in private-public domains �Ordinance of IT-80 G and ISM

� Survey of facilities at PHC and needs �Resources for ISM: Central, State and local levels � Private-public enterprises, ISM priority

�Current number of ISM personnel � Linkages with PHCs: Aushadhis � Bridges with ISM hospitals

�CME for PHC/ISM �Computers and Ayusoft (C-DAC) �CME workshops for ISM

� Panchayat participation �Mobiles and tele-ISM � Panchakarma units

�Health needs and ISM �Communications/education �Rehabilitation ISM

� ISM in medical colleges � Panchakarma units �Computer networks

�Complementarity �Management synergy � Specialty integration

�Records and documentation � ISM dispensaries �Research and education

CME: continuing medical education; PHC: primary health care; ISM: Indian systems of medicine; C-DAC: Centre for Development of Advanced Computing

The performance of the State DIM and BIM, based ontargets and deliverables as per the time schedule, will beaccountable both to the public as well as to the Central Direc-tor General of IM (directly reporting to the Prime Minister[PM]). Total transparency and right to information of citi-zens should be ensured. The State DIMs will have websitesdisplaying the progress, problems of and solutions to theprogrammes. Networking with State health services has tobe harmonious. The existing State health infrastructure hasto be strengthened in a phased manner, at both district andlocal levels.

Paradigm Shift in Health Care: Emphasis on Prevention

The promotion of health and prevention of diseases, as stressedby ISM, are currently considered to be of great importance-genomics and proteomics help predict a propensity for spe-cific diseases, years or decades before they manifest. ISM canplay a vital role in this changing scene of global health wis-dom. Ayurgenomics and prakriti genomics can play a majorrole in the integration of ISM for long-term health-promo-tive and disease-preventive management.16,17

ISM have modalities in ahara, vihar and aushadhi, whichcan effectively fulfil the need for promotion of health andprevention of diseases. These need to be integrated even inschool health programmes and in all community health proj-ects at the grassroots level. Table 4 gives a list of certain non-drug modalities of ISM that deserve attention. Experts inthe system will have to evolve incremental modules for schoolsand appropriate programmes for communities. There is thusa need to call a meeting of experts to prioritize ISM non-drug modalities.

Health and longevity

Ritucharya, Dinacharya and Swasthavritta have to be devel-oped in health care.18Knowledge and suggestions for healthyageing and a long life are available in ISM and must be adopted.Table 5 lists some Ayurvedic recommendations and otheraspects of healthy ageing.

General and specific prevention of the diseaseburden in India

Certain general conditions that are widespread in India canbe addressed by the integration of ISM with MM. Iron defi-ciency is highly prevalent in India, both in the rural and theurban populations. It is proposed that ISM practitioners ini-tially focus on the iron deficiency problem at the PHC level.The baseline survey, haemoglobin values and the response toAyurvedic iron preparations, e.g. varitara loha bhasma or punar-nava mandoor, will help gain community support for practi-tioners of ISM. Quantitative methods will also sensitize prac-titioners of ISM to other major endemic problems. A nationaltask force will evolve the approaches, treatment modalities,etc. The programme would be evolved with appropriate soft-ware, data management and evaluation, with advice from theCentre for Development of Advanced Computing (C-DAC).

Diarrhoea in children being a major disease burden, prac-titioners of ISM and MM should jointly work on preventivemeasures-pure water supply and precautions, and link thesewith laja manda of ISM and WHO-oral rehydration therapy(ORT) recommendations. Baseline prevalence and improve-ment due to interactions should be monitored to assess theperformance of the team. Educational programmes in schoolsand for mothers should be integrated with diarrhoea pre-vention programmes.

In the Gadchiroli district of Maharashtra, laypersons havebeen trained in health and basic elements of ISM, to be prac-tised at home. This can go a long way in preventing infec-tions, diseases, nutritional deficiencies and allergy in children.Emphasis has to be on: (i) intestinal helminths, (ii) vitaminA/D deficiencies, (iii) tuberculosis, (iv) malaria, (v) upper andlower respiratory tract infections, (vi) otitis media, (vii)poliomyelitis, (viii) whooping cough, (ix) malnutrition, etc.

Women's infections and sexually transmitted diseases, includ-ing AIDS, can also benefit from inputs from ISM. In a projectsponsored by the Department of AYUSH, panchavalkal hasbeen shown to be safe and effective in leucorrhoea. The



Table 4

Non-drug modalities of therapy in ISM

ISM Modality Indications

Yoga Asana-pranayama Stress, anxiety, asthma

Ayurveda Pragnya-vivek Pragnya-aparadha

Panchakarma Dosha homeostasis

Naturopathy Fasting Water therapy Sama Srotavarodha

Unani Mizaz Aggravation or relief

Siddha Kalpas Ageing problems

Homeopathy Avoidance of precipitation Migraine, allergy, etc.

Table 5

Recommendations for health and longevity

Government Community Individuals

Sanitation Hygiene Personal cleanliness

Safe water Guard the supply Purifiers

Clean air Gardens and parks Fresh air

Adequate food Supply free Pathya miatahar

Health education Health centres Health diary

Encourage Ayurveda Community vaidya Griha Ayurveda

Avoid pollution Activist groups Home/work milieu

Sports and games Group events Walking/yoga

Production: rasayanas Ensure supply Individualize intake

Respect for prevention Obesity clinics Family weight control

Respect for seniors Award longevity Revere the aged

Monitor health care Health indices Commitment to health

Mahatma Gandhi Institute of Medical Sciences (MGIMS), Seva-gram can be developed as a centre for evolving models forthe extension of ISM to the rural areas.

ISM modalities for the management of theidentified diseases

Almost 25 years back, a meeting was held by the Indian Coun-cil of Medical Research (ICMR) to consider appropriate tech-nology for PHC.19 At that time, a large number of medicinalplants were included in the Indian Pharmacopoeia (IP). Thesewere later dropped. Now the IP is reconsidering the inclusionof selected Indian plants. But for integration of ISM at thePHC level, the Ayurvedic Pharmacopoeia and the Herbal Phar-macopoeia (IDMA-RRL) can also be utilized.

Monitoring of the quality of integrated health care has tobe transparent. A drug-utilization survey of Ayurvedic teach-ing hospitals and practising vaidyas would help to assess theusage frequency of Ayurvedic drugs. Prescribing habits inAyurveda vary significantly according to the geographicallocation, vaidya's background, pharmaceutical advertisements,etc. Hence, the BIM has to play a pivotal role in each State.

Primary health care and ISM services and products

The family and village communities should be the targets forand active participants in absorption of ISM in health care.The Gram Panchayat must have a Gram swasthya rakshak (GSR)as one of its members. The GSR must be trained as a basicprimary health worker with additional training in basic ISM,first aid, core nursing and mother-child care. The GSR andSarpanch should provide regular reports to the District Med-ical Officer (DMO) on the prevalence of diseases, unusual cases,epidemics, health statistics, health education activities, ISMdata, hygiene, sanitation, problems of integration, etc. Theoffice of the DMO will enter the data on a village-wise basis.The consolidated data analysis will be provided regularly tothe State DIM, who will consolidate State data for the Cen-tral DGIM. A precise but simplified format will be evolved ateach level, with help from C-DAC and the University of Pune.

Gram aushadhi vatika (GAV)

All village communities should preserve and enhance alreadyexisting groves. The Gram Panchayat and social forestry willharmonize efforts to create new groves and GAV, for a vil-lage or a group of villages. The list of herb plants and treesto be grown should be as per the climatic zone, water sup-ply, soil and local medicinal requirements. The NationalMedicinal Plants Board (NMPB), Ayurvedic and agriculturalinstitutes and universities should facilitate the process by pro-viding seeds, planting materials, advice for cultivation andpost-harvest practices, etc. Local religious, social, political andbusiness leaders must be sensitized to the need for GAV.They have to be the champions of the cause. A database ofexisting medicinal plant nurseries, farms and large cultivatedtracts must be created both state-wise and on a national basis.

The Botanical Survey of India (BSI) and National BotanicalResearch Institute (NBRI) can coordinate this effort. Thesedata should be available on the Internet. A record of the listof GAVs and their status have to be kept at every districtmedical centre as well. Wherever villages are close to forests,special projects can be initiated for socioeconomic growththrough medicinal plants. Ethnobotanical studies also haveto be encouraged. Tribal belts must receive sizeable funds andexpertise to conserve healing plants and preserve knowl-edge. Cooperative medicinal plant farms have to be estab-lished on the Amul Cooperative Model.

Gram aushadhi nirmana (GAN)

Villages with a population of more than 5000 persons mustevolve a rural pharmacy of ISM remedies. The raw materialsof the GAV as well as from other sources have to be properlystored and used. The GAN has to have minimal pharmaceu-tical facilities, viz. capsule-filling, granulation and tablet mak-ing, quath preparation, and ointments and creams. The vil-lage 'pharmacist' should be trained in simple manufacturingwith periodic inspections for hygiene, operations, etc. Phar-macy colleges also need to be involved in ISM efforts for GAVsat the district level.

Gram swasthya samvad (GSS)

The health of women, children and the elderly is often neg-lected. Gram Panchayats must hold quarterly GSS to reviewproblems, obstacles and solutions for IM. The report of eachGSS must be sent quarterly to the DMO. Referrals of seriouscases and feedback on management must be reviewed. Thevillage can invite practitioners of ISM from outside to con-duct a camp along with the GSS. The Panchayat should takeadvantage of the expertise of those who have moved out ofthe village by informing them about the GSS. Their assistance-financial, technical and professional-should enhance ISMintegration at the village level. ISM health education mobilevans should be commissioned at the district level for audio-visual and other modes of learning.

Bridge model for secondary and tertiary care

Bhavan's SPARC and the Nandigram Trust have evolved anovel rural health programme-top medical experts and vaidyasfrom the city visit the rural centres (primary health centres).Thosewho need secondary and tertiary health care are referred tocities close by or a metropolis such as Mumbai to identifiedand empathetic specialists. ISM health care mobile vans canserve the important purpose of such bridge models. ISM col-leges also have to be involved in this effort.

Quality of health care delivery in ISM

Historically, ISM were based on patient-physician relation-ships and trust. Hence, hardly any effort was made in thefield of research in health care delivery. Even in ISM educa-



tion, there is little emphasis on how to assess the quality ofhealth care delivery. A task force needs to be established toevolve a module for the quality of care in ISM. Experts inISM, health administrators and community medicine spe-cialists have to identify criteria and health indices, which wouldbe impacted by good ISM practices (GISMP). Each compo-nent of ISM has to evolve a set of guidelines for Good Clini-cal Service Practices (GCSP). For example, for diabetes mel-litus, the New Millennium Indian Technology LeadershipInitiative (NMITLI) national group has evolved GCSP guide-lines. Such efforts would assist the process of effective inte-gration of ISM for health care delivery.

Dynamic Learning Model and Deployment

ISM Education and Relevant Life Sciences

The International Association recently held an IntellectualConclave for the Study of Traditional Asian Medicine (IAS-TAM) at Pune. Vaidya Vilas Nanal20 presented the results hissurvey of Ayurvedic students. These are as follows:

� A revamping of the syllabus of ISM education is urgentlyneeded.

� Allopathy metamorphosed into MM because the basic sci-ences of chemistry, physics, biology, etc. were incorporated.

� There was resistance from the protagonists of shuddhaAyurveda against any change. However, without compro-mising on the fundamental principles of Ayurveda, mod-ern life sciences should be introduced in ISM education atthe earliest.

� Further, following subjects also need to be considered forincorporation: (i) immunology, (ii) clinical biochemistry, (iii)genetics and molecular biology, (iv) pathological physiol-ogy and (v) obstetrics and gynaecology.

� These changes would facilitate the integration of ISM inhealth care delivery.

� ISM undergraduate training must include the needs of essen-tial rural medical practice.

Pluralistic Health Care: India's Leadership Role

India is the only nation in the world with officially recog-nized multiple systems of medicine.19 But the absence offunctional bridges across the systems is a major lacuna ofour pluralistic health care. With the integration of ISM, thislacuna will be filled. Then India will offer truly global lead-ership in IM. This will depend on how efficiently and effec-tively ISM can be integrated into national health care.

Some recommendations to enrich our pluralistic health caresystem by ISM are:1. Sanitation, hygiene, clean water and nutrition should receive

maximal attention to minimize infectious disease. PositiveISM practices of personal hygiene should be ingrained.

2. Family, schools, workplaces and communities must beactively involved in following the healthy lifestyles recom-mended by ISM.

3. Monitoring mechanisms and accountability should be intro-duced at the district, State and Central levels via data trans-parency, performance appraisals and quality assurance.

4. Private ISM practitioners should be encouraged to assistthe integration process by financial, professional and socialinducements.

5. Intersystem case presentation fora must be encouraged toenhance the quality of pluralism and emphasize the needfor integrative care.

Pharmacoepidemiology and Reverse Pharmacology in ISM

A major drawback of the practice of ISM is the paucity ofdocumentation of clinical records. The clinical notes arepoor in quality or non-existent. Also, ISM education doesnot cultivate the habit of detailed clinical records. It will besome time before these habits can be rectified. Hence, tostart with, Ayurvedic pharmacoepidemiology can be initi-ated at the PHC level. The major emphasis should be on drugutilization, prevalence of diseases and safety of drugs. Spe-cial training should be provided in epidemiology even toallopathic doctors.13

Reverse pharmacology or observational therapeutics, emerg-ing at the interface of MM and ISM has to be actively encour-aged with utilization projects and centres for excellence andresearch at all tiers of health care. This approach may con-vince the world too about the evidence-based nature of ISM.Many leads for drugs have been obtained by astute clinicalobservations in the field. Table 6 lists the drugs obtained bythe reverse pharmacology path, which could be an econom-ical and effective drug development path among diverse R&Dpaths for natural products (Fig. 3).

Evidence-based IM and ISM

The age-old experiential healing wisdom of ISM constitutesa different kind of evidence from randomized controlled tri-als of drugs. ISM even have different conceptualization ofpathogenesis based on prakruti, ahar, vihar, ritu, pragnya-paradh, etc. These cannot be lightly brushed aside due to thedominant paradigms of MM. Only massive clinical data, col-



Table 6

Drugs obtained by the reverse pharmacology path

Indian Other

Medicinal plant Disease Medicinal plant Disease

Rauwolfia serpentina Hypertension Catharanthus roseus Cancer

Commiphora wightii Hyperlipidaemia Cinchona officinalis Malaria

Mucuna pruriens Parkinson disease Digitalis purpurea Heart

failure

Picrorrhiza kurroa Hepatitis Salix alba Fever

Curcuma longa Oral cancer Ephedra sinensis Asthma

lected from multiple locations, can provide evidence on thesafety, efficacy and quality of ISM. Information technologyand telecommunications must be efficiently utilized to cre-ate massive databases from thousands of villages. The dis-eases responsible for high morbidity and mortality shouldreceive priority. Such data, when analysed and interpreted,will expedite the growth of IM for health care.

Evidence-based ISM requires strong support for researchat all levels of biological organization, in a nationwideR&D network such as the New Millennium Indian Technol-ogy Leadership Initiative (NMITLI) project. There is an urgentneed to build into ISM education and service strong ele-ments of clinical pharmacology and research methods. Thevital elements are: pharmacovigilance, rational drug ther-apy, adverse drug reporting (ADR), experimental designand epidemiology. ISM practitioners trained in this mannerwould enhance the process of ISM-MM harmonization. Later,specialization with dominant ISM or MM categories couldbe undertaken for postgraduate courses. Integration ofISM would be automatic if such a change in medical edu-cation takes place.

The new model of integrative health care that India can evolvewould need to be: (i) pluralistic and patient need-based; (ii)accessible and economically viable; (iii) evidence-based, in abroad sense, with experiential data; (iv) learning and dynamicin terms of emergent diseases; (v) environment-friendly, withthe growth and use of plants; (vi) people-driven at the grass-roots levels of democracy; (vii) research and education-ori-ented for national needs; and (viii) transparent and account-able. Figures 4a and b outline the proposed new model andpriorities of integrative health care for India.

Summary and conclusions

In this paper an attempt has been made to think in an out-of-the-box manner and suggest radical ideas to revamp healthcare by a three-horizon strategic approach for ISM integra-tion. This will involve identifiable deliverables and grassroots-



Fig. 3

R&D paths for natural products

Ayurvedic usage

Whole formulations

AYURVEDIC THERAPEUTICS

Medicinal plants

Standardize

Experiential documentation(observations)

Exploratory studies

Reverse pharmacology

Field use

Standardize

Ethnomedicine

Screening of extracts Experimental researchStandard extract

Isolation of active principle Clinical phase IIClinical trials

Modern drug Natural drugsHerbal remedy

Fig. 4a

New model of integrative medicine

ORGANOGRAM

Central BIMMOH/ISM

State BIMState CM/HM

DMO DMO

Panchayats Panchayats

PM and PMO

Central DGIM

State DIM

DMO

Panchayats

and State-level 'empowered' DIM. The approach has to befrom bottom-up and not top-down. Certain proposals suchas a village-level ISM herbal garden, pharmacy and healthmeetings, if well implemented, would make India a globalleader in health matters. The emphasis has to be on the pro-motion of health and prevention of diseases by synergy ofISM-MM. The use of information technology, telecommuni-cation and computers in IM is proposed at the PHC level. TheICMR-ISSR document of 1981 has recommendations thatare still very relevant.

Certain precise and prompt actions need to be taken to empha-size the seriousness of the resolve for IM. The following aresummarized for programmes in education, service and research:1. ISM modules in the fundamentals of Ayurveda and com-

mon non-drug/drug modalities of health care must beincluded in all medical colleges within a year. Similarly,ISM students must be trained in rural health practice as perMM and in essential drugs of MM.

2. ISM and MM practitioners should be deployed for healthcare delivery, on an equal footing, in States with the poor-est health statistics. They have to undergo training in ruralhealth practice (cf Sri Lanka)

3. The list of drug and non-drug modalities of ISM sug-gested by consensus has to be widely circulated and a for-

mulary published as soon as possible (within 6 months). Acomposite medicine kit needs to be evolved for villages toaddress common household ailments. Ayurvedic pharma-coepidemiology and reverse pharmacology centres mustbe established in each State to identify currently used,safe, effective and quality ISM remedies.

4. Gram aushadhi udyan cooperative farms and Gram aushadhinirmana must be developed in at least 10,000 villages alreadybeing served by competent NGOs. Village healers have to beidentified, and their skills assessed, enhanced and utilizedin the integrative model. The FRHLT can be a catalytic agency.

5. Ayusoft and computer-friendly case-record forms must bedeployed in these 10,000 villages (C-DAC has already initi-ated a project). An interactive website needs to be created forinputs and suggestions in the process of integration of ISM.

6. The Central Directorate of Integrative Medicine (CDIM) mustbe created within six months to steer the course.

7. Targets, transparency, accountability for ISM/IM perform-ance, etc. have to be in the public domain and monitoredby local citizens' groups for quality and deliverables. Theinfrastructure and adequacy of supplies of AYUSH drugshave to be actively ensured. Modern management tech-niques are to be used.

8. The community must be involved for maximum supportto the local IM personnel and infrastructure. Financial inputshave to be at the Panchayat/PHC level, need-based andaccountable. Health education at school level must includeISM lifestyles and disease-prevention modalities.

Acknowledgements

The paper used diverse contributions-written, verbal andscientific-from several authentic experts and colleagues.Some of the communications have been part of long-termdialogues on the subject of health care and ISM. I craveindulgence for any errors of opinions. I thank all the fol-lowing for their inputs:

Dr Ranjit Roy Chaudhury, Dr Shailaja Chandra, Dr Naren-dra Bhatt, Dr Urmila Thatte, Dr Darshan Shankar, Late Pro-fessor Sharadini Dahanukar, Dr Navneet Fozdar, Dr D.B. Anan-thnarayana, Dr Abhay Bang.

I wish to thank Drs Pradnya Talawadekar and ShridharAnishetty for technical and Ms Anupama Bhaskaran for sec-retarial assistance.



Fig. 4b

Priorities of integration of ISM

Reductionin morbidity

and mortality

Integrativedisease

management

Promotionof

healthPreventionof diseasesHealth

pluralism,patient's needs

and accessibility

Qualityof life and

longevity

Learningand

dynamic model

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Effective Integration of Indian Systems of Medicine in Health Care Delivery SECTION I

RIVATE HEALTH MARKETS ARE COMPLEX AND PROFOUNDLY AFFECTED BY several factors. The nature of health financing and payment systems, type of tech-nology, cost of initial education and training, public expectations and perceptions,regulatory framework, and social values are some of the factors that interact withone another to determine how equitable, efficient, safe and accessible the private sec-tor could be. International experience shows that the private sector tends to focuson profit maximization and is hardly concerned with public health goals (Bennett1997), making state intervention essential. In India, largely due to lack of under-standing of the implications, the state's role has been negligible in articulating astrategic vision of the health system that we should have and would be appropriatefor us, given our levels of development, wide disparities, huge diversity and poverty.In the absence of such a vision, the growth and development of the private sector inthe delivery of health services has been relatively autonomous and independent, andnot a consequence of any deliberate state policy.

Over the years, the private sector in health care has gained a dominant presence inall the submarkets–medical education and training, medical technology and diag-nostics, manufacture and sale of pharmaceuticals, hospital construction and ancil-lary services and finally, the provision of medical services. Three-quarters of the humanresources and advanced medical technology, 68% of a total of over 15,097 hospitalsand 37% of over 623,819 beds in the country are in the private sector (Directory ofHealth Services, GOI 1996). Another estimate showed that the private sector pro-vided almost 81% of all outpatient (OP) and 46% of inpatient (IP) care (52nd Roundof the National Sample Survey [NSS]). Analysis of the 57th Round of the NSS cover-ing 30,000 health providers shows that there are an estimated 13 lakh private healthcare provider enterprises employing 22 lakh people. Over one-third of them have noregistration of any kind and 25% are AYUSH practitioners. An important subset ofproviders are the large number of informal providers–quacks (almost one in every vil-lage), bonesetters, traditional healers, traditional birth attendants (TBAs), etc. (SeeAnnexure I for note on analysis and detailed tables of the 57th Round NSS). A sur-vey of 'quacks' in 3 districts of Andhra Pradesh showed that there was one for every2000 population (Rao et al. 1997)

Private expenditure as percentage of the gross domestic product (GDP) is esti-mated at 72%, and the private health market is over Rs 71,000 crore. If the pharma-ceutical industry is added, it would be another Rs 31,000 crore. The CII-McKinseyReport of 2004 has estimated the private sector in India to be worth Rs 69,000 croreand expects it to double to Rs 156,000 crore by 2012, besides an additional Rs39,000 crore if health insurance picks up. The study also estimates that the propor-tion of IP care will go up to 47% largely due to lifestyle diseases, namely cancer andcardiovascular diseases. This growth is likely to require an additional 750,000 beds,520,000 doctors and an overall investment of Rs 100,000-150,000 crore, of which80% has been projected as the share of the private sector.

Coinciding with falling public health investment, emergence of non-communica-ble diseases and a spiralling demand, there has been a steady growth in the corpora-tization of medical care. In no small measure is this development a result of the processof liberalization since the early 1990s. Several NRIs and industrial/pharmaceuticalcompanies are investing money in setting up superspecialty hospitals such as Medi-nova, CDR, Mediciti, L.V. Prasad Eye Institute in Hyderabad, Hindujas and Wockhardtin Mumbai, Max and Escorts in Delhi, etc. Apollo Hospitals raise a substantial pro-

Delivery of health services in the private sector

P


S E C T I O N I I

K. SUJATHA RAO SECRETARY, NATIONAL

COMMISSION ONMACROECONOMICS AND

HEALTH, GOVERNMENT OFINDIA, NEW DELHI


MADHURIMA NUNDYCENTRE OF SOCIAL MEDICINE

AND COMMUNITY HEALTH,JAWAHARLAL NEHRU

UNIVERSITY, NEW DELHIE-MAIL:

[email protected]

AVTAR SINGH DUAMEMBER, SUB-COMMISSION,NATIONAL COMMISSION ON

MACROECONOMICS ANDHEALTH, GOVERNMENT OF

INDIA, NEW DELHIE-MAIL:

[email protected]

portion of their resources from the stock market. These insti-tutions are capable of providing world-class care at a frac-tion of the cost compared to the West. There is, thus, enor-mous potential for India to become a hub for medical tourism,with trade-offs in terms of welfare implications such as rais-ing the overall cost of health care in the country (Purohit 2001).For example, a substantial proportion of insurance claimsare for treatment in corporate hospitals. If this trend increasesthen we can soon be talking about a high-cost medical sys-tem for those who are insured and able to afford such healthcare. Keeping pace with this kind of hi-tech, inappropriate,supplier-induced system, which keeps an eye on profit max-imization and good dividends for their shareholders, couldwell mean higher budget outlays for government hospitals ifthey are to stay and be counted.

Public Policy Response: Public-Private Partnership

In response to this enormous resource, since the past five years,the Government has been attempting to engage the privatesector in providing services under the National Health Pro-grammes (NHPs). The primary objective of such an attempthas been to expand access to health care. As can be seenfrom Table 1, the experience has been far from satisfactoryand even the little success achieved is more due to the part-nership with the not-for-profit sector and non-governmen-tal organizations (NGOs). The huge for-profit sector contin-ues to be a parallel development that public policy has yet totake cognizance of.

Apart from the limited engagement of the government withthe private sector for achieving public health goals, otherforms of public-private partnerships can be categorized intothree types:

(1) Handing over public facilities to the private sector for

management, more in the nature of a joint partnership. Underthis scheme, about 35 primary health centres (PHCs) (31 inKarnataka and 4 in Gujarat) have been handed over to NGOsto manage. In Karnataka, the superspecialty hospital con-structed in Belgaum under the OPEC Assistance programmehas been handed over to the Apollo Group for managementwith some further grants for meeting a part of the recurringcosts during the first year. In Chhattisgarh, the State Gov-ernment provided Escorts a grant of Rs 12 crore to build andoperate the cardiac specialty centre, subject to earmarking15% of patients identified by the Government to be treatedat discounted rates.

(2) A major initiative and the first, serious, large-scale expe-rience of contracting the for-profit sector has been the Cen-tral Government Health Scheme (CGHS), which has a contractwith over 200 private providers for the medical treatment ofits members as per pre-fixed rates. Other public sector under-takings (PSUs) have private doctor/hospital panels for theiremployees for OP and IP care, and some organizations suchas the Railways have their own health facilities, contract outto the private sector for specified superspecialty services.

(3) Similarly, State Governments are also innovating withvarious forms of such public-private partnerships for specificservices ranging from ancillary services, such as, laundry andsecurity to diagnostics, drug management, etc. In West Ben-gal, diagnostic services for high-end equipment such as mag-netic resonance imaging (MRI) are outsourced to privateproviders who work within the medical college campus sub-ject to covering a certain number of cases referred by themat pre-fixed rates. In Rajasthan, drug stores established in allhealth facilities are managed by the private sector in lieu ofa commission over the rates fixed. This has been found to bebeneficial as there are no stockouts or non-availability ofessential drugs at any point of time. Other forms of contractingare for specific ancillary services such as security, canteens,

sanitary services, landscaping, etc.Efforts of the Government to collabo-

rate with the private sector have been pro-gramme-based, sporadic, disjointed andtentative, and not the result of a wellthought-out strategy aimed at achievingnational health goals. Despite the mixedand varied experience, it is clear that col-laboration with the private sector couldenable expansion of access. The problemis a lack of clarity as to the financial, legaland institutional arrangements that gov-ernments need to possess to ensure thatsuch partnerships result in social gain. Theexperience of giving incentives to privatehospitals, such as excise duty exemptions,free land, etc. in lieu of treating 10% ofIPs and 40% of OPs free has not beenfavourable. Such adverse experiences ofnon-compliance with the conditionsimposed were observed by the LegislatureCommittee of Andhra Pradesh as well as


SECTION II Delivery of health services in the private sector

Table 1

Public-private partnership in health care

Name of the programme Nature of collaboration Outcome

Malaria Nil

TB IEC, provision of diagnostic services Negligible–problem of conflict and laboratory support of interest

Blindness due to cataract IEC and cataract surgeries Positive–30% of cataract surgeries contributed by the private sector

Leprosy IEC Substantial

RCH Contracting specialists, conducting Poor–huge amounts allocated for RCH camps, IEC contracting services of specialists

left unutilized due to the non-availability of specialists where needed and amount offered found not worthwhile by private practitioners.

HIV IEC, care and support Positive–mainly NGOs.

TB: tuberculosis; IEC: information, education and communication; RCH: Reproductive and Child Health; NGO: non-governmental organizationSource: Authors' assessment

the Delhi High Court.Demographic shifts, the dual burden of pre- and post-

transition diseases, constrained public resources and the grow-ing demand for services that require resource-intensive treat-ment are factors that cannot be ignored. The private sectorprovides services only to those who are able to pay for them,leaving out a majority of the poor and lower middle-incomegroups, who become impoverished when they do avail of suchservices. While efforts to strengthen and optimize existingpublic facilities with more investment and better manage-ment should receive priority, collaborating with the privatesector will still be required due to the government's limita-tions in mobilizing the required capital for meeting thegrowing demand and, more importantly, the expertise andskill base that the private sector possesses. Adoption of a moreholistic and pragmatic approach–of contracting with theprivate sector–will need to be considered for expanding access.Any such policy will have to be within the context of a reg-ulatory framework and insurance system to ensure that thereis no adverse selection and risk-sharing is facilitated. In otherwords, supporting the private sector without accompanyingpolicies to provide financial risk protection could be ruinousas is being witnessed today.

We now discuss the current status of the private healthsector in India based on a qualified provider facility surveyconducted by the National Commission on Macroeconomicsand Health (NCMH) in eight districts and briefly analyses, withthe help of available data, issues that public policy needs toconsider before collaborating with the private sector. The sec-tion is divided into three parts. Part I gives a brief overviewof the salient points regarding the current status of the pri-vate sector; Part II details some key findings of the eight-dis-trict facility survey of all qualified providers; and Part III dis-cusses policy issues arising from the study.

Part IPrivate Sector in India–Current Status

Since the past 15 years, several researchers have sought to studythe nature, spread and functioning of the private sector in India(Baru, Bhat, Nandraj, Dugal, Mahapatra, Jesani). Those stud-ies have brought out the diversity in the composition of theprivate sector, which ranges from voluntary, not-for-profit,for-profit, corporate, trusts, stand-alone specialist services,diagnostic laboratories, pharmacy shops, unqualified providers(quacks); each addressing different market segments. Mostcharacterization of typology suggests that the private sectorconsists largely of sole practitioners or small nursing homeshaving 1-20 beds, serving the urban and semi-urban clien-tele and focused on curative care.

In the absence of regulations governing location, standards,pricing, to name a few, private facilities run in marketplaces, res-idential colonies, pharmacy shops, with the freedom to provideany kind of services, of whatever quality and at exorbitant cost,which varies from facility to facility. However, due to a weaklegal framework, only a few studies based on small localized sam-ples reveal the type of services being provided, human resources

engaged, technology used, etc. by the private sector. Somestudies have, however, documented the abysmal quality of caregiven by private providers at the rural periphery. Baru (2002) foundthat the private sector appointed persons at low wages, and dis-charged patients earlier than medically advisable to keep a quickturnover of patients. In a survey of 24 hospitals in Mumbai, halfwere found to be operating from sheds and lofts, congestedspaces, with leaking operation theatres (OTs) and over 90% ofunqualified nurses and doctors with degrees in alternative med-icine providing care in allopathic medicine. Care included unnec-essary tests, consultation and surgery, without providing anyinformation on diagnosis or treatment (Nandraj 1994). Thankap-pan's study in 1999 of 9 hospitals in the Thiruvananathapuramdistrict of Kerala showed that the private sector tended to keeppatients in their hospitals for a shorter time and order morediagnostic tests as compared to public sector hospitals.

These studies also suggest that the macroeconomic con-text provided the main stimulus for the proliferation of theprivate sector–the National Health Policy of 1983, advocat-ing the private sector to offer specialty services provided apolicy context for extending a spate of subsidies in the formof excise duty exemptions, subsidized land, bank credit, etc.The corresponding decline in public expenditure on health,particularly capital investment, constrained the public sectorfrom keeping pace with the private sector, in terms of finan-cial, human and technological resources; the shifting demandfor services as a result of demographic and epidemiologicalchanges; rising incomes that increased the willingness topay for health services that did not entail long queues andwere aligned with their perceptions of quality (saline injec-tions, or going through needless tests, for example); an unfet-tered regulatory environment, etc.

Public Policy Challenges

The irrefutable evidence brought forth in all these studiesoften raises questions of what the future direction of publicpolicy should be. Should it, as argued by some (National HealthPolicy 1983; World Development Report1993), confine itselfto providing only public goods and primary care and leave allcurative care to market forces; or regulate the private sector,selectively contract its services to achieve public health goalsand compete with it; or should the Government over timebecome a purchaser and regulator of service delivery and divestitself from the responsibility of service provisioning? Whatwould be the correct approach keeping in view the state'sobligations to the poor on the one hand, and severe limita-tion on public finances on the other? Current research onthe private sector falls short in providing the financial andpolicy implications for the Government on how to contractthe private sector, where, for what and why, and what wouldbe the most cost-effective option based on a clear under-standing of the functioning of the health system at the dis-trict level. A survey conducted of all qualified providers in 8districts is a part of the effort to get a closer appreciation ofthe ground-level reality so that based on such evidence pol-icy implications can be examined at the local level.


Delivery of health services in the private sector SECTION II

Part IIDistrict-based Facility Survey of Qualified Providers

Since any public contracting or social insurance arrangementscan be implemented only with qualified providers and accred-ited facilities, it was felt necessary to understand the supplymarkets in the qualified provider subsector. Accordingly, thesubcommission of the NCMH undertook a facility survey in8 districts to obtain information for filling existing informa-tion gaps.

The key research questions for the survey were whether theprivate sector is actually available in underserved areas wherethe functioning of the public sector is poor or unavailable.What is the organizational structure of the private sector?What services does the private sector actually provide andwhat skills and technology do they possess? What is the levelof utilization and what prices do they charge for basic serv-ices? Is the private sector really much more efficient than thepublic sector? Is it complementing or substituting public serv-ices, and if so, to what extent? Is it adding value or merelyduplicating what the public sector is doing resulting in anoverall waste of resources?

The motivation for undertaking this survey was to assessthe 'supply gaps' that need to be addressed for designingdemand-side financing such as social health insurance (akey concern in the context of the increasing costs of medicaltreatment resulting in the impoverishment of about 3% ofthe population). The failure of the Universal Health Insur-ance Scheme to reach out to the poor despite its attractive-ness is in large part due to the lack of availability of serviceswithin reach, provider markets being fragmented, dysfunc-tional and weak.

Methodology

The survey was taken up in 8 median districts identified inthe 1991 Centre for Monitoring Indian Economy (CMIE) index:Nadia (West Bengal), Jalna (Maharashtra), Khammam (AP),Kozhikode (Kerala), Vaishali (Bihar), Varanasi (UP), Ujjain (MP)and Udaipur (Rajasthan). It covered only the qualified providersector of both the disciplines–allopathy and AYUSH. Thesurvey was undertaken by well-known and reputed agenciesand the data validated by random inspections of facilities aswell as detailed discussion with district authorities.

The survey obtained information on the ownership pattern,services provided, utilization levels, human resources appointed,equipment used, prices charged for some services, etc. Sucha database is useful for micro-level planning for ensuring anequitable geographic distribution of facilities. Geographicalinformation systems (GIS) mapping has helped us measurethe distances people have to travel for accessing services,duplication or overlap between the public and private facil-ities, identifying the underserved areas to quantify the levelof additional investment required; relocating of existing facil-ities for achieving better efficiency, etc.

The block-wise survey data for key indicators was tabulated.

While the 8 districts have 93 blocks in all, due to the non-availability of the coordinates for Varanasi and Kozhikode,the tabulation was in terms of tehsils. Both these districts have3 tehsils and 7 and 12 blocks, respectively. Due to this, thetotal number of blocks is expressed as 80, instead of 93, asthey include 6 tehsils instead of 19 blocks of Kozhikode andVaranasi. The surveyed districts covered a population of 210lakh–9987 villages and 83 towns.

Results of the Survey Size, growth and organizational structure of the private sector

In the surveyed districts, there are a total of 9457 facilities runby qualified providers. Of these, 61% are private. Since the pastdecade, the number of private hospitals has increased. Two-thirds of the corporate hospitals and 50% of the hospitalsowned by partnership firms were established after 1995. Thesurvey also showed a high concentration of these facilities,clustered as they are in 5.5% of the villages and about 73 towns.The ratio of the public-private sector is 60:40 in rural areas ascompared to 10:90 in urban areas. The higher percentage ofpublic facilities in rural areas is on account of the subcentresestablished for every 5000 population. On analysis we foundthat the presence of the private sector in the poorest 15 blocksis negligible (See Annexure II for detailed tables of the sur-vey and also the website of the Ministry of Health, GOI, forBlock wise data).

Organizationally, the private sector is fragmented, with 91%of the facilities being run by sole proprietors. The survey, how-ever, indicated a falling trend under this category and anincrease of partnerships. There was also an increase of cor-porate hospitals from 5 before 1980 to 36 in 2000-04 (Fig. 1).



Fig 1

Cumulative establishment of facilities over theyearsn = 7319, public facilities = 1605, private = 5714; Year ofestablishment not available for 1967 facilities

Source: Faculty survey, NCMH 2004

Infrastructure of the private sector: Beds, humanresources, and diagnostic services

Almost 86% of the facilities are small, OP clinics with one ortwo beds. Of the 1281 facilities having 35,349 beds, 49% bedsare in 931 private facilities (Figs 2 and 3). Two-thirds of thefacilities and 79% of beds are in urban areas. An intra-dis-trict analysis based on measuring the adequacy of beds bythe norm of 100 beds for every 100,000 population shows adisturbing picture. Considering a block has, on an average,over one lakh population, nearly 75% of the blocks have barely3 beds, and one block in Nadia with a population of 1.9 lakhhas no beds at all.

Human resources in the private sector

In the 8 districts there are a total of 2746 MBBS doctors and4466 specialists. Seventy-five per cent of these specialists arein the private sector: 61% anaesthetists, 78% cardiologists,85% general physicians and 73% gynaecologists and sur-geons (Tables 2 and 3). The number of specialists workingper facility increased in accordance with the number of bedsin the facility, with the majority in the above 30-bed cate-gory hospitals.

The ratio of doctors per 1000 population is disturbingly low,except in Kerala. The total average for all these districts is0.40/1000, far lesser than 0.59/1000 for all India. The posi-tion is particularly severe in Jalna, Nadia, Khammam andVaishali. This is despite Khammam having a private medicalcollege.



Fig 2

Distribution of beds in rural areas

Fig 3

Distribution of beds in urban areas

Table 2

Availability of full-time and part-time MBBS doctors in public and private sectors

Urban Rural % of full-time

District Public Private Public Private Full-time doctors in the

Full time Part time Full time Part time Full time Part time Full time Part time Public Private Total public sector

Jalna 9 0 52 2 44 0 10 2 53 62 115 46.1

Khammam 34 0 56 17 75 0 35 1 109 91 200 54.5

Kozhikode 89 0 139 15 117 0 214 11 206 353 559 36.9

Nadia 123 0 71 207 85 0 56 109 208 127 335 62.1

Udaipur 311 0 68 20 99 0 57 0 410 125 535 76.6

Ujjain 74 0 90 13 20 0 106 9 94 196 290 32.4

Vaishali 24 0 100 6 40 0 76 16 64 176 240 26.7

Varanasi 52 0 288 64 38 0 94 14 90 382 472 19.1

Total 716 0 864 344 518 0 648 162 1234 1512 2746 44.9

Note: A part-time doctor could serve part-time in more than one facility and hence there are chances of double-countingSource: Faculty survey, NCMH 2004

Source: Faculty survey, NCMH 2004 Source: Faculty survey, NCMH 2004

The position is equally dismal in relation to nurses. The aver-age for all districts is 0.32 per 1000 population while it is0.23 in Vaishali and only 0.16 in Khammam. Of the 80 blocks,32 have less than 0.10/1000. The position of other paramedicalprofessionals is equally dismal.

Access to emergency obstetric care

Of particular interest for us was to assess the access to skillsand emergency obstetric care (EmOC) as Madhya Pradesh,Uttar Pradesh, Bihar and Rajasthan are States with unac-

ceptably high levels of maternal and infant mortality, andwhere institutional deliveries are particularly low. To meas-ure access, facilities having a full-time gynaecologist andanaesthetist or a full-time surgeon and anaesthetist, as proxyfor providing EmOC facilities, were listed. The norm adoptedwas 1 facility with a combination of these specialists forevery 100,000 population, where, as per government norms,a community health centre (CHC) consisting of 4 specialistsis expected to be located. As per this norm, 70% of the blockshave no EmOC facilities, while the remaining 23 have a clus-tering of 113 facilities accounting for 50% of the caesareansections (Table 4).

Access to diagnostic laboratories and technology

Data were collected for 21 items of equipment and 17 inves-tigations/tests. Almost half of the haematology and urinetests and one-third of angiographies are being done inthe public sector, while the rest of the tests are mainly donein the private sector. With regard to diagnostic equip-ment, the dominance of the private sector is total; 90% ofthe expensive equipment is concentrated in a few urbanareas.

Of all tests and investigations, haematology is consideredthe most basic, while electrocardiogram (ECG) and X-ray arenow considered fairly routine. Computerized tomography (CT)scan and MRI require high-end equipment. There is substantialinfusion of technology, brought in largely by the private sec-tor. Almost 20% of the blocks do not have even one X-raymachine and in a backward district, such as Vaishali, thereare 69 X-ray machines, all in the private sector. Taking thenorm of 1/10 lakh population for a CT scan or an MRI, analy-



Table 3

Availability of full-time allopathic specialists in public and private sectors

Urban Rural Total

Specialist Public % public Private % Private Total Public % public Private % private Total Public % public Private % private Total

Anaesthesist 96 40.85 139 59.15 235 8 28.57 20 71.43 28 104 39.54 159 60.46 263

Cardiologist 22 23.91 70 76.09 92 0 0.00 6 100.00 6 22 22.45 76 77.55 98

Dentist 28 10.04 251 89.96 279 14 6.83 191 93.17 205 42 8.68 442 91.32 484

Endocrinologist 6 35.29 11 64.71 17 0 0.00 0 0.00 0 6 35.29 11 64.71 17

ENT specialist 47 29.01 115 70.99 162 5 16.67 25 83.33 30 52 27.08 140 72.92 192

Gastroenterologist 9 27.27 24 72.73 33 0 0.00 2 100.00 2 9 25.71 26 74.29 35

Gynaecologist 138 24.38 428 75.62 566 32 22.86 108 77.14 140 170 24.08 536 75.92 706

Ophthalmologist 54 23.68 174 76.32 228 10 17.86 46 82.14 56 64 22.54 220 77.46 284

Orthopaedician 56 25.00 168 75.00 224 4 10.53 34 89.47 38 60 22.90 202 77.10 262

Paediatrician 102 28.25 259 71.75 361 26 30.59 59 69.41 85 128 28.70 318 71.30 446

General physician 99 15.02 560 84.98 659 38 15.83 202 84.17 240 137 15.24 762 84.76 899

Psychiatrist 25 37.88 41 62.12 66 0 0.00 7 100.00 7 25 34.25 48 65.75 73

Skin and VD specialist 24 23.76 77 76.24 101 2 11.76 15 88.24 17 26 22.03 92 77.97 118

General surgeon 136 32.30 285 67.70 421 26 22.22 91 77.78 117 162 30.11 376 69.89 538

Urologist 10 20.00 40 80.00 50 0 0.00 1 100.00 1 10 19.61 41 80.39 51

Total 830 2572 3402 165 801 966 995 22.28 3373 75.53 4466Source: Faculty survey, NCMH 2004

Fig 4

Availability of equipment/investigations inpublic and private facilitiesECG: electrocardiography; CT: computerized tomography, MRI:magnetic resonance imaging


sis showed that there were a total of 30 CT scan and 24 MRIequipment, indicating an excess (Fig. 4). The study also founda proliferation of other technology–over 300 ultrasound and106 Doppler machines.

Nature of Services

The share of the private sector in the provision of dental,ENT, orthopaedic services, and for all non-communicable dis-eases such as myocardial infarction, cancer chemotherapy,mental health, medical termination of pregnancy (MTP), hys-terectomies is very high, accounting for almost three-fourthsof the total caseload. The survey also showed that the privatesector seemed to be actively engaged in providing treatmentfor acute care as well–tuberculosis (TB), deliveries, child-hood diseases (Fig. 5).



Table 4

Block-wise availability of emergency obstetric care facility

Number of facilities with full-time specialists

Gynaecologist and anaesthetist Surgeon and anaesthetist EmOC per 100,000

District Blocks Population Public Private Public Private Total* population

Jalna Ambad 207142 1 0 1 0 1 0.5

Badnapur 131362 0 1 0 0 1 0.8

Jalna 432129 1 4 2 4 8 1.9

Khammam Bhadrachalam 158625 1 0 1 0 1 0.6

Khammam 690728 1 4 1 1 5 0.7

Kothagudem 346472 1 2 0 1 4 1.2

Kozhikode Kozhikode 1100582 2 10 3 9 13 1.2

Quilandy 621623 1 0 1 0 1 0.2

Vadakara 575344 2 5 1 4 7 1.2

Nadia Krishnaganj 133359 1 0 0 0 1 0.7

Krishnagar-I 280386 0 1 0 0 1 0.4

Municipal Areas 749705 3 3 4 3 7 0.9

Ranaghat-I 207394 1 0 1 0 1 0.5

Santipur 217318 1 0 0 0 1 0.5

Udaipur Girwa 740863 3 6 3 7 13 1.8

Salumbar 212492 0 0 1 0 1 0.5

Ujjain Ghatiya 90828 0 1 0 1 1 1.1

Nagda 84929 0 1 0 1 1 1.2

Ujjain 968693 3 5 2 5 8 0.8

Vaishali Bhagwanpur 162213 0 1 0 0 1 0.6

Lalganj 173856 1 2 1 2 4 2.3

Vaishali 146364 0 0 0 1 1 0.7

Varanasi Varanasi 2334190 5 20 6 20 31 1.3

10766597 28 66 28 59 113 1.0

EmOC: emergency obstetric careOnly 23 blocks have full-time gynaecologists and anaesthetists/general surgeons and anaesthetists *Total facilities providing EmOC is less than the total of previous four columns because one facility could have all three-gynaecologist, surgeon and anaesthetist

Fig 5

Public-private share in National HealthProgrammesTB: tuberculosis; ARI: acute respiratory infection; MTP: medicaltermination of pregnancy

Utilization of Facilities

Outpatient care

Overall, the private sector share of OP cases is estimated tobe 52% (Table 5), comparatively lower than the estimateof 81% indicated in the 52nd Round of NSS. Besides, onextrapolating the OP cases over 7 days to the year, datashowed that the number per thousand was double that ofNSSO estimations at 2171/1000, with Kerala at a high of4204 and Vaishali at a low of 775 per 1000 population(Table 6). This indicates a gross underestimation of the NSSdata as the survey covers unqualified quacks as well. Anothercaveat to be kept in mind while interpreting these data isthe timing of the survey. This survey was taken up in 2004,following a three-year economic downturn in the rural areas,which could have made people opt for public sector facil-ities on grounds of affordability. Such an association between

economic hardship and preference forpublic sector care has been observed inother countries such as Indonesia, Koreaand Thailand during the economic reces-sion of the late 1990s.

While private facilities had higher OPcases, the average turnover per facility wasalmost four-fold higher in the public sec-tor facilities, as also the number of patientsseen per doctor, in three districts–Kham-mam, Jalna and Nadia.

Inpatient services

The survey provided information on the useof facilities for IP care and the bed occu-pancy rate. Of the total IP cases, 47% uti-lized private facilities. In Udaipur and Nadia,utilization of the private sector was low.The IP data also showed that the rate of IP

per 1000 popula-tion was 45.5 (Table7)against 16/1000estimated in 52ndRound of NSS.However, rough cal-culations suggestthat the NSS may bea gross underesti-mation.

Bed occupancyrate is a good indi-cator of the effi-ciencies in the sys-tem. It also indi-cates the urban-rural differentials.The bed occu-



Table 5

Number of outpatients in the past 7 days

Grand total

District Total Share of the Total Share of the Total

public public sector private. private sector

Jalna 17228 19.9 69508 80.1 86736

Khammam 85165 60.0 56884 39.8 142049

Kozhikode 139262 58.2 100153 41.8 239415

Nadia 81381 59.0 56584 41.0 137965

Udaipur 75255 65.3 39946 34.7 115201

Ujjain 31893 40.7 46521 59.3 78414

Vaishali 5839 13.5 37534 86.5 43373

Varanasi 27166 22.2 95341 77.8 122507

Total 463189 502471 965660

% 48.0 52.0 100.0

* Information on subcentres has not been included in calculations for these tablesSource: Faculty survey, NCMH 2004

Table 6

Number of outpatients per 1000 population per year

OP No.of OPs per year OPs per 1000 per year

District Government Private Government Private Total Government Private Total

Jalna 17228 69508 895856 3614416 4510272 528.5 2132.4 2660.9

Khammam 85165 56884 4428580 2957968 7386548 1651.8 1103.3 2755.1

Kozhikode 139262 100153 7241624 5207956 12449580 2445.4 1758.7 4204.1

Nadia 81381 56584 4231812 2942368 7174180 871.3 605.8 1477.1

Udaipur 75255 39946 3913260 2077192 5990452 1382.6 733.9 2116.4

Ujjain 31893 46521 1658436 2419092 4077528 910.2 1327.7 2237.9

Vaishali 5839 37534 303628 1951768 2255396 104.3 670.7 775.1

Varanasi 27166 95341 1412632 4957732 6370364 419.2 1471.1 1890.2

Total 463189 502471 24085828 26128492 50214320 1041.5 1129.8 2171.3

OP: outpatient*Information on subcentres has not been included in calculations for these tables Source: Faculty survey, NCMH 2004

Fig 6

Average number of inpatientsper facility in the past 30 daysby availability of beds


pancy rate in rural areas is 47% and 55% in urban areas. Onan average, the bed occupancy in the private sector is 44%as compared to 62% in the public sector. Nearly 50% of allthe private facilities having beds had less than 50% bedoccupancy rates. Though the utilization of public facilitiesis more than the private (Fig. 6), in terms of per facility num-ber of cases and also in the bigger range hospitals, the totalnumber of IPs is higher in the private sector because thereare a larger number of small units. This clearly corroborateswith other evidence on this subject–the failing public sec-tor in rural areas due to absenteeism and inadequate facil-ities being made up by small-sized nursing homes and theoverflowing city hospitals. In cities, public hospitals areable to compete with the private sector hospitals, despiterelatively lesser access to resources (Fig. 7).

Cost of care

The payment system in the private sector is predominantlybased on fee for service. Due to the absence of any system ofprovider control, there is a huge variation in the prices chargedfor similar services. An IOL surgery can cost anywhere betweenRs 2000 and Rs 80,000, a caesarean section can cost betweenRs 3500 and Rs 50,000. To get an idea of the prices in thesemedian districts for some common medical interventions, datawere obtained through exit interviews of patients and ratecards where available. The average charges for some com-mon procedures are listed in Table 8.

The pricing structures indicate an interesting pattern: pricesare lower in rural areas for the same procedure/service/inves-tigation; prices are far higher in Kozhikode than the 3 north-



Table 7

Inpatients per 1000 population per year

Total Facilities IP for 30 days No. of IPs per year IPs per 1000 per year

District Government Private Government Private Government Private Total Government Private Total

Jalna 54 466 2287 4304 27444 51648 79092 16.2 30.5 46.7

Khammam 559 300 6054 8572 72648 102864 175512 27.1 38.4 65.5

Kozhikode 203 964 7229 7695 86748 92340 179088 29.3 31.2 60.5

Nadia 436 1452 16863 1821 202356 21852 224208 41.7 4.5 46.2

Udaipur 630 361 6901 3994 82812 47928 130740 29.3 16.9 46.2

Ujjain 178 307 2962 2880 35544 34560 70104 19.5 19.0 38.5

Vaishali 314 579 426 4579 5112 54948 60060 1.8 18.9 20.6

Varanasi 276 1360 4071 7139 48852 85668 134520 14.5 25.4 39.9

Total 2650 5789 46793 40984 561516 491808 1053324 24.3 21.3 45.5

IP: inpatientSource: Faculty survey, NCMH 2004

Fig 7

Distribution of inpatients by availability of beds

Table 8

Charges for some common medical procedures(in Rupees)

Services Urban- Rural- Cost in Cost in Private:

private private private public Public

facilities facilities ratio

Normal 582-1925 275-1350 472-1573 0-128 18.3delivery

Caesarean 2291-5385 1843-3910 1792-4647 50-250 24.3section

Major 2314-6950 2021-5000 1638-5975 0-711 20.8surgery

ECG 60-119 56-121 56-115 0-55 3.6

X-ray 72-111 62-140 68-123 0-143 2.2

Blood test 36-86 20-43 30-59 0-19 5.1

OP per 24-64 12-31 18-37 0-12 10.7episode

IP per 38-117 20-59 38-84 0-80 2.6hospitalization

Source: Faculty survey, NCMH 2004Source: Faculty survey, NCMH 2004

ern States, which is clearly indicative of the cost of inputsand paying capacity, as it is known that Kerala is more expen-sive–labour costs are higher as also the people's willingnessand ability to pay. Thirdly, government pricing is three timeslower than market prices. This is one reason for the generalperception that physicians take payments under the tablemaking it equally expensive for the poor. However, it is clearthat the prices are unaffordable for the poor, particularly thosewho earn less than Rs 50 a day. Since most of these servicesare also clustered in specific urban areas, accessing them alsoentails substantial indirect expenditures. This is one factorwhy an increasing proportion of persons do not avail oftreatment on grounds of 'not being serious'. Therefore, inthe absence of subsidized care in public facilities or insur-ance coverage, the poor either resort to low cost solutionssuch as the village quack, do not use services, or get impov-erished when they do.

Government initiatives for public-private partnerships

Given the huge spread of the private sector, it is expectedthat public policy would have assiduously sought their serv-ices to extend the reach of public health programmes. Syn-ergizing the efforts of the two sectors in mutually beneficialpartnerships to provide a package of services could have thepotential to enhance and upscale the implementation ofseveral programmatic interventions, such as institutional deliv-eries, cataract surgeries, sterilizations, provision of DirectlyObserved Treatment, Short-course (DOTS) under the TB Con-trol Programmes, etc. The survey showed that such partner-ships were few, not exceeding 4.6% of the total private facil-ities and that too largely in Jalna, Khammam and Udaipur.

What can we learn from the evidence?

The facility survey was undertaken in the context of assess-ing the supply-side issues of the health system in a scenariothat seeks to introduce a universal social health insurancescheme. Such an evaluation was considered necessary in thelight of the prevailing perception at policy level that the pri-vate sector could address the health needs of the poor wherethe public sector has failed, by addressing the financial bar-rier through health insurance. The survey has clearly broughtout three important issues: (i) that there is a very highly skeweddistribution pattern of facilities, beds and specialists; (ii) a verylarge number of providers working as sole practitioners areproviding substandard treatment; and (iii) the cost of theprivate sector is high. These then are the aspects that a pub-lic policy will have to address while designing an appropriatestrategy. Addressing these issues from the standpoint of a Uni-versal Health Insurance scheme that will help bring down thefinancial barrier and enable people to access health careservices would require clear policies; these are elaboratedbelow.

Supply gaps and distributional inequities

No insurance policy, no matter how attractive, can have anyvalue for the poor if the provider supplying the services islocated at a distance that would entail huge indirect expensesin terms of loss of wages, transport costs, etc. This is morerelevant for women and the elderly who may have to dependon another person to accompany them to the facility. The sur-vey clearly showed that in the poorest districts, the distribu-tion of facilities is highly skewed. In half the rural areas, theonly alternative is the ill-equipped and under-funded publicsector which, in some States such as Bihar, is 'mostly on paper'.Figures 8 and 9 show the long distances that women have totravel for accessing basic EmOC, so necessary for savinglives, in the Jalna district of Maharashtra and Kozhikode inKerala. While Maharashtra has a maternal mortality rate of4/1000, Kozhikode has less than 1 with 98% institutionaldeliveries.

The figures also indicate the concentration and duplica-tion of facilities which then provide possibilities for a moreequitable spread and greater access. Jalna has 10 facilities allclustered in 3 towns. If these could be relocated through aset of policy incentives, the distance to be travelled could behalved (Figs 8 and 9).



Fig 8

Distance to emergency obstetric care facilitiesin Kozhikode, Kerala (in km)

Such distributional inequity raises three issues that need tobe addressed. The first is the duplication of public and pri-vate facilities almost everywhere. The private sector, in mostplaces, is located where the public sector is already established.Does this show an unmet demand that the private sector ismeeting or are many of these facilities established and sus-tained by government doctors doubling up to work in pri-vate hospitals, creating a win-win situation where the gov-ernment doctor makes additional income and the private facil-ity gets respectability and a ready market? Government doc-tors are generally believed to be more experienced and alsocarry the stamp of being ‘certified'–a major psychologicalneed for patients in the absence of accreditation processes.While one study showed that two-thirds of private hospitalsemployed government doctors, it is believed that 30% of theprivate sector consists of government doctors working in small,rural nursing homes or large city hospitals. This plurality needsto be more closely studied as in the event of the governmentdoctor 'owning' the private facility, chances of relocationcould be initially problematic, calling for hard policy decisionsto address such issues of conflicts of interest.

Besides, having multiple facilities in the same locationdoes provide choice. However, such choice in a small marketspace could also lead to creating small unviable units, eachadopting unhealthy practices and cutting corners on qualityto stay competitive, as well as the suboptimal utilization ofpublic facilities which have been designed to cope with thewhole caseload for a population of 100,000. Given the small-ness of the population units, i.e. the CHC area, there is notenough room for a full-fledged, 30-bed CHC as well as avariety of private facilities to function. How is the decision tobe taken to relocate the CHC to a more needy area which, ina rationalization of the infrastructure matrix, would makeeconomic sense? Policy choices in such a situation could rangefrom reducing the norms of public hospitals to cater to half

the patient load or, through a range of financial incentives,motivate the private sector to relocate in underserved areas.

Secondly, non-standardization of facility location as pernorms or needs, creates problems for considering other alter-native payment systems such as capitation, a better systemfor containing cost than the existing fee-for-service system.Capitation systems, such as those in the UK, function if thereis an assured population base per provider whose health needsare to be taken care of by the provider. Such a system alsorequires the provider to be within easy distance and accessi-ble at all times. Thus, while there are an 'adequate' numberof qualified providers available, they need to be de-concen-trated to get a more equitable spread where populations canthen be 'attached' for providing basic care.

Third, if the design for collaborating with the private sec-tor is based on a basket of services to be provided and not asingle, one-time activity such as a delivery or a sterilization,then it would require a multiskilled health team rather thana sole practitioner who can at best provide some OP servicesand refer. Such an approach would require the sole practi-tioner to expand his facility to conform to the standards. Suchexpansion would require investment that a practitioner willbe willing to make only if he is certain that he will get the con-tract for that period of time till he breaks even. In a compet-itive system, where providers would perhaps be selected onthe basis of open tenders, such assurances become problem-atic, requiring a new way of doing business. At the sametime, if competition is eliminated, the provider can also chargemonopoly prices.

What emerges from the data is the need to undertake detailedmicroplanning of facilities and, based on regulations, finan-cial incentives and a process of negotiation, undertake thetask of redistribution in the manner required. Addressing thisissue will therefore call for a policy package that will help stim-ulate such reorganization and restructuring of the public-pri-vate sectors so as to have an equitable spread of facilities inaccordance with viability norms and functional needs. Thisthen becomes the first requirement for any health insurancescheme to work.

Concentration of specialists and technology

The NCMH survey showed that more than three-quarters ofspecialists and technology are in the private sector, all locatedin a few towns. In the absence of insurance and given the hugeburden of non-communicable diseases, there is a need tobridge this divide. As per estimates from the Registrar Gen-eral of India (RGI), 1998, 275 per 100,000 persons died of car-diovascular disease (CVD) in Rajasthan compared with 187in Kerala. Could some of the deaths have been avoided inRajasthan if there was better access to timely treatment?

The policy options before the Government to address theproblem of timely access could be to increase public invest-ment. In China, county hospitals equivalent to our 30-bedCHCs have CT scans. The second is to strengthen the capac-ity of public facilities to force down the prices in the privatesector to reasonable levels. Another option could be to get



Fig 9

Distance to emergency obstetric care facilitiesin Jalna, Maharashtra (in km)

into public-private partnerships, as in Chhattisgarh and Bel-gaum, for joint venture approaches to high-end care. Publichealth goals can be assured by having public representativeson the board and the power to fix rates based on a costing.Any such collaboration requires basic treatment protocols andstandards that would form the basis for costing of services.In the absence of such standards and protocols, there is anelement of arbitrariness in fixing prices, often stretching theseto the maximum that the market can bear. With treatmentcosts reportedly increasing at the rate of about 22% everyyear, no government or insurance system can sustain suchinflation over a period of time.

Need for Standards and Treatment Protocols

Engaging the private sector and controlling health marketswill need to have a basis–a framework of rules, regulationsand transparency. This is because in the ultimate analysis, serv-ice delivery is based on discretionary judgement of the providerand this can (and does) change from case to case, since nosingle case is similar to another. Balancing the dual role ofprotecting the interest of the patient and his own creates agrey area where the provider can abuse his power by gettingthe patient to undergo unnecessary tests and procedures, staylonger in the hospital, or resort to irrational prescribing, etc.The single most effective way of countering such perverseincentives and speeding the restructuring process of providermarkets to offer multiskilled quality care under one roof isthrough standards and treatment protocols and having asystem for enforcing them. Standards-based payment sys-tems do help in enforcing provider accountability, and alsocheck unethical practices and conflict of interest issues. Theseare very critical as, for example, the survey found that insome places there was a clear nexus between private medicalpractitioners and pharmacy shops–in one district it was learntthat most pharmacy shops were 'owned' by the doctors;most private doctors depended on referrals from quacks whoacted as 'procuring' agents for getting patients to their facil-ities for which a certain commission was paid; fee-splittingbetween diagnostic centres and referring doctors, AYUSH prac-titioners practising allopathy; etc. Such practices contributeto increasing costs on account of over-prescription of drugs,over-diagnosis of tests and over-treatment, or subjectingthe patient to unnecessary investigations and procedures. Theindiscriminate proliferation of technology is a clear pointerof such tendencies.

Part IIIIssues for Policy

Equity: Cost of care

Most literature on the private sector has found it to be 'exploita-tive' and three to four times more expensive when comparedto the public sector, making it inaccessible to the poor andthe chronically ill. The 52nd Round of the NSS showed that35% of those hospitalized in Bihar (compared to 16% in Ker-

ala) got pushed below the poverty line on account of meet-ing the cost of medical treatment. This needs to be read withinthe context of what the survey showed–over 90% of servicedelivery in Bihar is in the private sector compared to about60% in Kerala.

The question that is often raised in the context of differ-entials in public-private sector pricing is that the private sec-tor rates are unreasonably high. The issue to examine then iswhether they could be lesser. The second issue is whether thecomparison is fair. Are we comparing apples and oranges ordifferent types of apples? For, after all, in the pricing of theAll India Institute of Medical Sciences (AIIMS), the salary struc-ture or the cost of maintenance of building and land, etc. arenot factored in but only the cost of consumables and drugs,etc. and therefore, government rates do not really reflecttrue costs. The question of what goes into the pricing ofservices in the private sector is an important issue that needsto be understood in a comprehensive manner.

In the private sector (barring some faith-based institu-tions) pricing is influenced to a large extent by the marketprices of inputs–land, building, equipment, provider pay-ments, etc. Based on this understanding, the Governmentextended subsidy to the private sector–the logic being thatin subsidizing the actual cost of inputs by giving land free orexcise waivers on import of equipment it would enable low-ering of prices. Such 'lowered prices' were then seen as a socialgain, justifying the public subsidy. Time has shown this logicto be faulty.

Bhat (1999) carried out a survey of 108 private practition-ers of allopathy to examine the factors that influence health-seeking behaviour and growth of private practice. The sur-vey showed that three factors provided the competitive edge–theexperience of the treating physician, technology and loca-tion, which also acted as barriers to entry. Of these, experi-ence of the treating physician carried the highest score. Sinceexperience comes with repetitive practice and is built overthe years, the value addition commands a price. Similarly, spe-cialists are high consumers of technology as it enables bet-ter diagnosis and a psychological edge as they are more knowl-edgeable and well trained. Finally, distance and ease of accessis again an important factor; facilities located in commercialareas do get higher clientele though such areas are more costly.The study found that competition pushed most doctors tolocate their practice in residential areas so as to bring downthe prices. Pricing by the private sector is then determined bythe cost of capital and operational expenses. Input prices suchas the cost of labour, rentals, level of technology and spe-cialization, and source of capital and interest rates deter-mine the cost, explaining for the rural-urban differentials inprices. However, it is also observed that due to the generallylow occupancy of beds, the private sector does attempt tostay competitive by appointing unqualified nurses and AYUSHdoctors at far lower wages, combine sale of drugs and earn-ing commissions from diagnostic laboratories for every casereferred, etc.

Muraleedharan (1999) in a study of private sector pricingin Chennai identified three forms of payment systems: fixed-



fee schedule, flexible-fee schedule and fee-sharing system.Of these, the most prevalent was the flexible-fee schedule sys-tem under which the physician and the hospital chargedtheir rates separately. In none of the systems is there any incen-tive for cost control since the payment system is based on feefor service.

Public policies in fixing rates do not take these factors intoaccount. For example, under the Central Government HealthScheme (CGHS) for its employees, rates for reimbursement ofservices availed of in private hospitals are based on an aver-age of the rates quoted by all the tendering hospitals. In sucha system, higher than market rates are paid to facilities locatedin smaller towns where the input prices are lower, and lowerrates paid for city hospitals where the input prices are higher.If the CGHS is an important source of revenue for the townhospital, then it generates an overall increase in the price struc-ture in those areas, while patients in the city hospitals areforced to pay the differential amounts out of pocket. Simi-larly, in public hospitals, the pricing of diagnostic tests is lowerthan the variable costs (Purohit 1995) making it attractivefor the richer sections to avail of these services. These aspectsneed to be looked into for addressing the issues related toresource efficiency.

In the light of the above, it is necessary for the Governmentto undertake the unit costing of services. This is an impor-tant and useful exercise even for itself as it gives the bench-mark with which to compare the extent to which the privatepricing structures are unreasonable. Such pricing also wouldhelp instil some consciousness of costs and prices, which isvery necessary, as there is nothing called 'free health care' sincesomeone does pay for it–directly through user fees or indi-rectly through taxes. Therefore, when the Government pro-vides 'free care' it reflects the principle of solidarity wherethe richer sections through taxes enable the poor or all sec-tions of society obtain free or subsidized care depending onthe value society attaches to health. This then makes it unjus-tifiable to allow wasteful use of these resources which hap-pens as a consequence of not being 'cost conscious'. For exam-ple, no private company would waste its money in fundingsubcentres in a State such as Kerala where road connectivity,health-seeking behaviour, 98% institutional deliveries, easyaccess to specialists and different health needs from whatauxiliary nurse-midwives (ANMs) are trained for, togethermake more sense to go to the PHC or the city hospital thanthe subcentre. Yet these are not only continued but furthermoney is also being spent in having the already overworkedmedical doctor of the PHC conduct OP clinics at the subcentreonce a week. These arrangements continue unchanged becausewe have no idea of the costs involved and the fact that thesame money could be better spent on services that the peo-ple desperately need.

Pricing in the Not-for-Profit Sector: Is the thirdsector an option?

Given the high costs of the for-profit private sector, weexamined the pricing system in the not-for-profit sector,

referred to as the third sector, which could be nurtured to bea credible alternative to a cash-strapped and poorly man-aged public health system and an expensive private system.Though scattered, isolated and small in scale, there are exam-ples of NGOs which have conclusively demonstrated that theyhave the capability of providing reasonably good-quality careat affordable rates to the poor. Besides, contrary to our expe-rience with the for-profit health sector, public subsidiesextended to NGOs have shown substantial social gain, as expe-rienced, for example, under the Blindness Control Programme.Under this Programme, almost 30 organizations, located inunderserved areas, were provided a non-recurring grant ofRs 18 lakh for construction of an operation theatre or award, purchase of a microscope or vehicle, etc. in return fordoing a certain number of IOL surgeries free of cost and laterat low rates against a subsidy of Rs 600 from the Government.These 30 NGOs in association with other not-for-profit pri-vate sector bodies perform almost 30% of the total 40 lakhcataract surgeries in a year. The experience under the NationalLeprosy Programme is similar.

Due to the rising cost of inputs and uncertainity of grants,both foreign and domestic, the proportion of user fees isincreasing and free care reducing. This is corroborated by theresults of the 52nd Round of the NSS that showed a decreasein access to free care from 19% to 10% during 1986-96. How-ever, to ensure that the poor are not denied care for want ofability to pay, the not-for-profit institutions follow the sys-tem of differential pricing–higher amounts for well-off patientsand free or subsidized rates for the poor.

An enquiry by the NCMH with three Delhi-based hospi-tals–one each to represent a charitable hospital, a not-forprofit-private/trust hospital and one for-profit corporate hos-pital showed that the charitable hospitals charge a nominalfee for registration and provide treatment at differential rates–aprivate room for a person willing to pay and a general wardfor free care. However, neither the drugs nor the expensivediagnostic tests are subsidized. The for-profit hospitals, onthe other hand, have uniform rates for all sections. A com-parison of costs on some common procedures in these threehospitals showed that the charges of the not-for-profit hos-pital were almost one-third to one-half of the corporate,for-profit hospital (Table 9).

A survey that included community-based organizations inrural areas (Berman and Dave 1994) showed that the not-



Table 9

Rates of some common procedures (in Rs)*

Procedure Charitable Trust I (Tertiary) Corporate

Caesarean section 2500-5850-7475 5750-11,500 7700-25,800

Removal of cataract 4500-6500 6500-20,000 8400-28,000

Appendectomy 2970-4290 4750-9500 6500-21,500

*The rates vary according to the graded bed charges. The table gives the lower and the upper limitsSource: NCMH 2004

for-profit hospitals are able to achieve cost efficiencies dueto the following factors:� Low wages of employees, using contract workers, thereby

fixing the wage bill not to exceed 30% of the total; � Utilization of specialist services on an honorary basis;� Use of generic and essential drugs manufactured by not-

for-profit organizations such as Low-Cost StandardizedTherapeutics (LOCOST)

� Emphasizing referrals and stringent use of expensive tech-nology.Analysis seems to suggest that the not-for-profit sector,

particularly community-based organizations, seem to havehad a beneficial impact on access, equity and quality of serv-ices in rural and backward areas. For public policy this pro-vides an option to examine whether by providing financialand technical support this sector can be strengthened toengage in providing health services, particularly in rural areas.

Quality of Care

The question under quality of care is whether people receivevalue for their money. No one knows, as there are no normsor yardsticks with which to measure good quality against infe-rior. All that is known is that while the private sector hasexpanded access and been responsive to patient needs, com-petitive pressures have set off a 'technology race', makingquality a concern. While on the one hand, there is the privatesector getting known to overtreat, undertake unnecessary andexpensive investigations; on the other hand is the rapid mush-rooming of substandard facilities indulging in malpracticewith impunity. The private sector, particularly at the lowerend of the spectrum, is seen to have a poor knowledge baseand tends to follow irrational, ineffective and sometimes evenharmful practices for treating minor ailments (Nandraj 1994).A study showed that 74% of hospitals in Delhi did not meetthe standards of the Delhi Nursing Homes Act. In the absenceof a nationally accepted set of standards and quality assur-ance mechanisms, there is a disturbing perception that equatesthe use of sophisticated technology with 'good' quality andgood value for money. In the health sector, the patient's per-ceptions determine health-seeking behaviour, which haveimportant implications in a system where money follows fromthe patient.

Quality is perceived to be expensive. This is true as qualityof care requires conforming to certain minimum standards ofpatient care. Such standards range from physical standards tothe type and proportion of personnel that should be appointed,the equipment that ought to be available and how they haveto be maintained, the records that have to be filed, the reportsthat need to be furnished, etc. In other words, adherence tosuch standards makes the provider more accountable to thesystem and the patient in particular. However, as adhering toa minimum level of standards requires investments, there is acost pressure both on capital as well as revenue.

As the Government is constantly poorly funded and privateproviders seek to save on costs to maximize profits, low qual-ity is an issue for both. In other words, low prices give low

quality. In Nigeria, a community-based movement raised theslogan of 'free care is free death,' to draw the government'sattention to the rotten state of the public facilities, whichexisted only on paper–a situation similar to Vaishali. There-fore, there is a need to focus on quality of care rather thanon whether services are priced or not, since public policies canalways protect the poor and those unable to pay throughvarious means, such as exemptions.

It is pertinent in this context to revisit the pervasive influ-ence of the untrained practitioner at the village level. In adiscussion with private sector doctors in Khammam, it becameclear that their practice was entirely dependent on this infor-mal provider to get them patients for a fee. They reportedlyearned almost Rs 10,000-15,000 just from referrals. Similarly,drug companies provided commissions for the sale of drugs.Their unanimous opinion that the primary health care serv-ices would totally collapse if these informal providers wereremoved as required by law was the most disturbing. This sen-timent has been echoed elsewhere too.

A study conducted by Bhat (1999) of 49 unqualified pri-vate medical practitioners in 4 blocks, spread over 3 districtsin West Bengal, showed that unqualified practitioners enjoyedclose rapport with and the trust of the local community asthey were a part of the community, were accessible at all times,provide treatment for several types of ailments, includingantibiotics that gave quick relief, etc. However, the studyobserved that while such rapport earned them yearly incomesranging from Rs 8400 to Rs. 65,000, their poor knowledgeand lack of training did result in substantial morbidity, asmany would go 'beyond their level of expertise in providinginappropriate treatment to retain patients'. Government doc-tors are reported to have stated that several women suffer-ing from toxaemia, eclampsia, septic abortions, fever, retainedplacenta, abdominal pain, incomplete abortions, etc. exam-ined in the PHC were all traced to the administering of incor-rect dosage of medicines, intramuscular administration of cin-tocenon, manhandling, lack of knowledge and the use ofroots, hormones, twigs, etc. for abortion, faulty handling oflabour, unscientific delivery, etc. by these providers.

In the long run, quality reduces morbidity and mortality,which entail huge costs to the society and family when abreadwinner dies. However, the motivation to institute qual-ity assurance systems for enhancing patient safety will be alow priority so long as the payments are based on fee forservice for, in such a system, every visit and every additionalinvestigation brings revenue to the provider. Therefore, non-development of standards and non-establishment of qualityassurance systems either by law or professional bodies is abarrier for expanding social insurance.

Improving efficiencies: Is market segmentation practical?

In Canada, the private sector can provide only those servicesthat the country's national insurance policy does not cover,namely, physician fees for OP services and all hospitalized care.Therefore, the private sector provides all home care and any



treatment that does not need hospitalization. This avoids dupli-cation of resources, better system efficiencies and unhealthycompetition due to which the public sector suffers. The fea-sibility of such segmentation should be explored so that thetwo sectors complement and supplement each other ratherthan substitute and duplicate efforts. Such segmentation, forexample, may imply that all public health programmes underthe National Health Policy alongside a set of regulations suchas the Certificate of Need for installation of equipment thatcost beyond a certain amount, could be in the public domain,where the Government should pay for the services rendered,whether in the public or private sector.

Such a policy will strengthen the demand side and maywell facilitate the private sector to develop capacity and investin skills that are not being provided by the public sector. Thesecond advantage would be the standardization of treatmentand reduced probability of drug resistance induced by irra-tional use of drugs and medicines for treating diarrhoeoa, TB,malaria, etc.

Regulatory Capacity of the state

Collaboration with the private sector carries the implicationof substituting in many ways the role of the state by marketforces to regulate several aspects of provider and patient behav-iour. By and large, regulations are not known to have sortedout many of the issues as can be seen in the case of the US,which has several regulations and yet an inequitable healthsystem. Yet, since health markets do entail several failures, thestate has to be vigilant and control and guide through itspower as a regulator. Therefore, regulations on all aspects ofhealth care service provisioning need to be formulated andcertifying institutions established for laying down benchmarksfor excellence and accreditation of facilities.

The development of the capacity to enforce these regula-tions is also important. Enforcement is expensive; extensivecomputerization and people to monitor, inspect, verify andcorrect are required. The capacity to contract and enforce thecontractual obligations is an important set of monitoring skills.Data collection, collation, analysis and research require med-ical doctors as well as economists and biostatisticians. Microplan-ning, restructuring of the health provider markets, price-set-ting, etc. require patience, negotiating skills and dialogue withvarious provider associations. Money and making laws is thusonly one part of the solution, having the required human

skills and technical capacity is the other and needs immediateattention. Without such capacity, institutionalizing public-private participation is difficult to sustain.

Conclusion

It is to be realized that, as elsewhere in the world, the privatesector in India too has been shown to maximize profits; failto address public health goals; lack integration with govern-ment health services; draw professionals from the publicsector instead of supplementing it; and in this unregulatedenvironment provide inappropriate or poor quality care (Ben-nett 1994).

It is clear that the need of the hour is to regulate providermarkets and correct distortions that have created an inequitable,inefficient and expensive system. The regulations will needto address all market failures that give rise to malpracticessuch as fee-splitting, overmedication, low adherence to qual-ity standards. They also need to ensure ethical practices, trans-parency and dissemination of information on prices and qual-ity to consumers, impose requirements for licensing and accred-itation of hospitals, protocols and prices. If these marketfailures are not urgently and decisively addressed, the healthcare system will be unsustainable.

It is important to acknowledge that considerable resourceshave been invested by the private sector. It makes no eco-nomic sense for the Government to duplicate investments,when these resources can be directed towards underservedareas and achieving public goals. Therefore, fresh invest-ment should be need-based. Second, expansion of access tohealth care should now be through innovative financing strate-gies such as universal social insurance or subsidized com-munity financing options. Mechanisms that separate therole of the state from being the provider and financier willfacilitate contracting private health services and, with pub-lic facilities also enabled to improve quality, create a healthycompetitive environment to the advantage of the Govern-ment and the consumer. However, the success of such a sys-tem will be dependent on having comprehensive regula-tions, the consensus of professional organizations, con-sumer advocacy forums, institutionalization of quality assur-ance mechanisms, a responsive grievance redressal mecha-nism, an administrative capacity and the will to enforcethem.





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References

Annexure ISize and Structure of the Private Health Sector in India

Compiled by: S Sakthivel, Technical Consultant, NCMH, 2005

The dominance of the private sector in the health care deliverysystem in India is well known. Large-scale household surveys haveclearly established the supremacy of the private sector in the pro-vision of health care. On the financing front as well, private expen-diture (mostly households) on health care is substantially higher.Although the dominance of the private sector is established fromthe demand side, with people preferring to seek health care whetherit is outpatient or inpatient facilities, evidence from the supplyside is weak and almost negligible. This section intends to fill thisvoid from the recently conducted large-scale National SampleSurvey Organization (NSSO) survey. On the broader aspect of thesize and structure of the private health sector, we draw largelyfrom the 57th Round of NSS on Unorganised Service Sector Enter-prises in India, conducted during 2001-02.

Size of Private Health Enterprises in India

The 57th round of NSS studied all health practitioners, fromsole practitioners to the largest hospitals, from Indian Sys-tems of Medicine (ISM) to allopathy, from qualified doctorsto unqualified quacks in the private sector. According to thesurvey, in 2001-02, all these practitioners and facilities puttogether were approximately 13 lakh enterprises providinghealth services in the country, excluding public facilities. Tables1.1 and 1.2 show that the majority of these enterprises areown-account enterprises (OAEs), which accounted for over80% of the total health facility in the country. OAEs are typ-ically run by an individual or are a household business pro-viding health services without hiring a worker on a fairly reg-ular basis. OAEs are also those enterprises where there aretemporary labourers working in such enterprises not on aregular basis. On the other hand, the number of health estab-lishments in the country was roughly around 2.3 lakh, whichaccounted for less than 20%. Establishments are those thathire at least one worker on a regular basis. The predominanceof OAEs and the lack of establishments in rural areas as com-pared to urban India are quite stark, with over 92% of OAEsand around 7% of establishments in rural areas. In contrast,in the urban areas, establishments accounted for roughly38% and the remaining 62% facilities were OAEs. Except afew, these trends are more or less the same in most of the States.

Magnitude of the Private Health Workforce in India

Of the 13 lakh are engaged enterprises in India, roughly 20lakh health providers, including skilled, semi-skilled andunskilled ones, are involved. These 20 lakh individuals rangefrom dais, quacks, paramedicals to specialized doctors, etc.in the private sector (Tables 1.3 and 1.4). They account forless than 1% of the total workforce in India, around 2.5% of

the overall service sector workforce and around 6.5% of thetotal workforce engaged in community, social and personalservices.

Since OAEs sometimes employ workers on a temporary basis,the number of workers in OAEs is slightly more than the num-ber of enterprises per se. While the number of OAEs was 10.77lakh in 2001-02, the number of workers involved in OAEs was11.56 lakh, accounting for roughly 56% of the total workforcein the health sector. The remaining 44% were engaged inestablishments. A casual glance at size-class distribution of work-ers reveal that of the 10.77 lakh OAEs, 10.04 lakh are single per-son-run health facilities and the remaining 73,204 OAEs hireone or two workers on a temporary basis. In rural India, 80% ofthe private sector health workforce is engaged in 90% of healthOAEs. In urban areas, however, around 38% of health estab-lishments employs close to 70% of the urban workforce. Sucha pattern is visible across most States, with few exceptions.

Structure of Private Health Providers in India

If we consider all the 13 lakh private health providers, both OAEsand establishments taken together, a little over half of themare allopathy-practising physicians and specialists. Tables 1.5and 1.6 reveal that the remaining 50% of health facilities, amongothers, are equally divided between (i) nurses, paramedicals,physiotherapists, (ii) Ayurveda practitioners, and (iii) Home-opathy practitioners. Thus, over one-fourth of the enterprises(involving both OAEs and establishments) belong to the cate-gory of ISM practitioners/health facilities. Further, the 57thRound of the NSS shows that diagnostic/pathology laborato-ries account for less than 3% of the health facilities in India.

Status of Regulation in Private Health Enterprises

The need for regulating a lifeline sector such as health care hardlyneeds to be emphasized. Although beer bars and pan shopsrequire a licence for establishing and running these stores inIndia, health facilities-whether consultation chambers run bydoctors or a big private hospital-do not require a licence. Themushrooming of the private health sector without a regulatorystructure is a cause for concern. Since health is essentially a Statesubject, regulatory mechanisms needed for uniform and trans-parent application of various legislations are lacking. Poorquality of medical care, medical negligence, self-seeking behav-iour, etc. have been the bane of the health sector in India caus-ing untold misery particularly to the needy, as well as the rich.

In the country as a whole, the 57th Round of the NSS revealsthat only a little over half of the enterprises are actually registeredunder the Medical Practitioners Act and another 8% are registeredunder other Acts (mostly Societies Act, Shops & EstablishmentsAct, and Local Bodies Act). More than one-third of the healthenterprises do not have any form of registration. State-wise analy-sis shows that in Assam, only one-fourth of the health facilitiesappear to be registered, with a paltry 12% of the facilities regis-tered under the Medical Practitioners Act (Tables 1.7 and 1.8).This is followed by Orissa, wherein over half the enterprises donot have registration. On the other end of the spectrum are smaller



States such as Goa and Uttaranchal where only 1.5% and 7.25%of enterprises are not registered, respectively. Maharashtra is theonly big State in which roughly three-fourths of the health facil-ities are registered under the Medical Practitioners Act.

Non-Profit Health Institutions in India

With the State abdicating its responsibility in the provision ofhealth facilities in India ever since the liberalization processstarted in the early 1990s, health NGOs are reportedly mush-rooming rapidly. Presently, however, evidence on the size ofnon-profit institutions (NPIs)/non-governmental organisations(NGOs) involved in the health sector in India is virtually non-existent or is at best, inadequate. The 57th Round of NSS cap-tures the magnitude of NPIs in India (Tables 1.9 and 1.10).Compared to for-profit institutions, NPIs account for a minis-

cule 1.32% of the total enterprises. However, the break-up ofNPIs among OAEs and establishments show that the formeraccounted for a paltry 0.85% and the latter 3.54%. SinceOAEs are practically run by a single person, a non-profit motiveis unlikely. Therefore, it would be worth assessing the estab-lishments. Among the establishments that employ more thanone worker on a fairly regular basis, 3.54% of the total estab-lishments belong to the category of NPIs in India. However,the spread of NGOs is quite erratic in different States. For instance,Uttaranchal has a substantial number of NGO health estab-lishments followed by Punjab. The respective shares of NGOsin the total health establishments in these two States are roughly43% and 15%. States such as Bihar, Goa, Jharkand and Kar-nataka have a negligible presence of NGOs, accounting forless than 1% of the total health establishments in these States.




Table 1.1

Number of enterprises in the unorganized health services by States – 2001-02

Rural Urban Aggregate

State OAE Establishments Total OAE Establishments Total OAE Establishments Total

Andhra Pradesh 48,306 2,865 51,171 17,951 8,705 26,656 66,257 11,570 77,827Assam 38,802 2,239 41,041 4,431 1,071 5,502 43,233 3,310 46,543Bihar 105,563 13,850 119,413 14,504 6,281 20,785 120,067 20,131 140,198Chhattisgarh 7,222 724 7,946 1,475 3,766 5,241 8,697 4,490 13,187Delhi 170 419 589 7,226 8,256 15,482 7,396 8,675 16,071Goa 246 16 262 125 465 590 371 481 852Gujarat 14,235 957 15,192 6,680 12,687 19,367 20,915 13,644 34,559Himachal Pradesh 4,449 228 4,677 509 344 853 4,958 572 5,530Haryana 10,591 2,354 12,945 6,791 5,305 12,096 17,382 7,659 25,041Jammu and Kashmir 7,876 340 8,216 1,492 741 2,233 9,368 1,081 10,449Jharkhand 56,702 1,055 57,757 6,553 1,566 8,119 63,255 2,621 65,876Karnataka 12,181 2,717 14,898 10,126 14,037 24,163 22,307 16,754 39,061Kerala 15,132 5,940 21,072 6,359 3,541 9,900 21,491 9,481 30,972Madhya Pradesh 26,547 644 27,191 15,749 7,687 23,436 42,296 8,331 50,627Maharashtra 23,409 3,389 26,798 32,664 34,064 66,728 56,073 37,453 93,526Orissa 46,064 884 46,948 3,197 1,489 4,686 49,261 2,373 51,634Punjab 20,298 2,794 23,092 10,349 6,370 16,719 30,647 9,164 39,811Rajasthan 16,935 1,035 17,970 13,041 4,208 17,249 29,976 5,243 35,219Tamil Nadu 11,350 3,508 14,858 9,380 10,566 19,946 20,730 14,074 34,804Uttar Pradesh 253,989 13,565 267,554 49,678 21,618 71,296 303,667 35,183 338,850Uttaranchal 5,404 1,570 6,974 1,845 1,137 2,982 7,249 2,707 9,956West Bengal 78,519 3,781 82,300 42,332 9,966 52,298 120,851 13,747 134,598Others 8,699 174 8,873 2,201 1,386 3,587 10,900 1,560 12,460Total 812,689 65,048 877,737 264,658 165,256 429,914 1,077,347 230,304 1,307,651

“Source: Extracted from the unit-level record data of the 57th Round, Survey of Unorganised Services, NSSONote: (i) OAEs indicate own-account enterprises wherein an undertaking is run by a household, usually without any hired labour working on a fairly regular basis. ii) Establishments are the ones that employ atleast onehired worker on a fairly regular basis.iii) Others include all minor States and Union Territories”

Table 1.2

Percentage distribution of enterprises in the unorganized health services by States – 2001-02


State OAE Establishments OAE Establishments OAE Establishments

Andhra Pradesh 94.40 5.60 67.34 32.66 85.13 14.87Assam 94.54 5.46 80.53 19.47 92.89 7.11Bihar 88.40 11.60 69.78 30.22 85.64 14.36Chhattisgarh 90.89 9.11 28.14 71.86 65.95 34.05Delhi 28.86 71.14 46.67 53.33 46.02 53.98Goa 93.89 6.11 21.19 78.81 43.54 56.46Gujarat 93.70 6.30 34.49 65.51 60.52 39.48Himachal Pradesh 95.13 4.87 59.67 40.33 89.66 10.34Haryana 81.82 18.18 56.14 43.86 69.41 30.59Jammu and Kashmir 95.86 4.14 66.82 33.18 89.65 10.35Jharkhand 98.17 1.83 80.71 19.29 96.02 3.98Karnataka 81.76 18.24 41.91 58.09 57.11 42.89Kerala 71.81 28.19 64.23 35.77 69.39 30.61Madhya Pradesh 97.63 2.37 67.20 32.80 83.54 16.46Maharashtra 87.35 12.65 48.95 51.05 59.95 40.05Orissa 98.12 1.88 68.22 31.78 95.40 4.60Punjab 87.90 12.10 61.90 38.10 76.98 23.02Rajasthan 94.24 5.76 75.60 24.40 85.11 14.89Tamil Nadu 76.39 23.61 47.03 52.97 59.56 40.44Uttar Pradesh 94.93 5.07 69.68 30.32 89.62 10.38Uttaranchal 77.49 22.51 61.87 38.13 72.81 27.19West Bengal 95.41 4.59 80.94 19.06 89.79 10.21Others 98.04 1.96 61.36 38.64 87.48 12.52Total [Au? Pls check the total] 92.59 7.41 61.56 38.44 82.39 17.61

“Source: Extracted from the unit-level record data of the 57th Round, Survey of Unorganised Services, NSSONote: (i) OAEs indicate own-account enterprises wherein an undertaking is run by a household, usually without any hired labour working on a fairly regular basis. ii) Establishments are the ones that employ atleast onehired worker on a fairly regular basis.iii) Others include all minor States and Union Territories”




Table 1.3

Number of workers in the unorganized health services by States – 2001-02



Andhra Pradesh 51,084 8,461 59,545 20,862 38,794 59,656 71,946 47,255 119,201Assam 39,177 5,669 44,846 4,500 5,041 9,541 43,677 10,710 54,387Bihar 108,201 28,330 136,531 15,498 21,302 36,800 123,699 49,632 173,331Chhattisgarh 7,686 1,698 9,384 1,528 13,257 14,785 9,214 14,955 24,169Delhi 170 1,256 1,426 8,515 33,058 41,573 8,685 34,314 42,999Goa 257 32 289 125 1,532 1,657 382 1,564 1,946Gujarat 14,588 4,622 19,210 7,884 48,587 56,471 22,472 53,209 75,681Himachal Pradesh 4,725 692 5,417 636 1,601 2,237 5,361 2,293 7,654Haryana 10,778 4,708 15,486 7,781 21,347 29,128 18,559 26,055 44,614Jammu and Kashmir 8,825 740 9,565 1,675 2,184 3,859 10,500 2,924 13,424Jharkhand 57,007 2,392 59,399 6,996 4,181 11,177 64,003 6,573 70,576Karnataka 13,686 5,938 19,624 12,316 49,590 61,906 26,002 55,528 81,530Kerala 17,786 31,355 49,141 7,077 30,005 37,082 24,863 61,360 86,223Madhya Pradesh 26,920 1,725 28,645 17,564 24,543 42,107 44,484 26,268 70,752Maharashtra 25,178 8,063 33,241 37,590 151,708 189,298 62,768 159,771 222,539Orissa 47,321 2,042 49,363 4,058 5,968 10,026 51,379 8,010 59,389Punjab 21,323 8,220 29,543 10,877 28,130 39,007 32,200 36,350 68,550Rajasthan 17,511 2,978 20,489 14,054 16,272 30,326 31,565 19,250 50,815Tamil Nadu 15,281 16,059 31,340 11,259 54,252 65,511 26,540 70,311 96,851Uttar Pradesh 276,581 32,823 309,404 58,938 79,998 138,936 335,519 112,821 448,340Uttaranchal 5,466 26,322 31,788 1,951 5,001 6,952 7,417 31,323 38,740West Bengal 79,298 11,130 90,428 44,279 50,912 95,191 123,577 62,042 185,619Others 8,912 622 9,534 2,351 5,513 7,864 11,263 6,135 17,398Total 857,761 205,877 1,063,638 298,314 692,776 991,090 1,156,075 898,653 2,054,728

“Source: Extracted from the unit-level record data of the 57th Round, Survey of Unorganised Services, NSSONote(i) OAEs indicate own-account enterprises wherein an undertaking is run by a household, usually without any hired labour working on a fairly regular basis.(ii) Establishments are the ones that employ at least onehired worker on a fairly regular basis.(ii) Others include all minor States and Union Territories.”

Table 1.4

Percentage of workers in the unorganized health services by States – 2001-02


State OAE Establishments OAE Establishments OAE Establishments

Andhra Pradesh 85.79 14.21 34.97 65.03 60.36 39.64Assam 87.36 12.64 47.16 52.84 80.31 19.69Bihar 79.25 20.75 42.11 57.89 71.37 28.63Chhattisgarh 81.91 18.09 10.33 89.67 38.12 61.88Delhi 11.92 88.08 20.48 79.52 20.20 79.80Goa 88.93 11.07 7.54 92.46 19.63 80.37Gujarat 75.94 24.06 13.96 86.04 29.69 70.31Himachal Pradesh 87.23 12.77 28.43 71.57 70.04 29.96Haryana 69.60 30.40 26.71 73.29 41.60 58.40Jammu and Kashmir 92.26 7.74 43.41 56.59 78.22 21.78Jharkhand 95.97 4.03 62.59 37.41 90.69 9.31Karnataka 69.74 30.26 19.89 80.11 31.89 68.11Kerala 36.19 63.81 19.08 80.92 28.84 71.16Madhya Pradesh 93.98 6.02 41.71 58.29 62.87 37.13Maharashtra 75.74 24.26 19.86 80.14 28.21 71.79Orissa 95.86 4.14 40.47 59.53 86.51 13.49Punjab 72.18 27.82 27.88 72.12 46.97 53.03Rajasthan 85.47 14.53 46.34 53.66 62.12 37.88Tamil Nadu 48.76 51.24 17.19 82.81 27.40 72.60Uttar Pradesh 89.39 10.61 42.42 57.58 74.84 25.16Uttaranchal 17.20 82.80 28.06 71.94 19.15 80.85West Bengal 87.69 12.31 46.52 53.48 66.58 33.42Others 93.48 6.52 29.90 70.10 64.74 35.26Total [Au? Pls check the total] 80.64 19.36 30.10 69.90 56.26 43.74

“Source: Extracted from the unit-level record data of the 57th round. Survey of Unorganised Services, NSSONote(i) OAEs indicate own-account enterprises wherein an undertaking is run by a household, usually without any hired labour working on a fairly regular basis.(ii) Establishments are the ones that employ at least onehired worker on a fairly regular basis.(iii) Others include all minor States and Union Territories.”



Table 1.5

Magnitude of various private health providers in Indian States – 2001-02

State Hospital Physicians Nurse, physio-therapist Ayurveda Unani Homeopathy Diagnostic/ Blood Others Aggregate

gen./spl. and specialists and para medical pathology lab banks (ambulance)

Andhra Pradesh 2,579 53,775 7,357 6,982 167 2,599 3,925 4 439 77,827

Assam 329 3,614 18,831 5,645 7529 9,024 599 49 923 46,543

Bihar 595 88,996 20,982 1,864 2964 12,648 1,719 0 10,430 140,198

Chhattisgarh 192 7,017 1,146 2,017 8 595 1,352 0 860 13,187

Delhi 240 9,796 8 1,790 836 801 1,965 0 62 15,498

Goa 0 600 0 53 0 12 187 0 0 852

Gujarat 5,507 14,063 1,569 4,203 0 8,020 1,109 37 51 34,559

Himachal Pradesh 103 2,450 872 718 34 187 259 0 907 5,530

Haryana 3,004 11,876 893 5,198 192 3,110 678 0 90 25,041

Jammu and Kashmir 25 5,717 3,428 661 155 35 336 0 92 10,449

Jharkhand 61 12,713 19,703 24,658 881 2,588 737 0 4,535 65,876

Karnataka 4,087 25,713 268 5,734 432 1,326 1,460 0 41 39,061

Kerala 2,419 9,679 324 8,131 349 7,817 1,828 0 425 30,972

Madhya Pradesh 1,239 26,230 2,727 7,636 46 2,191 1,305 0 9,253 50,627

Maharashtra 6,621 53,918 3,144 12,157 748 11,228 3,645 134 1,931 93,526

Orissa 431 15,670 5,490 22,933 330 4,417 1,257 17 1,089 51,634

Punjab 1,313 21,712 1,602 9,225 390 2,534 1,466 0 1,569 39,811

Rajasthan 1,153 16,945 7,701 4,207 1437 1,187 1,149 0 1,440 35,219

Tamil Nadu 5,188 13,294 530 4,174 513 5,106 1,691 23 4,285 34,804

Uttar Pradesh 4,424 214,127 53,280 27,042 5192 19,861 5,957 6 8,961 338,850

Uttaranchal 1,527 6,310 0 689 291 253 279 0 607 9,956

West Bengal 1,286 61,859 9,665 3,669 586 48,779 2,344 3 6,407 134,598

Others 310 2,846 3,982 780 1861 1,218 310 0 1726 13,033

Total 42,633 678,920 163,502 160,166 24941 145,536 35,557 273 56,1231,307,651



Table 1.6

Percentage of various private health providers in Indian States – 2001-02

State Hospital Physicians Nurse, physio-therapist Ayurveda Unani Homeopathy Diagnostic/ Blood Others

gen./spl. and specialists and para medical pathology lab banks (ambulance)

Andhra Pradesh 3.31 69.10 9.45 8.97 0.21 3.34 5.04 0.01 0.56

Assam 0.71 7.76 40.46 12.13 16.18 19.39 1.29 0.11 1.98

Bihar 0.42 63.48 14.97 1.33 2.11 9.02 1.23 0.00 7.44

Chhattisgarh 1.46 53.21 8.69 15.30 0.06 4.51 10.25 0.00 6.52

Delhi 1.55 63.21 0.05 11.55 5.39 5.17 12.68 0.00 0.40

Goa 0.00 70.42 0.00 6.22 0.00 1.41 21.95 0.00 0.00

Gujarat 15.94 40.69 4.54 12.16 0.00 23.21 3.21 0.11 0.15

Himachal Pradesh 1.86 44.30 15.77 12.98 0.61 3.38 4.68 0.00 16.40

Haryana 12.00 47.43 3.57 20.76 0.77 12.42 2.71 0.00 0.36

Jammu and Kashmir 0.24 54.71 32.81 6.33 1.48 0.33 3.22 0.00 0.88

Jharkhand 0.09 19.30 29.91 37.43 1.34 3.93 1.12 0.00 6.88

Karnataka 10.46 65.83 0.69 14.68 1.11 3.39 3.74 0.00 0.10

Kerala 7.81 31.25 1.05 26.25 1.13 25.24 5.90 0.00 1.37

Madhya Pradesh 2.45 51.81 5.39 15.08 0.09 4.33 2.58 0.00 18.28

Maharashtra 7.08 57.65 3.36 13.00 0.80 12.01 3.90 0.14 2.06

Orissa 0.83 30.35 10.63 44.41 0.64 8.55 2.43 0.03 2.11

Punjab 3.30 54.54 4.02 23.17 0.98 6.37 3.68 0.00 3.94

Rajasthan 3.27 48.11 21.87 11.95 4.08 3.37 3.26 0.00 4.09

Tamil Nadu 14.91 38.20 1.52 11.99 1.47 14.67 4.86 0.07 12.31

Uttar Pradesh 1.31 63.19 15.72 7.98 1.53 5.86 1.76 0.00 2.64

Uttaranchal 15.34 63.38 0.00 6.92 2.92 2.54 2.80 0.00 6.10

West Bengal 0.96 45.96 7.18 2.73 0.44 36.24 1.74 0.00 4.76

Others 2.38 21.84 30.55 5.98 14.28 9.35 2.38 0.00 13.24

“Total [Au? Pls check the total]” 3.26 51.92 12.50 12.25 1.91 11.13 2.72 0.02 4.29





Table 1.7

Status of registration in the private health sector in Indian States (2001–02)

State Medical Practioners Act Other Act Not registered Total

Andhra Pradesh 39,749 6,147 31,907 77,803

Assam 5,509 5,649 32,545 43,703

Bihar 77,981 6,947 54,844 139,772

Chhattisgarh 10,753 1,282 1,152 13,187

Delhi 12,421 1,251 2,399 16,071

Goa 763 77 12 852

Gujarat 26,651 5,497 2,411 34,559

Himachal Pradesh 3,303 403 1,824 5,530

Haryana 16,303 2,574 6,164 25,041

Jammu and Kashmir 6,308 865 3,276 10,449

Jharkhand 14,085 648 51,143 65,876

Karnataka 30,568 3,883 4,610 39,061

Kerala 15,565 9,705 5,517 30,787

Madhya Pradesh 33,641 2,561 14,395 50,597

Maharashtra 68,855 17,034 7,271 93,160

Orissa 13,356 10,656 27,622 51,634

Punjab 22,862 1,999 14,831 39,692

Rajasthan 14,567 4,395 16,257 35,219

Tamil Nadu 22,864 3,995 7,945 34,804

Uttar Pradesh 189,720 8,525 140,429 338,674

Uttaranchal 7,500 1,734 722 9,956

West Bengal 75,809 18,696 38,612 133,117

Others 3,739 665 7,799 12,203

Total 712,872 115,188 473,687 1,301,747“Source: Extracted from the unit-level record data of the 57th Round. Survey of Unorganised Services, NSSONote(i) OAEs indicate own-account enterprises wherein an undertaking is run by a household, usually withoutany hired labour working on a fairly regular basis.(ii) Establishments are the ones that employ at least one hired worker on a fairly regular basis.(iii) Others include all minor States and Union Territories(iv) Other Actsinclude Local Bodies Act, Shops and Estabilishments Act, Societies Act etc.”

Table 1.8

Status of registration in the private health sector in Indian States (2001–02) (in %)

State Medical Practioners Act Other Act Not registered

Andhra Pradesh 51.09 7.90 41.01

Assam 12.61 12.93 74.47

Bihar 55.79 4.97 39.24

Chhattisgarh 81.54 9.72 8.74

Delhi 77.29 7.78 14.93

Goa 89.55 9.04 1.41

Gujarat 77.12 15.91 6.98

Himachal Pradesh 59.73 7.29 32.98

Haryana 65.11 10.28 24.62

Jammu and Kashmir 60.37 8.28 31.35

Jharkhand 21.38 0.98 77.64

Karnataka 78.26 9.94 11.80

Kerala 50.56 31.52 17.92

Madhya Pradesh 66.49 5.06 28.45

Maharashtra 73.91 18.28 7.80

Orissa 25.87 20.64 53.50

Punjab 57.60 5.04 37.37

Rajasthan 41.36 12.48 46.16

Tamil Nadu 65.69 11.48 22.83

Uttar Pradesh 56.02 2.52 41.46

Uttaranchal 75.33 17.42 7.25

West Bengal 56.95 14.04 29.01

Others 30.64 5.45 63.91

“Total [Au? Pls check the total]” 54.76 8.85 36.39

“Source: Extracted from Unit Level Record Data of 57th Round, Survey of Unorganised Services, NSSONote: Other Acts include Local Bodies Act, Shops and Estabilishments Act, Societies Act etc.”


Table 1.9

For-profit and non-profit institutions in Indian States

Non-profit institution For-profit institution All institutions


Andhra Pradesh 53 150 203 66,204 11,420 77,624 66,257 11,570 77,827Assam 1861 122 1,983 41,352 3,188 44,540 43,233 3,310 46,543Bihar 120 130 250 119,947 20,001 139,948 120,067 20,131 140,198Chhattisgarh 16 65 81 8,681 4,425 13,106 8,697 4,490 13,187Delhi 61 279 340 7,335 8,396 15,731 7,396 8,675 16,071Goa 0 0 0 371 481 852 371 481 852Gujarat 39 224 263 20,876 13,420 34,296 20,915 13,644 34,559Himachal Pradesh 793 49 842 4,165 523 4,688 4,958 572 5,530Haryana 446 530 976 16,936 7,129 24,065 17,382 7,659 25,041Jammu and Kashmir 9 16 25 9,359 1,065 10,424 9,368 1,081 10,449Jharkhand 15 15 30 63,240 2,606 65,846 63,255 2,621 65,876Karnataka 384 28 412 21,923 16,726 38,649 22,307 16,754 39,061Kerala 69 450 519 21,422 9,031 30,453 21,491 9,481 30,972Madhya Pradesh 66 173 239 42,230 8,158 50,388 42,296 8,33150,627Maharashtra 1595 648 2,243 54,478 36,805 91,283 56,073 37,453 93,526Orissa 57 55 112 46,069 2,318 48,387 46,126 2,373 48,499Punjab 379 1,399 1,778 30,268 7,765 38,033 30,647 9,164 39,811Rajasthan 45 469 514 29,931 4,774 34,705 29,976 5,243 35,219Tamil Nadu 132 879 1,011 20,598 13,195 33,793 20,730 14,074 34,804Uttar Pradesh 1013 551 1,564 302,654 34,632 337,286 303,667 35,183 338,850Uttaranchal 0 1,162 1,162 7,249 1,545 8,794 7,249 2,707 9,956West Bengal 1794 654 2,448 119,057 13,092 132,149 120,851 13,746 134,597Others 142 96 238 10,758 1,464 12,222 10,900 1,560 12,460Total 9089 8,144 17,233 1,065,103 222,159 1,287,262 1,074,212 230,303 1,304,515“Source: Extracted from Unit Level Record Data of 57th Round, Survey of Unorganised Services, NSSONote:(i) OAEs indicate own-account enterprises wherein an undertaking is run by a household, usually without any hired labour working on a fairly regular basis.(ii) Establishments are the ones that employ at least onehired worker on a fairly regular basis.(iii) Others include all minor States and Union Territories “

Table 1.10

For-profit and non-profit institutions in Indian States (in %)

Non-profit institution For-profit institution

State OAE Establishments Total OAE Establishments Total

Andhra Pradesh 0.08 1.30 0.26 99.92 98.70 99.74Assam 4.30 3.69 4.26 95.65 96.31 95.70Bihar 0.10 0.65 0.18 99.90 99.35 99.82Chhattisgarh 0.18 1.45 0.61 99.82 98.55 99.39Delhi 0.82 3.22 2.12 99.18 96.78 97.88Goa 0.00 0.00 0.00 100.00 100.00 100.00Gujarat 0.19 1.64 0.76 99.81 98.36 99.24Himachal Pradesh 15.99 8.57 15.23 84.01 91.43 84.77Haryana 2.57 6.92 3.90 97.43 93.08 96.10Jammu and Kashmir 0.10 1.48 0.24 99.90 98.52 99.76Jharkhand 0.02 0.57 0.05 99.98 99.43 99.95Karnataka 1.72 0.17 1.05 98.28 99.83 98.95Kerala 0.32 4.75 1.68 99.68 95.25 98.32Madhya Pradesh 0.16 2.08 0.47 99.84 97.92 99.53Maharashtra 2.84 1.73 2.40 97.16 98.27 97.60Orissa 0.12 2.32 0.23 99.88 97.68 99.77Punjab 1.24 15.27 4.47 98.76 84.73 95.53Rajasthan 0.15 8.95 1.46 99.85 91.05 98.54Tamil Nadu 0.64 6.25 2.90 99.36 93.75 97.10Uttar Pradesh 0.33 1.57 0.46 99.67 98.43 99.54Uttaranchal 0.00 42.93 11.67 100.00 57.07 88.33West Bengal 1.48 4.76 1.82 98.52 95.24 98.18Others 1.30 6.15 1.91 98.70 93.85 98.09Total 0.85 3.54 1.32 99.15 96.46 98.68“Source: Extracted from the unit-level record data of the 57th Round, Survey of Unorganised Services, NSSONote(i) OAEs indicate own-account enterprises wherein an undertaking is run by a household, usually without any hired labour working on a fairly regular basis.(ii) Establishments are the ones that employ at least onehired worker on a fairly regular basis.(iii) Others include all minor States and Union Territories. “




Annexure IIResults of facility survey of eight districts in India

Table II-1

Distribution of public and private sector facilities by year of establishment

Info NA Pre-1980 1980-84 1985-89 1990-94 1995-99 2000-04 Total

Public sector 1893 593 243 330 222 120 97 3498

Cumulative total 593 836 1166 1388 1508 1605

% increase 41.0 39.5 19.0 8.6 6.4

Private sector 74 677 428 447 844 1083 2235 5788


% increase 63.2 40.5 54.4 45.2 64.2

Total 1967 1270 671 777 1066 1203 2332 9286


% increase 52.8 40.0 39.2 31.8 46.8

Note: The table does not include information on subcentres from Jalna, Maharashtra which were not surveyed

Table II-2

Distribution of establishment of private facilities over the years by ownership

Info NA Pre 1980 % 1980-84 % 1985-89 % 1990-94 % 1995-99 % 2000-04 % Total %

Corporate 2 5 0.7 2 0.5 3 0.7 3 0.4 9 0.8 12 0.5 36 0.6

Partnership 3 26 3.8 8 1.9 13 2.9 30 3.6 48 4.4 157 7.0 285 4.9

Sole proprietorship 64 603 89.1 409 95.6 420 94.0 790 93.6 997 92.1 2005 89.7 5288 91.4

Trust 5 43 6.4 9 2.1 11 2.5 21 2.5 29 2.7 61 2.7 179 3.1

Total 74 677 100.0 428 100.0 447 100.0 844 100.0 1083 100.0 2235 100.0 5788 100.0


% increase 63.2 40.5 54.4 45.2 64.2

Table II-3

Geographical spread of facilities in towns

Towns Villages

District No. of Towns % of Towns % of Towns Towns No. of Village % of Village % of Villages Villages

towns with any towns with towns covered without villages with villages with villages covered without

public with any with any by a facility any with any with any by facility

facility public private private any (%) public public private private any (%)

facility facility facility facility* facility facility facility facility facility*

Jalna 4 4 100.0 4 100.0 4 0.0 971 38 3.9 56 5.8 65 93.3

Khammam 9 8 88.9 7 77.8 8 11.1 1229 356 29.0 18 1.5 358 70.9

Kozhikode 13 8 61.5 9 69.2 9 30.8 87 68 78.2 67 77.0 75 13.8

Nadia 25 18 72.0 23 92.0 25 0.0 1346 376 27.9 105 7.8 408 69.7

Udaipur 10 8 80.0 8 80.0 8 20.0 2351 713 30.3 96 4.1 728 69.0

Ujjain 8 7 87.5 6 75.0 7 12.5 1107 188 17.0 22 2.0 194 82.5

Varanasi 11 4 36.4 6 54.5 9 18.2 1327 248 18.7 116 8.7 306 76.9

Vaishali 3 3 100.0 3 100.0 3 0.0 1569 190 12.1 73 4.7 230 85.3

Total 83 60 72.3 66 79.5 73 12.0 9987 2177 21.8 553 5.5 2364 76.3

Note: There are some towns and villages with both public and private facilities and hence this figure is less than the total number of towns or villages with any public or private facility



Table II-4

Distribution of facilities by availability of infrastructure

Public Private Total

Rural Urban Rural Urban Rural Urban Total* %

Floor space (in sq. ft)

1-500 1315 186 1863 2611 3178 2797 5975 76.4

500-1000 236 33 163 305 399 338 737 9.4

1000+ 283 126 163 534 446 660 1106 14.1

Total 1834 345 2189 3450 4023 3795 7818 100.0

Note: Information on floor space was not available for 1468 facilities

Table II-5

Distribution of facilities by availability of beds

Rural Urban Grand Total

District Facilities with Facilities with Facilities with Facilities with Facilities with Facilities with Public/ No. of

1-30 beds 31-75 beds >75 beds 1-30 beds 31-75 beds >75 beds private facilities

Public Private Public Private Public Private Total Public Private Public Private Public Private Total Public Private With With With Total

1-30 31-75 >75

beds beds beds

Jalna 34 33 0 1 0 0 68 3 83 2 4 1 3 96 40 124 153 7 4 164

Khammam 56 34 1 1 1 0 93 9 123 0 13 3 2 150 70 173 222 15 6 243

Kozhikode 8 46 3 7 2 2 68 4 34 0 8 11 9 66 28 106 92 18 24 134

Nadia 29 8 2 1 1 0 41 2 31 3 0 8 1 45 45 41 70 6 10 86

Udaipur 30 9 1 0 1 0 41 9 58 4 8 4 1 84 49 76 106 13 6 125

Ujjain 5 4 0 1 0 1 11 10 33 4 4 4 3 58 23 46 52 9 8 69

Vaishali 22 51 0 1 0 0 74 7 67 0 1 1 0 76 30 120 147 2 1 150

Varanasi 39 65 0 2 0 1 107 13 156 4 14 9 7 203 65 245 273 20 17 310

Total 223 250 7 14 5 4 503 57 585 17 52 41 26 778 350 931 1115 90 76 1281

(27.3%) (72.7%) (87.1%) (7.0%)(5.9%)

Table II-6

Availability of beds by year of establishment of facilities

Pre 1980 1980-84 1985-89 1990-94 1995-99 2000-04

Public Facilities 593 243 330 222 120 97

Beds 11151 771 483 387 759 588

Average bed per facility 18.8 3.2 1.5 1.7 6.3 6.1

Private Facilities 677 428 447 844 1083 2235

Beds 3900 832 1992 2681 2734 4909


Total Facilities 1270 671 777 1066 1203 2332

Beds 15051 1603 2475 3068 3493 5497




Table II-7

Number of institutions with beds in rural and urban areas

Districts Rural Urban Total Facilities (%)

Public Private Public Private Public Private

Jalna 34 34 6 90 164 24.4 75.6

Khammam 58 35 12 138 243 28.8 71.2

Kozhikode 13 55 15 52 135 20.7 79.3

Nadia 32 9 13 32 86 52.3 47.7

Udaipur 31 9 17 67 124 38.7 61.3

Ujjain 5 6 18 40 69 33.3 66.7

Vaishali 22 52 8 68 150 20.0 80.0

Varanasi 39 68 26 177 310 21.0 79.0

Total 234 268 115 664 1281 27.2 72.8

Table II-8

Distribution of specialists according to number of beds in facilities

Without beds 1-30 beds 31-75 beds 76+ beds Total Grand

Functional category Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Total

Anesthetist 4 13 11 72 1 20 12 130 28 235 263

Cardiologist 4 28 2 19 0 7 0 38 6 92 98

Dentist 83 201 108 16 6 17 8 45 205 279 484

Endocrinologist 0 4 0 3 0 2 0 8 0 17 17

ENT Specialist 13 56 4 21 5 11 8 74 30 162 192

Gastroenterologist 2 9 0 6 0 0 0 18 2 33 35

Gynaecologist 42 108 68 230 14 61 16 167 140 566 706

Ophthalmologist 34 77 13 44 2 18 7 89 56 228 284

Orthopaedician 9 43 20 75 5 17 4 89 38 224 262

Paediatrician 42 90 22 104 10 36 11 131 85 361 446

Physician 137 337 71 150 13 38 19 134 240 659 899

Psychiatrist 2 13 2 14 0 3 3 36 7 66 73

Skin and VD Specialist 11 48 2 6 0 6 4 41 17 101 118

Surgeons 20 56 54 141 7 41 36 183 117 421 538

Urologist 0 6 1 12 0 6 0 26 1 50 51

Total 403 1089 378 913 63 283 128 1209 972 3494 4466

Number of facilities 1955 3193 477 642 21 69 9 67 2462 3971 6433

Average per facility 0.21 0.34 0.79 1.42 3.00 4.10 14.22 18.04 0.39 0.88 0.69

Note: The table excludes number of subcentres in calculation of availability of specialists

Table II-9

No. of CS operations by 24-hour functional emergency obstetric care (EmOC) facilities

Gynaecologist and anaesthetist Surgeon and anaesthetist In all facilities

Public Private Total Public Private Total Public Private Total

Total 1432 675 2107 1268 509 1777 1432 678 2110

No. of EmOC facilities 28 66 94 28 59 87 35 78 113

Average no. of CS operations per facility 51.1 10.2 22.4 45.3 8.6 20.4 40.9 8.7 18.7

CS: caesarean section



Table II-10

No. of cases of different diseases/health conditions seen in facilities in the past 30 days

Name of disease/health condition Urban Rural Total public % public Total private % private Grand total

Acute Diarrhoea 67931 73861 57218 40.35 84574 59.65 141792

Acute respiratory infection 73734 70733 67959 47.04 76508 52.96 144467

Dental extractions 25377 15347 8000 19.64 32724 80.36 40724

Malaria 37815 39711 34875 44.98 42651 55.02 77526

New cases of TB 7686 5218 5865 45.45 7039 54.55 12904

Total TB cases on rolls 17591 10515 14844 52.81 13262 47.19 28106

Orthopaedic surgery under GA 1550 166 349 20.34 1367 79.66 1716

Closed fracture cases managed 6454 731 2018 28.09 5167 71.91 7185

Open fracture cases managed 6720 715 2264 30.45 5171 69.55 7435

Dislocations managed 3462 2278 2738 47.70 3002 52.30 5740

New cerebrovascular accidents (CVA) cases treated 2339 1258 1184 32.92 2413 67.08 3597

Acute myocardial infarction 5486 913 1868 29.19 4531 70.81 6399

Coronary angiography 1138 53 309 25.94 882 74.06 1191

Deliveries 15368 8517 14922 62.47 8963 37.53 23885

Caesarean sections 4184 509 1912 40.74 2781 59.26 4693

Hysterectomy 1725 302 504 24.86 1523 75.14 2027

Accidents/injuries 16889 12574 23255 78.93 6208 21.07 29463

General medicine 273077 461144 406510 55.37 327711 44.63 734221

Chronic Total cases of STD managed 10153 6571 8271 49.46 8453 50.54 16724

Tonsillectomy 2021 483 402 16.05 2102 83.95 2504

Ear surgery 6433 3009 4123 43.67 5319 56.33 9442

Eye care/cataract surgery 51148 18086 17310 25.00 51924 75.00 69234

Leprosy 2462 1944 2725 61.85 1681 38.15 4406

Adult diabetics on insulin 14502 11530 10783 41.42 15249 58.58 26032

Child diabetics on insulin 1190 423 750 46.50 863 53.50 1613

Hypertension 49440 60172 53301 48.63 56311 51.37 109612

Asthma and COPD 49076 62057 54031 48.62 57102 51.38 111133

Psychiatric illness 21340 2173 8499 36.15 15014 63.85 23513

Coma cases managed 1049 57 181 16.37 925 83.63 1106

Kidney/ureter surgery 740 78 253 30.93 565 69.07 818

Lithotripsy 410 52 120 25.97 342 74.03 462

Major surgery 7010 890 3383 42.82 4517 57.18 7900

Minor surgery 22993 10808 21369 63.22 12432 36.78 33801

Nasal surgery 955 113 382 35.77 686 64.23 1068

New cases of cancer on screening 7259 229 6376 85.15 1112 14.85 7488

Patients for chemotherapy 5252 137 1640 30.43 3749 69.57 5389

Patients for radiotherapy 2927 9 2840 96.73 96 3.27 2936

Prostrate surgery 4364 534 3576 73.01 1322 26.99 4898

Root canal treatment 4909 2625 538 7.14 6996 92.86 7534

Others Immunization 68798 163503 211590 91.08 20711 8.92 232301

Antenatal care 75378 55983 73859 56.23 57502 43.77 131361

Sterilization female 4126 3407 5742 76.22 1791 23.78 7533

MTPs 5537 1441 1567 22.46 5411 77.54 6978

Sterilization (male) 664 369 748 72.41 285 27.59 1033

TB: tuberculosis; GA: general anaesthesia; STD: sexually transmitted disease; COPD: chronic obstructive pulmonary disease; MTP: medical termination of pregnancy



Jalna (Maharasthra)



Khammam (Andhra Pradesh)



Nadia (West Bengal)



Kozhikode (Kerala)



Udaipur (Rajasthan)



Ujjain (Madhya Pradesh)



Vaishali (Bihar)



Varanasi (Uttar Pradesh)

N INDIA, HEALTH SERVICES ARE PROVIDED BY THE PUBLIC AND PRIVATE SECTORS.The public sector provides health services through the Central and State Governments,municipal corporations and other local bodies. The private health sector consists ofthe 'not-for-profit' and the 'for-profit' organizations. Individual practitioners fromvarious systems of medicine provide the bulk of medical care in the for-profit healthsector. The not-for-profit sector is heterogeneous, with varying objectives, sizes andthe areas they cater to. Their activities could be multifunctional and include welfareprogrammes such as health, education, nutrition, family planning, water supply andhousing, agriculture-related development programmes, livelihood programmes, etc.

The objective of this paper is to understand the nature and character of not-for-profit organizations in the delivery of curative health services in India. It seeks to gaininsights into the spread of this sector within the country in the field of providingmedical care, utilization of services, funding patterns and costs of care for the not-for-profit sector. In doing so, it seeks to define the role of these organizations indelivering curative health services and the way they can intervene to positivelyimpact the health of the people.

Defining 'not-for-profit'

The not-for-profit sector is generally said to comprise non-governmental organiza-tions (NGOs), the third sector, and the voluntary or charitable sector. There is no cleardefinition as to what precisely constitutes a not-for-profit organization. However, itis important for the purpose of setting internal government policy that at leastwithin a country a workable definition is adhered to.

In India, one of the criteria for a not-for-profit organization/NGO given in the Sev-enth Plan document is that the organization should have a legal entity. The PlanningCommission considers societies, associations, trusts or companies registered underthe Societies Registration Act, 1860; Indian Trust Act, 1882; the Charitable and Reli-gious Trusts Act, 1920 or Section 25 of the Companies Act, 1956 as NGOs (PlanningCommission 2002). Religious trusts and missionaries are usually governed by theCharitable and Religious Trusts Act, 1920. 'Charitable purpose' includes relief for thepoor, education, medical relief and the advancement of any other object of generalpublic utility but does not include a purpose that relates exclusively to religious teach-ing or worship. The Societies Registration Act, 1860 defines society as any seven ormore persons associated for any literary, scientific or charitable purpose. Both trustsand societies are exempted from income tax. At present, almost every State has adaptedits own Societies Act and Charitable Trust Act. For example, Maharashtra registersnot-for-profit medical care providers under the Bombay Public Trust Act, 1950. SomeStates have retained the original Act. Public Trusts are constituted for the benefit ofthe public at large but the author of a Public Trust may restrict the benefit to a par-ticular group or section of society, on the basis of caste, class, creed, sex, age, etc.

Ideologically, the development potential of the not-for-profit sector originates fromthe currently dominant neo-liberal perception that State organizations are inefficient.It is commonly argued that non-profit organizations constitute the 'third sector'located between the State and the market. Organizations grouped in the third sec-tor are bound by an appeal to voluntarism. According to the proponents of the 'thirdsector', the organizations in this sector share distinct characteristics: they possess aninternal organizational structure, they are structurally separate from the Government,

The not-for-profit sector in medical care

I


S E C T I O N I I

MADHURIMA NUNDY CENTRE OF SOCIAL MEDICINE

AND COMMUNITY HEALTH,JAWAHARLAL NEHRU

UNIVERSITY, NEW DELHI, INDIAE-MAIL:

[email protected]

and they do not generate profits that are distributed to mem-bers (Robinson and White 1997). During the 1980s, this sec-tor grew worldwide in terms of size, scope, number and vol-ume. The term NGO, which began to be used during this period,includes a kaleidoscopic collection of organizations differ-ing in size, form, orientation, resources, target groups andideological affinity (Valhans 1990).

Methodology

Since there are no comprehensive documentation and data-bases to assess the spread of all the non-governmental bod-ies working on issues relating to health, the focus of this paperhas been narrowed down to those not-for-profit organiza-tions that are providing medical care. The data for the pres-ent paper have been compiled from various sources. A ques-tionnaire survey through mail was undertaken for the pres-ent study to get a brief overview of the nature of the not-forprofit sector in health care. The objective of the survey wasto gather insight into the nature and presence of not-for profitorganizations providing curative services. The questionnairewas brief and responses were sought on the location of theorganization, number of beds, number of inpatients and out-patients, nature of funding, dispensing of drugs and presenceof medical personnel (doctors, nurses, paramedics). The sam-pling was purposive as there was no comprehensive databaseavailable of not-for-profit organizations providing curativeservices. The questionnaires were sent to organizations whoseaddresses were available. The Voluntary Health Associationof India (VHAI) is one of the major national networks ofmore than 4000 NGOs spread across the country. It is anassociation of voluntary agencies working in the area of healthand development. Questionnaires were sent to the 27 StateVoluntary Health Associations and they were requested toprovide names of the organizations in their network thatprovide medical care. Other than these, many organizationswere directly contacted (community-based NGOs/faith-basedNGOs) and questionnaires sent to them and also to thoseorganizations/individuals who could give us any further leadsin the form of names of not-for-profit health providers. Inall, 173 letters were sent and 86 institutions providing serv-ices at the primary, secondary and tertiary levels respondedto the questionnaire.

Various Christian groups (Catholic Health Association ofIndia, Catholic Bishops Conference of India and Christian Med-ical Association of India) were contacted as they form thelargest network of health services in the not-for-profit sec-tor. Secondary sources such as articles, books and various web-sites were accessed to gain more data on the spread of thissector in health care. An eight-district survey to map all healthfacilities/providers was conducted as part of the larger study.The eight-district health facility survey was conducted for theNational Commission on Macroeconomics and Health. Thesurvey mapped the entire universe of health facilities avail-able in each of the districts. The districts were Jalna in Maha-rashtra, Kozhikode in Kerala, Khammam in Andhra Pradesh,Ujjain in Madhya Pradesh, Vaishali in Bihar, Nadia in West

Bengal, Varanasi in Uttar Pradesh and Udaipur in Rajasthan.Data were obtained on the not-for-profit sector in these dis-tricts. Data on the spread of not-for-profit health care serv-ices in the unorganized sector have been obtained from the57th Round of the National Sample Survey (NSS). Data fromall the above sources have been consolidated in this reportand are attached as Annexure 1. For the utilization of med-ical services and expenditure patterns in charitable institu-tions, the NSS data for the 42nd and 52nd round were stud-ied. Data on foreign funding of the not-for-profit sector wereavailable from the Foreign Contribution Regulatory Act (FCRA)handbook.

Limitations of the study

The exact number of health institutions in the not-for-profitsector in India could not be consolidated through the ques-tionnaire survey due to difficulty in collating data by con-tacting all organizations within a short period of time. Manyorganizations did not respond to the questionnaire in spite ofseveral reminders. Since the sampling for the survey was pur-posive, more responses were received from some States suchas Madhya Pradesh, Karnataka and Gujarat. Several faith-basedorganizations were directly contacted and therefore, moreresponses were received from them. Some organizations gavethe names of institutions providing medical care but no details.Due to lack of time, the questionnaire could not be sent to allthese institutions to obtain further details about their insti-tutions. However, they have been integrated into the table onthe spread of the not-for-profit sector as providers. The resultsfrom various sources reiterate the fact that a more compre-hensive documentation of this sector is essential.

Role of the not-for-profit sector in India

In India, the role, activities and functions of the third sector,which originated outside the State structure, were previouslyperformed by local governments and local voluntary efforts.The efforts and initiatives towards welfare and developmentalactivities came into prominence during the colonial period. Theagents of these activities were called voluntary organizations.

Until the mid-1960s, the not-for-profit health sector washospital-based but later expanded to include communityhealth in developmental projects. Financial issues needed tobe considered; setting up institutions for medical care meantinvolvement of large amounts of funds and subsequently, thequestion of their sustainability. A number of NGOs, there-fore, took up health education as part of their communityprogrammes. Often, health was used by NGOs as the entrypoint to communities. Many professionals moved towards theNGO sector in response to the growing disillusionment withthe public sector. The characteristics of an NGO also under-went a change when these professionals entered the field. Theprojects now called for more involvement from the commu-nity and aimed at making them more self-reliant than adopt-ing a paternalistic attitude as in charity (Sundar 1994). Struc-tural adjustment policies also resulted in restructuring the


SECTION II The not-for-profit sector in medical care

provision of health services, resulting in support of the pri-vate for-profit and not-for-profit sectors (Baru 1998). Theefforts of the not-for-profit sector in health care today cov-ers a wide range of activities and can be classified broadlyinto: advocacy, awareness and education, research, and actualprovisioning of services. Several NGOs in India work on var-ied issues such as livelihood and poverty alleviation, women'sempowerment, health awareness and education, improvingwater supply and sanitation, etc. other than those providingmedical care. These wider developmental issues addressedthrough social mobilization, a more holistic approach toimproving the health status of the population, are known toimpact individual, family and community health.

Response of the State to the role ofvoluntary organizations/NGOs in health care

The State has attempted to define the role of voluntary organ-izations/NGOs through the Five-Year Plans, national healthpolicies and international commitments. After Independence,the Five-Year Plans were started to prioritize and allocateresources to developmental programmes. In the first two Plans,the emphasis was on the role of the State to provide welfareservices. In addition, the Five-Year Plans have constantly rec-ognized the role of the voluntary sector. The First Five-YearPlan stated that private efforts should be utilized for the pro-motion of social welfare. Voluntary organizations were rec-ognized for their contribution to the tuberculosis and leprosyprogrammes from the First Plan itself. From the 1960s, theGovernment offered subsidies and grants-in-aid to variousNGOs to assist the State in National Health Programmes suchas the tuberculosis, leprosy and family planning programmes.From the Fifth Plan onwards, the Government encouragedNGOs to take over some health programmes. There were a num-ber of initiatives at the governmental level to establish con-sultative groups of voluntary agencies in each State from theSixth Plan onwards but they were not very successful. In theSeventh Plan, NGOs were given the freedom to plan their ownschemes and follow the methodology they thought best totackle social and economic problems. Individuals and NGOsworking on rural development activities were appointed mem-bers of the governing body of the Council for the Advance-ment of People's Action and Rural Technology (CAPART).The Seventh Plan assigned an important role to voluntary agen-cies and sought their active participation in realizing thegoals and objectives of the Plan, especially in the field ofcommunity participation and in the delivery of health serv-ices, as stated in the Indian Council for Social Science Research(ICSSR)/Indian Council of Medical Research (ICMR) report onHealth for All (ICMR/ICSSR 1980). In the Eighth Five-Year Plan,it was proposed that grants-in-aid would be given to theNGO sector for experimental schemes. They were expected tohelp raise awareness of the small family norm, provide ante-natal and postnatal care, etc. In the Ninth Plan, the Govern-ment, recognizing that NGOs were complementary in nature,handed over a number of primary health centres to NGOs. Eachplan channelled a greater amount to NGOs for developmen-

tal programmes. The objective was to incorporate various ele-ments of the approaches that NGOs adopted in governmentprogrammes and to utilize NGO efforts to implement gov-ernment programmes. In the field of health care, the Govern-ment has used NGOs to train functionaries and has also giventhem the responsibility of delivering health services in theirarea. In the latter part of the 1980s, there was emphasis onNGOs playing a greater role, especially in delivering the nationalhealth programmes of leprosy, tuberculosis, blindness control,reproductive and child health (RCH) and later HIV/AIDS.

India was a signatory to the Alma Ata Declaration on Pri-mary Health Care. The NGO report presented at Alma Ata in1978 defined the role of the third sector more clearly and indi-cated that NGOs could:� Provide assistance to develop and/or strengthen local NGO

capabilities and activities with particular attention to localcommunity development groups

� Conduct reviews and assessment of existing health anddevelopmental programmes and assist communities in theexercise of their own role in such reviews

� Place primary health care in the context of comprehensivehuman development

� Ensure that their existing programmes and new initiativespromoted full participation by individuals and communi-ties in the planning, implementation and control of theseprogrammes

� Expand training efforts as in training of health workers,supervisors, administrators, planners and other developmentworkers

�Extend their efforts to develop locally sustainable and appro-priate health technologies, and the use of resources with par-ticular attention to energy, water, sanitation and medical care.Among the two National Health Policy (NHP) reports, the

NHP of 1982 stated that: 'with a view to reducing govern-ment expenditure and fully utilising untapped resources,planned programmes may be devised, related to local require-ments and potentials, to encourage the establishment of prac-tice by non-governmental agencies establishing curative cen-tres and by offering organised logistical, financial and tech-nical support to voluntary agencies active in the health field'(Government of India [GOI] 1983). The NHP of 2002 suggestspolicy instruments for the implementation of public healthprogrammes through individuals and institutions of civil soci-ety. The State will encourage the handing over of public healthservice outlets at any level for management by NGOs and otherinstitutions of civil society. The Policy highlights the expectedroles of different participating groups in the health sector.Further, it recognizes that, despite all that may be guaran-teed by the Central Government for assisting public healthprogrammes, public health services would actually need to bedelivered by the State administration, NGOs and other insti-tutions of civil society. The attainment of improved healthlevels would be significantly dependent on population sta-bilization, as also on complementary efforts from other areasof the social sectors-such as improved drinking water supply,basic sanitation, minimum nutrition, etc.-to minimize healthrisks for the population (GOI 2002).


The not-for-profit sector in medical care SECTION II

Spread of not-for profit organizations inproviding curative services

Not-for-profit organizations that are presently delivering cur-ative services range from faith-based to community-basedorganizations working at the primary and secondary levels,and also a few at the tertiary level. In addition, big businessgroups have also established hospitals as trusts or societies,which qualify them for tax exemptions. Due to the hetero-geneity and plurality of providers, the nature of services alsovaries across the providers in the not-for-profit sector; withinthis wide spectrum we have community-based organiza-tions in rural areas that provide health services at the primarylevel. At the other end of the spectrum we have trust hospi-tals located mostly in urban centres providing secondary ortertiary care. The dominant system of medicine in most not-for-profit hospitals is allopathic. General health services areprovided by almost all the institutions but very few provideonly specialized and superspecialized services such as cardi-ology and neurology. From the 86 responses received throughthe questionnaire survey, 30% were dispensaries and healthcentres, and the rest were hospitals; 84% of the organiza-tions provide general health services, 54% maternal healthservices and almost 30% paediatric services. Other special-

ized services include ENT, urology and dental, to very spe-cialized services at the tertiary level such as cardiac surgeryand neurosurgery. Of the institutions, 6% provided only spe-cialized services at the tertiary level. Almost 50% of the insti-tutions provide more than three services. Therefore, we con-clude that multispecialty services are provided by several ofthese institutions. Many charitable institutions venture intoproviding specialized services for communicable diseases atthe primary level. For example, in the Catholic network, thereare 165 institutions providing services only for leprosy and62 institutions for HIV/AIDS and TB, other than their hospi-tals and dispensaries. They also provide curative and rehabil-itative services through 188 facilities for the disabled and416 health institutions for the aged.

Various studies show that most not-for-profit health insti-tutions are located in semi-urban/urban areas. Most of theseorganizations establish themselves in places where infra-structure is already present (Jesani et al. 1986; Baru 1993and 1996). The questionnaire survey showed that 43% ofthe institutions were in rural areas, and the remaining in semi-urban and urban areas.

According to a study, the percentage of villages with anykind of NGO presence ranges from 1.4% in Uttar Pradesh to34.4% in Maharashtra. For India as a whole, it is estimatedthat 10.6% of the villages have the presence of some type ofNGO (Mahal et al. 2000) (Table 1).

According to another estimate by the Independent Com-mission on Health in India (VHAI 1997), more than 7000 NGOsare working in the field of health care.

The only official source that exists on the total number ofhospitals and beds in the not-for-profit sector is the data fromthe Directory of Hospitals, published last in 1988. The num-



Faith-based organizations include missionary organizations that have

a large network of health facilities (hospitals and dispensaries).

The two biggest networks are the Catholic Health Association of India

and the Christian Medical Association of India. Two smaller networks

are the Emmanuel Hospital Association and the Seventh Day Adventist

Hospitals. Other faith-based trusts have also emerged as health

care providers at the primary, secondary and tertiary levels.

The main providers of this kind include the Ramakrishna Math and

Mission, Mata Amritanandamayi Trust, Sathya Sai Central Trust, Sri

Chaitanya Trust, Swaminarayan Sanstha, the Aga Khan Health Service

network, Chinmaya Mission, etc. Several faith-based charitable

hospitals were also established after Independence by local

philanthropists.

Several community-based NGOs provide services at the primary level.

Due to their immense contribution and commitment to serve

rural communities, some have gained credibility and recognition,

and have been given the responsibility of running primary health

centres so as to ensure better functioning. Examples are the Karuna

Trust in Karnataka, SEWA-Rural in Gujarat, King Edward Memorial

Hospital (KEM), Pune districts; Rural Unit for Health and Social

Affairs (RUHSA), Kilvayattanan Kuppam Block in Tamil Nadu, Voluntary

Health Services (VHS) in Tamil Nadu and the Kasturba Hospital

in Sewagram, Maharashtra. Health services are integrated into

preventive, promotive and curative services, and are just one aspect

of their developmental and outreach activities. The most vital health

personnel in these projects are the community health workers, and the

delivery system follows a proper system of referral. These organizations

cater to the rural and poor populations, and make health services

accessible to them.

Box 1

Table 1

Percentage of villages with non-governmentalorganizations (NGOs)

State Villages with NGOs (%)

Andhra Pradesh 21.2

Bihar 2.6

Gujarat 9.1

Haryana 7.8

Himachal Pradesh 6.4

Karnataka 11.1

Kerala 8.0

Maharashtra 34.4

Madhya Pradesh 8.8

Orissa 9.7

Punjab 12.9

Rajasthan 4.7

Tamil Nadu 14.5

Uttar Pradesh 1.4

West Bengal 6.4

Aggregate 10.6

Source: Mahal et al. 2000

ber of hospitals in this sector was estimated to be 937 (10%of all hospitals) and the total number of beds 74,498, com-prising 13% of all beds in India (GOI 1988). It showed that17% of all the private hospitals were not-for-profit and 42%of all the private beds were in this sector (Table 2).

Data available for the present study (the questionnairesurvey on not-for-profit organizations alongside other exist-ing data sources on the not-for-profit sector) show that 11%of all hospitals and dispensaries, and 18% of all beds are inthe not-for profit sector (Table 2). They also show that 17%of all private hospitals and dispensaries are not-for-profit and47% of all private beds are in this sector. This corroboratesthe data for 1987. The more developed States of Kerala, TamilNadu, Karnataka, Maharashtra, Andhra Pradesh and Gujarataccount for 50% of such institutions with 64% of beds of atotal of 132,907 beds (Annexure 1). Christian missionaryorganizations lead in providing health services. States with alarger number of these organizations are Tamil Nadu and Ker-ala, and account for almost 30% of the total institutions; 42%of the beds in this network are in Kerala alone.

The eight-district facility survey conducted in 2004 showsthat just 3% of all private providers (including sole propri-etorships, corporate, partnerships and trusts) in these districtswere not-for-profit (Annexure 1); 45% of these not-for-profitorganizations were established between 1995 and 2004.

The data on economic and operational characteristics ofunorganized enterprises in the service sector besides con-sumer expenditure, and employment and unemployment, col-lected by the NSS were also analysed. It took into accountown-account enterprises (OAEs) and establishments and pro-vided a differentiation between those that are for-profit andthose that are not-for-profit. An own-account enterprise isan undertaking run by household labour, usually withoutany hired worker employed on a 'fairly regular basis'. The datashow that there are 17,233 health providers in the not-for-profit unorganized sector (comprising only 1.32% of all healthproviders in the unorganized sector). They further show thatonly 3% of all health establishments in the unorganized sec-tor are not-for-profit. State-wise data show that there is aconcentration of these not-for-profit providers in West Ben-gal, Maharashtra, Assam, Punjab, Uttar Pradesh, Uttaranchaland Tamil Nadu (Annexure 1).

Utilization of the not-for-profit sector in medical care

It is important to ascertain what constitutes the definition ofa 'charitable institution' by the NSSO. However, due to theabsence of a definition in any of the NSS reports it was dif-ficult to reach any definite conclusion. The perception of acharitable institution is one that provides free care or providescare at an extremely nominal rate. But if, by definition, wesay that it includes all those institutions that are registeredas charitable trusts, then it would include a wide range of hos-pitals that may otherwise be perceived as for-profit privatehospitals. Hence the data on utilization rates might be anunderestimate. Some data from the 42nd and 52nd round ofthe NSSO on the utilization of health services in charitableinstitutions elicits the following:

Both the 42nd and 52nd rounds of the NSSO showed lowutilization of charitable institutions for outpatient care (Table 3). This might be because the spread of charitable insti-tutions, especially in rural areas, is negligible compared tothe availability of private doctors. For outpatient care in ruralareas, most people access a private practitioner. For the low-est income group, the primary health centre (PHC) is the nextfrequently accessed source of treatment after private providers.For outpatient services, the private doctor seems most acces-sible even in urban areas (NSSO 1998).

For inpatient care (Table 3), the 52nd round of NSS showsthat there is an increase in the utilization of charitable insti-tutions in rural and urban areas; but this does not mean thatfree care has increased. Only 2.8% of the rural populationreceive free inpatient care in the private sector (one assumesthat this is due to some cross subsidization in the not-for-profit sector). For inpatient care in urban areas, only 3.5%receive free care in the private sector. For every 1000 inpa-tients treated in charitable institutions in urban and rural areas,more patients are from the higher income groups. Most of thepoor seem to access public facilities when it comes to hospi-talization (NSSO 1998).

Financing of not-for-profit organizations

Not-for-profit organizations draw on a wide variety of sourcesfor finance. These include donations, government funding



Table 2

Share and growth of voluntary and not-for-profit hospitals and beds

1987 2004

Hospitals (%) Beds (%) Hospitals and dispensaries (%) Beds (%)

Government and local 4180 43 395,062 69 14160 37 4,36,208 61

Voluntary/not-for-profit 935 10 74,498 13 3979 11 1,32,907 18

Private 4488 47 1,04,018 18 19419 52 1,47,093 21

Total 9603 100 5,73,578 100 37928 100 7,16,208 100

Source: Directory of Hospitals in India, 1988, Misra et al. 2003Data for 2004: Survey data, data from missionary organizations; secondary sources: CBHI, GOI 2002

as grants-in-aid, funding from foreign donors, corporate fund-ing, and user fees. Only 65 of the 86 institutions that filledthe questionnaire in the survey responded to the query onthe source of income. Most of the organizations have morethan one source of funding; 17 organizations get somefunds from the Government, 21 receive foreign charity, 29receive private donations and 44 stated user fees as a majorsource. Along with private and foreign donations, most hos-pitals charge user fees.

Foreign funding

Patterns of foreign funding have shifted. During the 1970s,the single largest funding for health came directly from theUS Government constituting 57% of the entire funds, fol-lowed by UNICEF with 15.6%, the World Bank with 10.7%and the WHO with 6.3%. The European bilateral govern-ment funded 3.2% and American foundations 1.9%. Thesefunds were channelled through the Government for a varietyof disease control programmes and family planning. A fewof the active bilateral agencies were United States Agencyfor International Development (USAID), Danish Interna-tional Development Agency (DANIDA), Swedish InternationalDevelopment Agency (SIDA) and Norwegian Agency for Devel-opment Cooperation (NORAD). During the 1990s, there wasan increase in funds from multilateral agencies and a decreasein funds from bilateral agencies. In fact, with the World Bank'sgrowing presence, bilateral agencies have become secondarysources and have linked their funds to the Bank's programmes(Baru 1998).

Private individuals, business organizations and NGOs canreceive funds under the Foreign Contribution Regulation Act(FCRA), 1976. Every dollar that comes into India as a grantdoes not automatically become foreign. There are numer-ous exceptions to this-the FCRA does not include aid receivedfrom the UN organizations and the World Bank. However, itis one of the formal sources that gives an estimate of thekinds of funds that flow through it. Foreign funds for theyear 2001-02 through the FCRA were Rs 4872 crore, of which

Rs 542 crore (11.1%) was for the purpose of health andfamily welfare. FCRA data also show that the States of Delhi,Tamil Nadu, Andhra Pradesh, Karnataka, Kerala and Maha-rashtra received 74% of the total funds for the year 1999-2000 (Table 4). Of the 13,983 NGOs that received funds, 60%were located in these States. Among the top donors, themajority were Christian or Church-based organizations. TheUS, Germany and the UK were the largest fund givers (AccountAid 2002).



Table 4

State-wise distribution of foreign contribution(1999-2000) (Rupees in crore)

State 1999-2000 Number of organizations

(Rs in crore) receiving foreign funds

Andhra Pradesh 536.99 1616

Assam 24.35 163

Bihar 104.75 723

Delhi 636.11 735

Gujarat 126.95 551

Himachal Pradesh 68.20 77

Jammu and Kashmir 13.64 34

Karnataka 411.34 1154

Kerala 361.70 1483

Madhya Pradesh 84.57 432

Maharashtra 350.23 1198

Orissa 111.65 714

Punjab 35.22 70

Rajasthan 37.26 220

Tamil Nadu 572.51 2143

Uttar Pradesh 128.10 802

West Bengal 233.99 1212

Others* 87.08 656

Total 3924.64 13983

Source: Accountable handbook: FCRA, 2002 * Includes north-eastern States and other Union Territories

Table 3

Percentage distribution for outpatient/inpatient care by source of treatment

Outpatient (%) Inpatient (%)

Source of treatment Rural Urban Rural Urban

1986-87 1995-96 1986-87 1995-96 1986-87 1995-96 1986-87 1995-96

Share of the public sector 25.6 19 27.2 19 59.7 45.2 60.3 43.1

Private hospitals 15.2 12 16.2 16 32 41.9 29.6 41

Nursing homes 0.8 3.0 1.2 2.0 4.9 8.0 7.0 11.1

Charitable institutions 0.4 0.0 0.8 1.0 1.7 4.0 1.9 4.2

Private doctors 53.0 55.0 51.8 55.0 - - - -

Others 5.2 10.0 2.9 7.0 1.7 0.8 1.2 0.6

Share of the private sector 74.5 80.0 72.9 81.0 40.3 54.7 39.7 56.9

Total 100.1 99 100 100 100 99.9 100 100

Source: Sen et al. 2002.

Role of not-for profit organizations in NationalHealth Programmes

Grants-in-aid released by the Central Government

The Central Government releases grants-in-aid to NGOs acrossthe States for national programmes-tuberculosis, Reproduc-tive and Child Health (RCH) Programme, leprosy, blindnessand HIV/AIDS. Under the National Blindness Control Pro-gramme, approximately Rs 22 crore was dispersed to NGOsfor 2001-02. Under RCH, Rs 18 crore was released for theyear 2003-04. Comparatively, grants to NGOs for the Lep-rosy Programme and Revised National Tuberculosis ControlProgramme (RNTCP) were low at Rs 1 crore and Rs 61 lakh,respectively (Table 5). Some funds from foreign funding agen-cies are also channelled through the Government. For exam-ple, for HIV/AIDS, 40% of the funds allotted under the NationalAIDS Control Programme were from bilateral agencies (NACO2004).

User fees

As the responses to the questionnaire survey showed, user feesis one major source of revenue, particularly due to the grad-ual decrease in foreign funding. However, there has been con-cern that the levy of user fees may be affecting the utiliza-

tion of services by the poor, thereby undermining their prin-cipal objectives of serving the poor. An interesting insight inthe not-for-profit financing system is cross-subsidization. Itis observed that in some secondary and tertiary hospitals whereservices are provided at a cost, not-for-profit organizationstend to provide free services or charge lower rates for inpa-tient care from the poor and cross-subsidize them by charg-ing higher rates from those who can afford it.

The results of the survey show that only 7 of the 86 providerswho had responded supplied drugs free of cost; 16 responsesstated that drugs were supplied free to the poor. In some cases,some essential outpatient drugs are provided free of cost whilethe rest are either dispensed at a cost or need to be pur-chased on prescription. NGOs have to buy medicines like anyother commercial establishment directly from the market,which restricts access to drugs for a large section. To makedrugs easily accessible to people by dispensing them for freeor at a subsidized cost, Locost, a not-for-profit pharmaceu-tical company in Baroda, manufactures essential drugs at alow cost and distributes them only to NGOs which providecurative services to the needy. They have a distribution cen-tre in Karnataka for the NGOs in south India (Locost 2004).

Costs of care at not-for-profit facilities

According to the 52nd round of the NSS (1998) (Table 6),the average total expenditure per hospitalization in a chari-table institution is less than in for-profit hospitals but higherthan in public sector hospitals.

Further, the 52nd round of the NSS also brings out the factthat there was a decrease in access to free care from 19% to10% between 1986 and 1996. This reflects the fact that userfees have been introduced in several public and not-for-profithealth institutions during this period.

Studies have attempted to analyse whether not-for-profithealth programmes are more expensive than government orthe for-profit private sector. It is noted that the kind ofaggregate figures presented for hospitals can be misleading.For instance, variation in the size and quality of services inhospitals is not considered here. A study among the not-forprofit hospitals, government hospitals and private hospitals



Table 5

State-wise grants-in-aid to NGOs under theNational Health Programmes (Rs in lakh)

Leprosy RNTCP (grants Blindness RCH

(2002-03) and honorarium) Control (2003-04)

(2001-02) (2001-02)

Well-performing States

Kerala 9.25 3.57 59.03 104.34

Tamil Nadu - 2.5 617.81 55.38

Andhra Pradesh 14.6 3.73 379.4 135.52

Maharashtra 10.96 7.75 58.53 145.95

Karnataka 4.09 3.39 148.57 30

Moderate-performing States

Gujarat - 10.49 50.88 23.64

West Bengal 28.13 18.8 85.57 159.84

Punjab - 21.94 - 13

Haryana - 0.57 20.41 47.3

Poor-performing States

Rajasthan - 1.8 109.89 5

Orissa - - 44.29 199.29

Madhya Pradesh - 0.52 255.3 208.12

Uttar Pradesh 12.65 0.8 165.82 179.14

Assam 1.24 0.02 9.38 36.64

Bihar - 2.76 12.75 180.73

India 99.39 61.8 2151.88 1807.17

RCH: Reproductive and Child Health; RNTCP: Revised National Tuberculosis Control ProgrammeSource: Annual reports, MoHFW, various years

Table 6

Average total expenditure per hospitalization(in Rs) by source of treatment

Type of hospital Rural Urban

Public sector hospital 2080 2195

Private hospital 4394 5524

Nursing home 4185 5749

Charitable institution 3808 3078

Others 3015 1630

Private sector hospital 4300 5344

All hospitals 3202 3921

Source: 52nd round, NSSO 1998

reported that, in general, the cost per hospital bed per day inthe not-for-profit sector was very low compared to others.But this study included only community-based organizationsin rural areas (Berman and Dave 1994). These not-for-profitinstitutions are able to achieve substantial 'cost savings' dueto the following reasons:� They give low wages. In some cases, they use the services

of honorary physicians and these lead to a lower wage billand lower overall cost. For example, the results of the sur-vey show that 73% of the not-for-profit organizations hadpart-time medical personnel.

� Another example of cost control is observed where com-munity-based organizations serving the poor purchasegeneric and essential drugs manufactured and distributedat a low cost by a not-for-profit organization (Locost 2004).

�Such community-based organizations focus on rational careby emphasizing on referrals and lessening the role of unnec-essary technological interventions.A study of four private hospitals was conducted in Delhi

for the National Commission on Macroeconomics and Healthto understand the financing patterns. A study of two chari-table hospitals and one for-profit hospital in Delhi (2004)showed that the rates of some common procedures are lowerin the charitable hospitals when compared to for-profit hos-pitals (Table 7).

Recommendations and Conclusion

The objective of this study was to examine the characteris-tics, structure and spread of the not-for-profit sector in deliv-ering medical care in India. The study shows that it is notpossible to put the not-for-profit sector into one typologybecause of its heterogeneity in terms of organizational struc-ture, pattern of funding, ownership, nature of services andits changing character. It is also scattered and disorganized.

The not-for-profit sector has its own constraints and lim-itations. Even if one wants to establish a charitable institu-tion, for most of these organizations, especially those func-tioning in rural areas, the question of sustainability is central

to their existence. In order to achieve appreciable and sus-tainable results, NGOs have to make long-term commit-ments to the community. They frequently face difficultiessuch as shortage of trained staff, high turnover of middle-level workers, and dependency on donor agencies. For exam-ple, funding from foreign churches of the Christian networkhas reduced. User fees have therefore been introduced totake care of recurrent costs.

It is difficult to study each and every not-for-profit providerto assess the kind of services or cross-subsidies they provideto the poor. It is evident that in the wake of increased priva-tization and corporatization of health services, not-for-profitinstitutions have also faced demands and competition toimprove their services by introducing technology and spe-cialized services. Numerous trust hospitals have become morecommercial in their operations, hence altering their charac-ter from a charitable institution to a private for-profit/cor-porate image. There needs to be greater transparency to seeif they are adhering to the conditions of cross-subsidizingprescribed by the law, such as 20% free admissions and freeoutpatient services for the poor.

Curative services are just one aspect of the health services,which also include preventive, promotive and rehabilitativeservices. A study of community-based NGOs in West Bengalshowed that simply health education and awareness do notimprove the health status of people. In the absence of a properreferral service system, awareness and health education havelittle impact (Sarkar 2003). Several NGOs have made effortsto work and coordinate with the State Government, andhave been successfully providing and managing primary healthservices. The experiences of these NGOs show that health serv-ices need to integrate preventive, promotive, curative andrehabilitative services and the issue of health has to be addressedas a part of the broader developmental goals with the involve-ment of the communities.

A 1990 World Bank study showed that limited numbers ofNGOs are involved in health and family welfare in rural areasand they mostly had weak financial management and tech-nical capacity (Misra et al. 2003. The macro picture shows thatthe not-for-profit sector is not present universally and, there-fore, cannot be seen as taking over the responsibilities of thepublic sector. As the National Health Policy 2002 calls forexpanding the coverage of services and strengthening pri-mary-level health services through the third sector, the chal-lenge is for the Government to intervene effectively and for-mulate strategies to assist those community-based NGOs/not-for-profit organizations committed to working in backwardareas by providing adequate support and engaging them innot just implementing and managing National Health Pro-grammes but in various health and developmental activitiesin the context of comprehensive primary health care.



Table 7

Rates of some common procedures (in Rs)*

Procedure Trust I Trust II Private hospitals

Caesarean section 5850-7475 5750-11,500 7700-25,800

Cataract removal 4500-6500 6500-20,000 8400-28,000

Appendicectomy 2970-4290 4750-9500 6500-21,500

*The rates vary according to the graded bed charges. The table gives the lower and upper limits.

Account Aid. Accountable Handbook: FCRA. New Delhi:Account Aid India; 2002.

Berman P and Dave P. Experiences in paying for healthcare in India's voluntary sector. In: Pachauri S (ed).Reaching India's poor: Non-governmental approaches tocommunity health. New Delhi: Sage Publications; 1994.

Baru R. Missionaries in health care. Economic andPolitical Weekly 1999. Available from URL:http://www.epw.org.in/showArticles.php?root=1999&leaf=02&filename=110&filetype=html.

Baru R. Inter-regional variations in health services inAndhra Pradesh. Economic and Political Weekly1993;28:963-7.

Baru R. Private and voluntary health services: An analysisof inter-regional variations. Report submitted to UNDP.1996.

Baru R. Structural adjustment and health: Changing roleof NGOs. Paper presented at International Seminar onGlobal Governance and Social Policy, Baltic Sea Centre:Kellokeski, Finland 1998.

Baru R. Privatisation and corporatisation. Seminar 2000.Available from URL: http://www.india-seminar.com/sem-frame.htm.

Catholic Bishops Conference of India (CBCI), Directory ofcatholic health facilities in India. New Delhi: CBCICommission for Health Care; 2003.

Duggal R. Do charitable hospitals deserve tax benefits?Express Healthcare Management 16-30 September 2003.

Government of India. Five-Year Plans (First to Tenth Plan).New Delhi: Planning Commission of India. 1951-2002.

Government of India. National Health Policy. New Delhi:Ministry of Health and Family Welfare; 1983

Government of India. Directory of Hospitals. New Delhi:GOI; 1988.

Government of India. Health Information of India. NewDelhi: Central Bureau of Health Intelligence, Ministry ofHealth and Family Welfare; 2002.

Government of India. National Health Policy. New Delhi:Ministry of Health and Family Welfare; 2002.

Government of India. National Sample Survey

Organization (NSSO). Fifty-second round on morbidityand treatment of ailments, 1995-1996; 1998.

Government of India. NSSO. Fifty-seventh round onunorganised sector, 2000-2001; 2002.

ICSSR/ICMR. Health for all: An alternative strategy.Report of a Study Group. New Delhi: ICSSR 1980.

Jesani A, Duggal R, Gupte M. NGOs in rural health care;Bombay: FRCH; 1986.

Locost. Impoverishing the poor: Pharmaceuticals anddrug pricing in India; Vadodra: Locost; 2004.

Mahal A, Srivastava V, Sanan D. Decentralisation and its impact on public service provision in the health and edu-cation sectors: The case of India. In: Dethier J (ed).Governance, decentralisation and reform in China, Indiaand Russia. London: Kluwer Academic Publishers; 2000.

Misra, R, Rao S, Chatterjee R. India Health Report Delhi:Oxford University Press; 2003.

Pachauri, S (ed). Reaching India's poor: Non-governmen-tal approaches to community health. New Delhi: SagePublications; 1994.

Robinson M, White G. The role of civic organisations inthe provision of social services. New York: United NationsUniversity, World Institute for Development EconomicsResearch; 1997.

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References





Annexure 1

Spread of not-for-profit organizations derived from various sources

States Facilities by missionaries Others Christian missionaries 57th round, NSSO Health facility

and others survey

Hospitals Dispensaries No. of Other Beds Total Total Own-account Establishments Total No. of not- No. of

beds facilities in these beds facilities enterprises for-profit

facilities (OAE) facilities beds

1 2 3


Kerala 257 288 35,832 28 2413 38,245 573 69 450 519 27 1451

Tamil Nadu 100 361 6598 14 8790 15,388 475 132 879 1011 - -

Andhra Pradesh 93 177 7159 15 1327 8486 285 53 150 203 10 83

Maharashtra 36 152 3878 24 2712 6590 212 1595 648 2243 12 474

Karnataka 53 168 5691 14 1992 7683 235 384 28 412 - -

Moderate-performing States

Gujarat 10 64 1503 87 7856 9759 161 39 224 263 - -

West Bengal 9 114 2465 4 824 3289 127 1794 654 2448 41 -

Punjab 6 27 511 - - 511 33 379 1399 1778 - -

Haryana 2 16 122 - - 122 18 446 530 976 - -

Poor-performing States

Rajasthan 23 29 993 32 264 1257 84 45 469 514 34 274

Orissa 9 118 2420 1 147 2567 128 57 55 112 - -

Madhya Pradesh 26 130 1324 22 1596 2935 178 66 173 239 14 813

Uttaranchal 5 12 43 5 181 224 22 0 1,162 1162 - -

Uttar Pradesh 41 121 4073 45 1809 5882 207 1013 551 1564 37 1147

Assam 10 93 939 4 195 1134 107 1861 122 1983 - -

Bihar 15 114 2311 9 420 2731 138 120 130 250 4 75

Others* 66 589 7712 60 2031 9743 683 1036 520 1556 - -

India 764 2575 83,598 332 32,557 132,907 3979 9089 8144 17,233 179 -

47% of all 17% of all 0.8% of all 3% of 1.32% 3% of all 18% of all

beds in private OAEs all of all private beds in the

private hospitals/ providing health unorganized health private

facilities dispensaries health establishments health providers/facilities facilities

(n= 2,76,000) (n= 23398) (n= 1,074,212) (n= 230303) services (n= 5788) (n= 24,241)

* Includes north-eastern States, Union Territories and five States

Sources:1. Data from the Directory of institutions, Catholic Bishops Conference of India 2003; Baru R. Missionaries in Charity 1996; Not-for-profit sector questionnaire survey; Directory of Hospitals in Delhi 2002; CBHI 2002 andvarious websites.2.Data obtained from CD-ROM of 57th round of unorganized services NSSO, 2002 (Note: OAE: own-account enterprises are run by the household without any hired worker, n = 1,074,212Establishments that have at least one hired worker n = 230,303)3. Eight-district health facility survey conducted by NCMH (2004) in Kozhikode (Kerala), Khammam (Andhra Pradesh), Jalna (Maharashtra), Nadia (West Bengal), Udaipur (Rajasthan), Ujjain (Madhya Pradesh), Varanasi (Uttar Pradesh), Vaishali (Bihar)

Community Health Needs

HE AIM OF THE HEALTH SYSTEM IS TO HELP EVERY MEMBER OF THE COMMUNITYto be and to remain as healthy as possible given the resources available. It hasbecome increasingly clear that this can not be done through a paternalistic approachof delivering health to the people; the people must be partners in achieving health,the governments’ role being that of facilitator and catalyst. Active participation bythe people should be an essential element of all (public sector) health systems and inthis paper it is assumed that this component will be taken as a first step. All otheraspects discussed can only achieve optimal efficiency along side an active partner-ship with the community.

To achieve this aim of a healthy population, the community has to adopt a healthylife style, live in a life sustaining environment (especially quantitatively and qualita-tively adequate water and effective sanitation), have access to preventive care andestablish a system for the early detection and prompt response to potential andactual disease outbreaks. In addition, and not instead, the community requiresaccess to curative care at an appropriate level. Though curative care is needed asthere will always be breakdowns in health including injuries and disease, it is mostimportant that the system plan to have a major focus on health promotion, preven-tive measures and water and sanitation. Health decision makers must resist thetemptation to be swayed by the glamour of high-technology tertiary curative initia-tives to neglecting health related measures in favour of disease linked interventions.

Curative care does not lead to the health of the community; it merely helps tomanage the breakdowns in health. To maintain health the system has to be gearedto provide preventive and promotive health and subsequently any deviations fromhealth can be tackled by the curative system at the individual level and by public healthmeasures at the community level. In all interventions the role of the people them-selves must remain at the fore. Effective health care, whether delivered in the com-munity or in the most advanced tertiary care institution ultimately depends upon theactive participation of the recipients of the care. Unless the people are actively involved,they and the community can not be healthy.

Another look is suggested to re-align India’s health priorities. Today only 0.9% ofthe GDP is allocated to health, a proportion far less than many less developed andpoorer countries than India. To make the situation even more stark, it must be remem-bered that of even this grossly inadequate allocation, a large proportion is spent onurban tertiary care and only a minor share is allocated to health care for the ruralareas. Of this latter proportion the majority is dedicated to curative care leaving pre-ventive and promotive interventions at the tail end of the budget allocation.

The increasing role of the private corporate sector has further accentuated the dis-parity; the disparity between rich and poor, urban versus the rural, tertiary care ver-sus primary care and the disparity between curative versus preventive / promotiveinterventions. The opening of many large deluxe hospitals has resulted in the afflu-ent having many additional options for health care but the poor in slums and therural community seem to have been forgotten. It is worth noting that many if notmost of these deluxe institutions have been directly or indirectly heavily subsidisedfrom the public exchequer.

Improving the health status of the community is desirable not only because healthsitself is an objective worth striving for, but also for very sound economic and social

People’s Partnership for HealthTowards a Healthy Public in India

T


S E C T I O N I I

LALIT M NATHFORMER DEAN, AIIMS

E-MAIL: [email protected]

reasons. A healthy population is not only a happy and con-tented population with a good quality of life, but it is a moreproductive population. Keeping people healthy also is costeffective because sickness is very expensive not only in termsof direct costs but also because of loss of productivity. There-fore not only the individual and family but the State also incursexpenditure in managing illness. Preventing disease andpromoting health pays many dividends.

Various evaluations of the state of health in India haveconfirmed that even though there have been very significantimprovements in many health parameters, the state of healthof large segments of the population are very far from satis-factory. India can be proud of the fact that the expectationof life at birth has doubled since India became Independent.Other parameters that have shown marked improvement includethe infant mortality rate, child mortality rate, maternal mor-tality etc. However these same parameters show that thebenefits of improvement in health status are not uniformlyavailable in all parts of the country, particularly to the poor.In health and in health care the divide between urban andrural, between rich and poor is very real and marked.

In the 57 years since Independence the laudable and far-sighted recommendations of the Sir Joseph Bhore commit-tee have largely been forgotten and health care in India hasbecome dangerously skewed towards tertiary level curativemedicine. Even the Alma Ata Declaration that India was asignatory to, did not serve as a catalyst to bring about a mid-course correction in emphasis.

While some communicable diseases have been eradicated,most notably small pox and Guinea Worm, others are still fartoo common and play an important role in the morbidityand mortality experience in the country. While the usual com-municable diseases still contribute a great deal of morbidityand even mortality, especially for women and children, theposition has actually got more severe with the onslaught ofnew and re-emerging diseases. NACO estimates that Indiaalready has 5.1 million HIV infected persons. The position ofMalaria and other vector borne diseases such as dengue, filar-ial and Kala Azar are also alarming. India even today remainsone of the most important holdouts in the battle to eradi-cate polio and has more Leprosy and Tuberculosis cases thanany other country in the world.

At the same time the augmented longevity of Indians hasallowed increasing numbers of people to reach an age wherenon communicable diseases become an important cause ofmorbidity and even mortality. The demographic transition hasresulted there being a larger cohort of older people and there-fore more diseases associated with that age group. In absolutenumbers there is an increase in the numbers of people withnon-communicable diseases. The demographic change hasacted in consonance with the ill-effects on health broughtabout by a changing life-style and pattern of nutrition. Obe-sity and a largely sedentary life is showing its affects; ciga-rette smoking, alcohol and drug use have become more accept-able and all these factors taken together have resulted in amanifold increase in the life-style associated diseases.

The prevailing view appears to be that ‘health’ is a part of

the largesse that can be doled out by the government. Unfor-tunately this opinion is not limited to health care decisionmakers but has now come to be accepted even by the com-munity. The government has tried with out success to pro-vide ‘health’ to the people for many decades. An urgent needis for the health care decision makers to come to terms withthe fact that ‘health’ is not a commodity that can be doledout to a passive community. People are not currently treatedas important partners in the general plan for improving healthin the country. To be healthy the community has to take anactive or even pro-active role and the governments’ major roleshould be as a partner in health care that plays a catalyticrole and in addition helps by providing infra-structure andhuman resources.

Ill-health is increasingly realised to be a manifestation ofthe interaction of a multiplicity of factors - biological, nutri-tional, socio-cultural, environmental. The multiplicity andcomplexity of causal factors explains why ill-health as notamenable to simple technical fixes that the doctor can admin-ister within his ward or hospital. Medicines, injections, andeven vaccines can not ensure health; to have a healthy pop-ulation requires an active role by the people themselves withattention to a multitude of correctional interventions.

Even in the case of bacterial or communicable disease, thepresence of the bacteria is only one of the factors that arerequired before disease manifests. Without the specific dis-ease causing organism a communicable disease does not occur;but the presence of the concerned organism does not neces-sarily result in disease. Tuberculosis is an obvious example.The mere presence of the tuberculosis bacteria in the body isnot automatically followed by the disease tuberculosis. Tuber-cular disease results when a multitude of factors come intoplay and thus permit the disease to gain a foothold in thebody.

The prevention of the disease tuberculosis therefore offersseveral options. Obviously there can be no disease if thebacillus does not enter the body, but this difficult to attainat the community level. It is also possible to prevent the dis-ease by increasing the body’s resistance to the organism eitherspecifically (by immunisation) or in general (by a healthylife-style).

We do not have specific vaccines for many diseases. HIV isone such example as there is no vaccine available as yet. Butthe disease can be totally prevented by adopting a life-stylethat does not expose one to risk of infection.

Malaria that affects so many millions of persons all overthe world is another example. We do not have a specific vac-cine against malaria yet but it can be controlled by prevent-ing the breeding of the mosquitoes that act as the vector fortransmitting the plasmodium from an infected person to asusceptible person by doing away with breeding places, or byintroducing larvivorous fish such as the Guppy or Gambusia.Adult mosquitoes can be killed by residual insecticide spray-ing on their resting places or even by space sprays. The dis-ease can also be prevented by not allowing mosquitoes to bitesusceptible people by using bed-nets or insect repellents. Thereare many options available to prevent malaria but in almost


SECTION II People’s Partnership for Health Towards a Healthy Public in India

all of them the active cooperation by the community itselfcan make the difference between a successful effort and anexpensive exercise in futility. Even a widespread and efficientcurative facility for the treatment of those suffering frommalaria, will have little impact on the prevalence of Malariain the community!

These examples are there not only for communicable dis-ease. With the demographic change now manifesting Indiais starting to have a serious problem of non-communicablediseases such as coronary artery disease. The solution is notto focus exclusively or even largely on developing interven-tion facilities for angioplasty and bye-pass surgery, but tomake a serious effort to initiate life-style changes at an earlyage. Exercise and physical fitness must be encouraged, obe-sity treated as a disease and a diet conducive to sensible lipidlevels adopted. Together with avoiding smoking these inter-ventions will do more to reduce the burden of coronaryartery heart disease for the people than the setting up expen-sive tertiary care facilities for cardiac care and bye-pass sur-gery!

A Columbia University project estimated the consequencesof Cardiovascular disease in developing countries. India wasone of the five countries studied (A Race against Time - KSReddy editor). They reported that in 2000 India was loosing9,221,165 person years of life due to cardio-vascular diseases.This figure was estimated to rise to 17,937,070 by 2030! Theeconomic consequences of loosing over nine million personyears of life can be imagined. Another way of looking at thesame data is by expressing the burden of disease in terms ofDALYs or disability adjusted life years lost due to cardiovas-cular disease. The Global Burden of Disease study estimatedthat India lost 28.6 million DALYs due to CVD in 1990. Initi-ating preventive promotive interventions to reduce the bur-den of disease due to CVD is likely to pay much greater div-idends than establishing only treatment facilities to cater tothe consequence of heart disease.

What we need to address community health needs is a greateremphasis on areas such as preventive and promotive health,nutrition, water and sanitation, a system of prompt detec-tion of and response to disease outbreaks and factors predis-posing to ill health. At he same time a healthy life-style includ-ing curbs on tobacco and drug use, judicious exercise will haveto be promoted. These are all factors that fall under therubric of Public Health measures.

It is not contended that tertiary care hospitals are unnec-essary but that preventive and promotive health care inter-ventions properly implemented can not only improve healthbut prevent conditions that would need heroic interventionsto save life. Preventing heart attacks is better than doing coro-nary bye-pass surgery. Because there will always be instanceswhen prevention efforts do not succeed, tertiary care insti-tutions will be needed to provide care for those persons whohave developed severe disease. However it is the balancebetween curative care and preventive care that has to be deter-mined. It is manifestly wrong to ignore the prevention of ill-health and focus ones energy almost entirely on institutionswith expensive technology to deal with the long term conse-

quences of preventable morbidity. Hospitals are needed, how-ever the system can not ignore the fact that all too oftenhospitals cater to the consequences arising from our failureto keep people healthy.

The treatment of ill-health can not only begin in the healthcare facility and neither is the treatment completed within theboundary walls of the hospital. Unfortunately too many prac-titioners of curative care are both physically, and more impor-tant mentally, confined to the hospital walls. Disease startsin the community and its management and treatments alsocomes to fruition in the community. Hospitals are monumentsto disease and not temples of health; every sick individual isa reminder of the failure of the system to provide health careto the people

It is not suggested for a moment that the sick do not needhospitals and health care facilities. However until more effec-tive measures are taken to actively promote health and pre-vent ill-health, we will continue to cater to our failures. Noris it being suggested that curative care is unnecessary. Cura-tive care is essential, but in too many cases it is essential onlybecause we have failed to prevent sickness.

Comprehensive health care is a spectrum of activities thatranges from providing usable and understandable informa-tion on promoting health all the way to the most techno-logically advanced intervention at centres of excellence. Estab-lishing a facility to do cardiac surgery and heart transplantsis necessary and good, but is it not more important to set inplace a system that will prevent persons from deterioratingto the extant that they need heroic interventions? Both typesof investments are needed but a balance must be struck andit is manifestly both morally wrong and cost-inefficient tobuild curative infra-structure without putting in an evengreater effort to prevent disease or to stop its progression assoon as possible.

There have recently been some statements from the high-est level of decision makers promising an increased alloca-tion for health. That is good and a step in the right direction.Care must be taken however to ensure that the increasedbudget is not spent in the same proportion as the existingoutlays and thus further accentuate the gap between terti-ary curative infrastructure and Public Health services for urbanslums and rural community’s. It is essential that urgent actionis taken to correct the gross discrepancy between the alloca-tions for curative versus that for preventive/promotive care.

There are powerful lobbies that suggest that the govern-ments’ role is limited to primary care and public health andthat all curative care, certainly tertiary level care, should beleft to the private sector. Perhaps the advocates of such anarrangement forget that some 37% of our population live ator below the poverty line. Private sector health care would becompletely out of their reach. This tenet also completely ignoresthe right to health care ensured by our constitution.

In a country like India it will be unthinkable to invest inprimary care for the poor and disadvantaged without mak-ing tertiary care available to those that need such interven-tions. Morally a focus on primary care facilities for the ruraland slum areas can only be justified if a system is developed


People’s Partnership for Health Towards a Healthy Public in India SECTION II

alongside to provide higher levels of care to those that needit. Of course the other side of the coin is that without an effi-cient and functioning primary care set-up, India will not beable to afford the cost of tertiary care. Tertiary care must beavailable to those whose condition needs specialised care, richor poor. In such cases tertiary level care can be provided tothe poor either at heavily subsidised public sector supportedinstitutions or at private sector hospitals through a mecha-nism of State support or health insurance. But a health sys-tem that does not provide tertiary level care to those poorand needy persons who need it and yet caters to the affluentis wrong and should be unthinkable. The provision by designof one level of care for the poor and another for the rich urbandweller is something that can not be condoned in any coun-try.

The gap is not so much between the urban and rural butbetween the affluent privileged persons and the poor. Theurban poor, the slum dwellers, are perhaps most discriminatedagainst group in India; practically no health infra-structureis available for the slum dweller, especially the millions livingin ‘unrecognised’ slums. These people build our cities, cleanthem and provide the domestic service that ensures our com-fort. Yet they have virtually no access to the civic services mosturban people take as a matter of right. This is an issue demand-ing urgent action.

Focusing on providing preventive and promotive care doesnot require a massive addition to the budget, but it does requirefunds. When a model Primary Health Centre was evaluated,Anand et al (Natl. Medical J India, 1995) reported the divi-sion of costs of running a properly functioning Primary HealthCentre with a well balanced emphasis on preventive and pro-motive care. They have reported that curative care cost 32%,communicable disease control cost 17%, child care 17%,maternal care 11% and family welfare 10% of the total cost.

Preventive and promotive Care: Need,Efficacy and Cost

There is ample evidence that many if not most health prob-lems of concern to the community are more amenable to man-agement that includes community level interventions. Eventhat most intractable of public health problems HIV/AIDS,responds to action by the people rather than due to techni-cal interventions. There are just a few countries that have rolledback or even arrested the progression of HIV/AIDS in the com-munity. Thailand, Cambodia and Uganda are examples of pro-grammes that have showed results. The example of Ugandais particularly relevant to India.

It is important to note the analysis of two of the well-knownsuccess stories in HIV. Both Thailand and Uganda have demon-strated a reduction in HIV prevalence in the general popula-tion. The 100% condom programme in Thailand was morethan condom promotion; education was an integral compo-nent. The Thai data showed a remarkable fall in HIV preva-lence in young army recruits. However this fall in prevalencewas accompanied not only by an increase in condom usebut, most importantly by a reduction in visits to sex workers.

Condom use cannot take all the credit for the change in HIVprevalence in army recruits, though behaviour change playeda major role in the reduction. The figure below is a compos-ite representation of the interventions in northern Thailand.While it is clear the HIV prevalence fell after 1993 and thatcondom use increased, the concomitant reduction in the vis-its to sex workers clearly points to a change in behaviour inthe community. Condom use probably played a role, butreduced access to sex workers was obviously a major factor.

The data from Uganda is even more striking. There is amarked and consistent fall in HIV prevalence in pregnantwomen starting from a peak in 1992. Similarly detailed analy-sis of the data from Uganda has showed that the major fallin HIV prevalence occurred before condoms became avail-able to the programme and before they were advocated nation-ally for protection against HIV infection. The change appearedto have come about largely because of behaviour change.Rates of partner exchange came down significantly and



Fig 1

Northern Thailand

Fig 2

Uganda

more young persons were abstinent for longer. A matter ofgreat interest is the fact that condom use became a part ofthe national programme only in 1996, long after the preva-lence had started to fall. Uganda’s success is attributed to aninitiative by the President who decided to control the rapidlyincreasing prevalence of HIV/AIDS by starting a people’s move-ment to reduce casual sex.

Incidentally a sharp contrast is provided by a bordering coun-try - Botswana - that started at the same level but followedadvice to focus on condom use. The HIV prevalence in Botswanahas continued to rise until it is one of the highest levels inworld, and the budget has remained comparable!

Both these examples have clearly demonstrated the greatrole of promotive interventions. The lives saved and the ben-efits to the economy of the country are immense. Of coursein the example of HIV/AIDS the benefits are even starkerbecause there is no cure for HIV/AIDS. In a rough estimatemade In 1999 the cost and possible consequences of HIV/AIDSin India was estimated The following para-graph is taken from chapter 2 of the bookedited by Peter Godwin.

“Estimates about the average cost of onebed day vary naturally from hospital to hos-pital. In the Government sector, one bedday at the All India Institute of Medical Sci-ences costs Re600 per day1 . Recently themedicine costs of one hospital bed perday was calculated to be Re 250 in a gov-ernment tertiary care hospital in Bombay2.This comes to Rupees 160 million annu-ally. In a district hospital on the other handthe cost of one bed for one day comes toonly Re2003. The costs in the private sec-tor similarly vary greatly but they are ingeneral many times more expensive thana similar bed / facility in the governmentsector Even if we take a figure at the lower end of the range,the 57 million bed days would cost Rupees 11400 million”

It is worth noting that these estimates of the cost of carewere made using an estimated 1.75 million infected and didnot include the cost of anti-retrovirals. Today India esti-mates that we have 5.1 million persons living with the virus,the cost of hospital beds has gone up and India is commit-ted to the provision of anti-retroviral drugs.

In a paper published in Health Policy (47 (1999) 195-205)we estimated that the cost of HIV to the nation would rangefrom 6.73 to 59.19 billion Rupees annually. It is noteworthythat the upper estimate was made on an assumption of 4.5million infections in India. Today NACO estimates 5.1 mil-lion infections and the cost of treatment has increased man-ifold with the availability of anti-retroviral drugs. The soundeconomic rationale for a focus on preventive and promotiveinterventions rather than on exclusively building more andmore care facilities needs no elaboration.

HIV/AIDS is of course a special case as there is currently novaccine and no cure. But it highlights the importance of pre-ventive and promotive care. The HIV epidemic can be con-trolled, Uganda has shown us how. The key is making the com-munity partners in the venture and behaviour change throughpreventive and promotive interventions.

To take another example, diarrhoea, acute respiratory infec-tions (ARI) and meningitis are three of the most commoncauses of morbidity and mortality in early childhood. Two-thirds of all early childhood deaths are attributable to thesethree conditions. The health care system manages these con-ditions in the community by treatment at the primary, sec-ondary and tertiary care institutions both in the public andthe private sectors. A recent study by Anand et al from theAIIMS estimated the cost of treating these conditions. It willbe seen from the Table1given below that considerable expen-diture is involved, especially if one keeps the frequency ofthese episodes in mind.

It also must be realised that it is not the State alone thatincurs this expenditure; in India it is now estimated that onan average the patient bears 83% of the cost of health care.

The sad thing is that all three conditions can largely be pre-vented by action at the community level by a functionalPublic Health system coupled with active community actionfor health. Those cases of diarrhoea and ARI that do occurcan be treated effectively at the early stages in the commu-nity setting itself.

Tobacco provides another example. It has been estimatedthat the cost of tobacco related disease in India in 1999(Rath and Chowdhury, quoted in “Tobacco Control in Indiap135) was estimated to be Rs. 277.611 billion (Table 2). Thecost in 2002-2003 the cost was estimated to have risen toRs. 308.33 billion, an increment of 11% in two years. The directcosts of caring for patients with Coronary Artery Disease andChronic Obstructive Lung Disease gives an idea of what theseconditions mean to the community.



Table 1

Cost of inpatient treatment of diarrhoea, acute respiratoryinfection (ARI) and meningitis in various settings

Disease Level of care Private sector Public sector

Rs (Mean; 95% CI) Rs (mean; 95% CI)

Diarrohea Secondary 5672 (4436-6908) 1315 (1115-1514)

Tertiary 3155 (2503-3807) 8580 (5918-11252)

Acute respiratory infections Secondary 8261 (5886-10636) 2229 (1961-2497)

Tertiary 4506 (3489-5522) 7598 (6143-9053)

Meningitis Secondary 7428 (3976-10881) 1842 (460-3203)

Tertiary 6991 (3916-10067) 17844 (15407-20281)

These data include the identification and measurement of direct medical costs, valuation of hospital costs, out-of-pocket expenditure,productivity losses (Anand et al.)

1. Choubey PC. Add. Professor of Hospital Administration, All India Institute of Medical Sciences, New Delhi. 1997. Personal Communication.2. Salunke, SR., 1997Director Health Services, Maharashtra. Personal communication. 3. Choubey PC. Add. Professor of Hospital Administration, All India Institute of Medical Sciences, New Delhi. 1997. Personal Communication

Even if we do not consider the opportunity costs due toloss of manpower and reduced work efficiency, in terms ofdirect payments patients with CAD and COLD involves a directloss of Rs. 8520.30 and Rs. 2257.60 to patients and their care-givers and when the losses borne by the State/Employers areconsidered a total of Rs. 14,909 and Rs. 11,952 is involvedper patient of CAD and COLD respectively. The extant of themorbidity related to cancers, heart disease and lung diseaseis phenomenal and to a very significant extant preventableby a combination of taxation and vigorous behaviour changecommunication.

A study was carried out by Pandav of the cost benefits ofthe salt iodisation programme proposed for Sikkim. Iodinedeficiency disease is common in Sikkim as it is in other partsof India. Iodised salt has been shown to be effective in pre-venting this condition. The benefits of iodised salt programmein Sikkim alone showed a total resource saving of Rs.24,406,000with an investment of Rs.17,669,000. It is clear that preven-tive/promotive interventions make sense in many ways andpay real economic dividends even if we disregard the price-less benefits of eliminating the parents anguish over a cretinin the family!.

One must not make the mistake of assuming that preven-tive and promotive interventions do not require any funds ortechnical expertise. The delivery of effective health promo-tion requires manpower, resources and technical expertise.When Thailand was rolling back HIV infection it was spend-ing the equivalent of US$ 45 million a year on air time aloneto propagate the concept of HIV prevention (. To some extantsome staff is already in place, but because of the low prior-ity given to health promotion, even this limited resource ismisused or not utilised for Behaviour Change Communica-tion. Technical expertise is required to plan and implementcost efficient and effective interventions, only the technol-ogy required is not establishing more advanced curativefacilities without investing in mechanisms to effectively deliverpreventive and promotive health care. Even health commu-

nication to be effective needs to be structured correctly andthat too requires skills and experience.

Focusing on providing preventive and promotive care doesnot require a massive addition to the total health budget,though the health budget itself does require a major incre-ment. What is urgently needed is that the priority change froma largely curative focus to a balanced programme of provid-ing preventive, promotive public health care rather than anover-riding allocation to urban curative care.

Even when a model Primary Health Centre was evaluated,Anand et al (Natl. Medical J India) reported the division ofcosts of running a properly functioning Primary Health Cen-tre with a well balanced emphasis on preventive and promo-tive care. They have reported that curative care cost 32%, com-municable disease control cost 17%, child care 17%, mater-nal care 11% and family welfare 10%. In other words at theperipheral level curative care needs only about a third of thenon-salary budget, preventive, promotive interventions demandat least 2/3 of the available resources.

Health in the Community

Having discussed earlier in the document that preventive meas-ures are effective and that though Prevention costs moneythe returns far exceed the investment, we will now considerpossible ways to improve the health of the community. Ofcourse this discussion will remain in the context of the basicpremise that effective improvement in health and health carein the community is contingent upon involving the commu-nity itself as partners in the health system. To reiterate whathas been said earlier in the document, improving the healthof the community, especially of the poor in both rural andurban settings demands resources in the form of skills, asuitable structure and finances.

�First and foremost the system must be built around the con-cept of the centrality of the community’s involvement inits own health care.

� A health promoting life style in essential for health as life-style diseases are becoming increasingly important.

� Factors such as water and sanitation play a very importantrole

� Disease outbreaks, and risk factors for disease must bedetected as soon as possible and corrective action initiatedwithout delay

� Easily accessible essential basic care must be available toall with referral facilities for complicated conditions

Mechanisms for Health in the Community

To meet the health needs of the community interventionsare required at a minimum of five levels. � Peoples participation in health care is the basic prerequi-

site.� A system of education and behaviour change communica-

tion has to be put in place with an objective of promotinga healthy life style



Table 2

Estimates of the cost of three major tobacco-related diseases for the year 2001-2002

Total cost Rs 25,478

Cancers

Direct cost Rs 49,980

(+) 1% Rs 4998

Indirect cost Rs 300,020

(+) 9.2 Rs 27,602

Total cost Rs 382,600

Total cost of CAD: 4.61 million x Rs 30,310 = Rs 139.7 billion

Total cost of COLD: 40.65 million x Rs 25478 = Rs 103.57 billion

Total cost of cancers: 0.17 million x Rs 382600 = Rs 65.04 billion

Total cost of the three = Rs 308.33 billion

Major tobacco-related diseases in 2001-2002 = Rs 308.33 billion

CAD: Coronary artery disease; COLD: Chronic obstructive lung disease Source: Reddy and Gupta 2004

� An effective mechanism for dealing with disease outbreakshas to be incorporated into the public sector health system

� Suitably trained staff with an expertise in Public Healthmeasures must be become an essential part of the publicsector health care team.

�Basic curative care and access to secondary and tertiary levelcare as needed

Peoples Participation or Communityinvolvement.

To be effective and self sustaining the community itselfmust be involved in health care. This can take many forms,through the Panchayati Raj Institutions, the involvement ofcommunity based and non-government organisations andthe involvement of people at all levels of health intervention.This must be the first change brought about in the functioningof the public sector health system. Only when the people areinvolved as equal partners in health care can the health sys-tem even begin to meet the health needs of the community.Doctors can prescribe but the medicine will be effective onlywhen it is taken. Unless the people are involved in their ownhealth care, not as passive recipients of a dole from the “author-ities” but as active players the fullest benefits are not likelyto reach the community on a sustainable basis. The active roleof the community is more important now than ever before.The so-called “lifestyle diseases” both communicable andnon-communicable are now contributing a major share ofthe morbidity and mortality experience of the community.These diseases, whether HIV, cardi-vascular disease, diabetesor even accidents are not amenable to prevention by con-ventional ‘medical’ interventions such as medicines or vac-cines. The key to their prevention is behaviour change andthis can only be achieved by the people themselves, the healthsystem increasingly needs to assume a catalytic and techni-cal resource role.

Education and Behaviour ChangeCommunication

More and more the diseases that affect people are the groupcollectively described as ‘Life Style Diseases’. Most other dis-eases that plague the community though not strictly speak-ing in the above category can also be prevented or modifiedby behaviour change. It is essential therefore that the publicsector health team include expertise in health education andbehaviour change communication.

Besides mass media efforts, the role of both the doctor andall other members of the Public Health team in one to oneand small group communication can not be overestimated.As was clearly demonstrated by IEC based project in 68 dis-tricts of Bihar, Madhya Pradesh, Utter Pradesh and Rajasthansimple health messages communicated by health workers tovillage key persons (link persons) are effectively communi-cated to the community with clearly demonstrated healthbenefits to the community. Such measures require improvedmanagement rather than extensive infusion of funds. Some

dedicated staff for communication in the form of the districtMedia Officer and the block extension educators are alreadyin place as a part of the health team; they need direction andsupervision to do their own jobs rather than being utilised asodd bodies.

A especial case must be made to use the school setting forinculcating the habits of healthful living right from the schoolage. It is these members of our society that are going to thecitizens of the future and there is increasing evidence to sug-gest that school age children are powerful communicatorswho can change the way the family behaves and thinks.

Similarly college going students need information on healthyliving, not only because if the need to protect themselves frommany life threatening conditions but also to act as changeagents and information repositories in their future lives. Thesudden freedom from parental and school supervision whena student joins college, coupled with peer pressure leads manyyouth to experiment with tobacco, alcohol and other drugsand with sex. In the current environment of the spread ofHIV and hepatitis virus in the community such ‘innocent’experimentation may lead to serious or even fatal illnesses.Some Universities such as Delhi University have a system ofcompulsory subsidiary subjects that have to be taken bysome groups. Though compulsory the marks do not countfor the final result. A Health subsidiary subject is badly needednot only so that students are empowered to protect them-selves for diseases such as HIV/AIDS but also to give themthe facts to enable them to influence others with preventiveand promotive information.

In addition to a health subsidiary, a ‘University Talks AIDS’type activity can be expanded to provide preventive and pro-motive messages.

Early Detection and Prompt Response:Disease Surveillance

Disease outbreaks are still a feature of the health scenario inIndia. The major epidemics that were a feature in BritishIndia are now fortunately a thing of the past but smallerscale outbreaks are still a fact that has to be addressed by thehealth system. The peoples felt needs can not be said to havebeen met unless a system is put into place to detect actualand potential outbreaks very early and by responding promptlyminimize suffering in the community.

Outbreaks of communicable disease are still not uncom-mon, too frequently the health system learns about them fromthe media or the political system. It is rare to hear of an impend-ing outbreak detected and tackled, even more uncommon tolearn of the health system taking proactive steps to abortdisease epidemics.

Every disease outbreak that occurs in the community andis not tackled fast not only increases the avoidable morbid-ity and mortality, but also produces dissatisfaction with thehealth system. This in turn makes the community less likelyto accept preventive and health promotive messages fromthe health system.

There is an urgent need to have a system in place to detect



the first signs of an impending or potential outbreak and theninitiate steps to control the problem. This process needs twopre-requisites, a system in place and the expertise availableto the community. Unfortunately the skills of Public Healthare not a part of the public sector health infrastructure

A system that follows the usual ‘medical’ practise of diag-nosis first and then an appropriate response is not a modelthat meets community needs where the first priority is con-trol rather than diagnosis. This may seem contradictory butone must remember that John Snow controlled the epidemicof Cholera in London long before the causative organismhad been identified and the more recent example where suc-cessful control measures were put in place for SARS muchbefore the organism had been identified.

It is not implied that a proper diagnosis is unnecessary butmerely that response can not and should not be delayed untilthe exact organism is identified and typed. Much can bedone to ameliorate the morbidity and mortality in the com-munity on the basis of general public health disease controlmeasures once an outbreak is identified.

Early detection can best be achieved by the peripheral healthstaff and the community (including PRI) itself acting in con-sonance to bring actual and potential health problems to theattention of the health system. The current all too frequentscenario where the health system at the headquarters learnsabout a disease outbreak from the media or political systemand then informs the peripheral health staff is obviously unsat-isfactory. Information from the community should alert thelocal health functionaries and initiate a response mechanismwithout waiting for instruction from above.

The etiological diagnosis is important, but response can notwait for it to be established because so much can be done tominimise morbidity and mortality even before the exact aeti-ology is established. To establish the diagnosis a laboratoryback-up is required.

It would seem logical to involve existing health institutionsin the process rather than to establish a completely fresh chainof public health laboratories. India has over two hundred med-ical colleges and about 600 districts. It would seem logical togive the responsibility for microbiology support and tertiaryreferral for 3 districts to each Medical College. After all everysuch teaching institution has a complete microbiology depart-ment with laboratories, staff and specialist expertise. The clin-ical departments of these institutions can also provide expertadvise for clinical management of persons affected by theoutbreak. This process would minimise expenditure, makeexperts available to the community and provide valuable train-ing opportunities for the students and junior doctors. Med-ical colleges should be persuaded to accept their corporateresponsibility to the community they serve.

Once a system is put into place for the early detection andreporting of disease outbreaks it can be expanded to alsobecome aware of risk factors that predispose to disease out-breaks (increased mosquito breeding may well presage an out-break of malaria, indeed an increase of potential breedingsites after an unusual monsoon may foretell of increased mos-quito breeding). In such situations timely action can prevent

an outbreak. An extension of this concept would be aware-ness about risk factors for Non Communicable Diseases (NCD).

Skilled Manpower -Public Health Expertise

If the public sector health care system is to be efficient andresponsive to the needs of the community, especially in viewof the resource constraints that are an integral and continu-ing part of the health care scenario in India, several steps needto be taken. Micro-level planning is essential so that the activ-ities and priorities of the health system match the actual andfelt needs of the community that the system serves. The healthinterventions must be tailored to meet the particular healthneeds of the community concerned and can not be addressedby an Nation-wide or even State-wide plan. The people andthe public sector health providers must together evolve aplan to meet the needs of the community.

For appropriate planning, information is needed, for infor-mation to be generated from data, and data to be collectedmeaningfully from the system and community, skills are needed- the skills of Public Health. Lacking these skills it is no won-der that all attempts to initiate micro-level planning have metwith resistance and failure. Micro-planning has been recom-mended repeatedly both by the Central Council for Healthand Family Welfare and by the Planning Commission.

If the health system does not address the felt health needsof the community, and if top down dictated health inter-ventions are all that the community experiences, it is nowonder that the community looks at the government healthstructure as an expensive and redundant imposition by thegovernment. The people feel that the health infra-structureserves the governments needs and does not cater to the needsof the community.

India can not afford the luxury of developing a health careprogramme by trial and error. We neither have the resourcesnor the time to delay making the benefits of existing knowl-edge in health available to all our people. Of course advancesin knowledge and technology are needed and will take place,but we must never forget that we already have the technicalknowledge to tackle most of the health problems plaguingour citizens in the community. Can we justify the delaying theapplication of available science with the excuse that ‘better’science lays ahead. Staff skilled in modern Public Health willbe in a position to bring the advantages of current scientificknowledge to finding solutions and selecting the best optionfor health interventions in the community. In most cases theeffective options will include a partnership with the commu-nity.

It is a peculiarity of the public sector health care system inIndia that in the field of health care in and for the commu-nity, there is no emphasis on the skills and knowledge of mod-ern discipline of Public Health. The Medical Council of India(MCI) has mandated that a major portion of the undergrad-uate medical curriculum be devoted to Public Health by anyname. Preventive and Social Medicine, Community Medicine,Public Health are all different names for essentially the samediscipline and every medical student in India has to study



this subject. Many medical colleges also train post-graduatestudents in this subject and award the MD degree. Some Insti-tutions also confer a doctorate in the subject. Yet the deci-sion makers in all but two States in India have decided thatthe skills of Public Health and related disciplines are not essen-tial in those responsible for looking after the health of a dis-trict or even that of a State or the Nation. They feel any med-ical degree, any specialisation is adequate qualification forplanning and implementing health care plans in the com-munity. A neurosurgeon or anatomist is supposed to be ableto implement Public Health programmes by virtue of thewisdom that goes with seniority! This decision seems to defylogic and appears contrary to the basic objectives of healthcare. Not only the highest planning and health decisionmaking bodies in the country have emphasised the impor-tance of the discipline of Public Health (by any name) buteven the premier health body in the UN system, the WorldHealth Organisation has stressed the importance of the dis-cipline of Public Health for the health of the community.

World Health Organisation and Public Health

The WHO has given the development of Public Health a veryhigh priority in its agenda. An idea of its stand on the needfor better Public Health for the country , with all its implica-tions of preventive and promotive health care, better diseasesurveillance and prompt response to disease outbreaks andthe great importance of water, sanitation and sound afford-able nutrition can be gauged from the fact that they organ-ised in the end of 1999 an important international meetingwith high level expert participants from many parts of theworld to deliberate on Public Health in the 21st Century. Thefocus of this meeting was to a very large extent on India.

Calcutta Meeting

This meeting held in Kolkata (then Calcutta) resulted in whatcame to be called the Calcutta Declaration. The Declarationwas presented at the final plenary chaired by Mr Jyoti Basuand endorsed not only by the Public Health community inIndia but by the international bodies and experts attendingthe meeting. The Declaration was again endorsed by the IndianPublic Health Association in Agra and more recently duringa follow-up meeting organised by WHO.

The first clause of the Declaration reads as follow:

1. Promote public health as a discipline and as an essentialrequirement for health development in the region. In addi-tion to addressing the challenges posed by ill-health andpromoting positive health, public health should also addressissues related to poverty, equity, ethics, quality, social justice,environment, community development and globalisation.

The entire text of the Calcutta Declaration is given as appen-dix 1 at the end of the Document together with the recom-mendations of the follow-up meeting. However the role ofthe discipline of Public Health is emphasised as a pre-requi-

site for implementing a community centric health focus withan emphasis on preventive and promotive measures.

The WHO has also proposed a model for ComprehensiveCommunity and Home-based Health Care (SEARO RegionalPublication No 40) which puts the community at the centreof the care paradigm and stresses the multi-facetted inte-grated care is needed to meet community needs for healthcare.

Public Health - Expertise to Meet Community Needs.

Except in the case of two states in India (Tamilnadu andGujarat) formal qualification in Public Health or its allieddisciplines is not a requirement for any of the ‘health’ relatedpositions. The District Medical Officer of Health can be aperson trained in any discipline appointed only on the basisof seniority with no regard for job requirements as long as heor she has a basis MBBS degree. He or she can be an eye spe-cialist by training and be expected to guide the provision ofpreventive and promotive health services, to tackle commu-nicable disease outbreaks or to carry out an epidemiologicinvestigation. This mismatch between training and job respon-sibilities is unfortunately the norm. After all the Union Min-istry of Health and Family Welfare appointed a professor ofAnatomy from the Maulana Azad Medical College in Delhi tobe the final technical authority in the Directorate, Union Min-istry of Health and Family Welfare for determining the healthrelated aspects for women and children!

Public Health is well defined discipline with its own expert-ise and skills; a person from another branch of medicine, nomatter how qualified in his or her own field can not take theposition of a specialist in Public Health just as a specialist inPublic Health can not take the place of another specialist. Thebody of knowledge and skills are not related to the seniorityor influence of the person but to the training and experi-ence.

The fact that there is a special body of knowledge and skillsthat deals with the provision of health care to the commu-nity is not seriously questioned. The Medical Council ofIndia has given the subject, by whatever name, a position ofgreat prominence in medical education. All the over 215 med-ical colleges in India teach the subject - this is mandated bythe MCI. In almost every one of those Medical Colleges thesubject is taught badly and as an abstract discipline. The stu-dents in turn neither care nor are interested as they haveimbibed the prevailing attitude that the subject is of no realvalue to their ultimate objectives. Unfortunately as thingsstand at present they are correct.

The MCI has also made provisions for postgraduate degreesin the subject. At this point of time those students who optfor a MD in a Public Health related subject are generallythose who have not succeeded in making it into a more pres-tigious subject. This is not surprising. Unlike other special-ties, those qualified in Public Health are not uniquely quali-fied for any particular positions except perhaps to join fac-ulties in medical schools to produce more misfits like them-selves. There is no strong cadre of Public Health Specialists



even though a very large part of the health care provider work-force in the country is engaged in delivering health care tothe community rather than exclusively to individual patients.

Our founding fathers who wrote the Constitution of Indiawere a farsighted and wise group. There are many aspects ofthe provisions made in the Indian Constitution that have beenacclaimed as establishing a high standard for other fledglingnations to emulate, or for that matter set an example forseveral important nations that had been free for a long time.Amongst the provisions is the fact that the Constitution estab-lishes Public Health as a fundamental right and thereforeenjoins upon the Government the responsibility to put intoplace health care systems that provides every citizen theright of access to health care. This does not mean that theState has to ensure that everyone is healthy, and obviously itcan not do that, but merely that the best achievable healthcare provision is provided with equitable access being guar-anteed.

This provision is spelt out in the Directive Principles ofState Policy which states:-

“The State shall regard the raising of the level of nutritionand standard of living of its people and the improvement ofpublic health as among its primary duties.”

-The Constitution of India; Part IVIndia has provided the infrastructure for providing health

care, an extensive network of Primary Health Centres and Sub-centres is in place; the vast majority, but by no means all, hasstaff in place. Unfortunately the government health care facil-ities do not meet the health expectations of the communityand their functioning as nodes for preventive and promotivehealth care is largely reactive rather than proactive. The com-munity identifies these facilities as the “governments FamilyPlanning Centre” rather than their own health care facility.The efficiency of the peripheral health care facility’s func-tioning is reflected in the less than satisfactory state of vari-ous indicators of health prevailing in the community.

Maternal mortality is still unacceptably high is much of thecountry, the infant mortality rate is even now very high inlarge parts of the nation. Immunization rates are unaccept-able in many states and even with all the effort being putinto it by many agencies, even polio immunization goals arenot met. Outbreaks of communicable disease are not a thingof the past.

CEA Wilson in 1920 defined Public Health and this wasaccepted with minor adaptations by the WHO in 1982 as:-

“The science and art of preventing disease, prolonginglife, and promoting health and efficiency through organizedcommunity efforts for the sanitation of the environment,the control of communicable infections, the education ofthe individual in personal hygiene, the organization of med-ical and nursing services for the early diagnosis and preven-tive treatment of disease, and the development of socialmachinery to ensure for every individual a standard of livingadequate for the maintenance of health, so organizing thesebenefits as to enable every citizen to realize his birthright ofhealth and longevity.”

Subsequently the organization of health care, both pre-

ventive and curative came to be included in the mandate ofthe specialist in Public Health. In modern usage the term hascome to be used synonymously with various allied disci-plines such a Preventive and Social Medicine, CommunityMedicine, Community Health, Public Health Administrationetc and during discussions it is understood to include relatedskills such as epidemiology, behaviour change communica-tion etc. It is in this larger context, incidentally very like theconcept of ‘comprehensive health care’ as proposed in theBhore Committee report, that the term is used in this paper.

Unfortunately the term Public Health is used to mean sev-eral different things. As defined above it refers to those spe-cial skills and the body of knowledge that deals with the organ-ization and delivery of efficient health care to the commu-nity. Unfortunately the term is also used to talk about the‘state of health of the public’. Another usage is synonymouswith “Public Sector Health Care” or health care activities deliv-ered by the state and includes both curative and preventiveaspects. This unfortunate ambiguity in language preventsclarity of thought and action.

Public Health the discipline has much to offer the commu-nity. Evidence based planning and proactive interventions toprevent or abort disease outbreaks are only some of the ben-efits. Currently reactive rather than proactive decisions aretaken about health interventions in the community and eventhese decisions are to frequently being taken hurriedly inseveral ways in response to pressure from ‘above’.

� Very often the mandate comes down from above as if Indiais a homogenous entity and local priorities are identicalacross the country.

�Another way to take decisions is based on ‘it has always beendone this way’.

� All too frequently interventions are based on a guess andthe pressure to do something. The intervention is justifiedwith the implicit understanding that if the intervention doesnot work something else can be tried.

If the intervention does not produce results most often nobody will know - the community does not expect results andthe system does not have the information or skills to deter-mine if an effect was produced. What matters is that the cri-sis has passed, the system met the need to ‘do something’and in any case the system is not accountable for ineffi-ciency in results or cost.

How long can we justify denying the people the funda-mental rights guaranteed by the Constitution? By denyingthe people the benefits of modern Public Health, we are deny-ing large segments of the population of the best options forhealth care.

Having outlined some of the reasons for the sorry state ofhealth in India, and also having argued that improved Pub-lic Health services are absolutely essential if the benefits ofmodern health care are to reach the community at large, thissection briefly outlines a vision for the structure and organ-isation of health care in India in the context of optimisingpublic sector health care in the country with the ultimate ben-



efits to the community.As described earlier, Public Health in India has entered a

vicious cycle where the lack of professional avenues to usePublic Health expertise has removed the incentive for thedevelopment of expertise in Public Health and has almosteliminated research and development in that field. New entrantsinto Public Health are almost always those persons who havefailed to enter more highly regarded disciplines and haveentered the discipline as a last resort. Poor material at pointof entry means that the average product at the end of thetraining is still very limited in intellectual capacity, expertiseand especially initiative. This further lowers the already lowstatus of the discipline and in turn additionally reduces theability of the discipline to attract talent.

Other than teaching positions in medical colleges, special-ists in Public Health (and its allied disciplines such as SPM,Community Medicine etc.) have almost no avenues for employ-ment that demands their specialisation as a mandated spec-ification. In a country of well over a billion population, thenumber of Public Health jobs (other than teaching positions)is still in two digits! Why should anyone good enter a disci-pline that gives very few avenues for employment and carry’sthe additional stigma of low status in the eyes of their pro-fessional peers, health decision-makers and even the public.The remuneration their specialisation earns is only a fractionof that taken home by their clinical colleagues. Those that optfor Public Health face the fact that their colleagues look atthem as professional failures and deserving of pity rather thanrespect.

Naturally the specialty has not made an impact on decisionmakers and decision makers see no reason to give the spe-cialty a priority.

A lot needs to be done. Better human material needs to bedrawn into the discipline, the discipline itself needs to estab-lish that Public Health specialists offer what no others can,and peer acceptance needs to be enhanced.

It is unlikely that mere pious platitudes by health decisionmakers are likely to materially influence the situation as itexists today. Improving the quality of teaching and training,and even increasing the number of seats available in teach-ing institutions will ultimately make little difference to theoverall picture; we will just get more of the same, studentsinterested not in the practice of Public Health but desperatestudents who could not get admission in more coveted dis-ciplines and who are therefore willing to settle for the post-ponement of the need to earn a living for another three yearsand the magic letters ‘MD’ after their names to impress theunsuspecting public.

The proposed Institutes of Public Health can not be con-sidered as solutions to the problem, they are only one step.The limiting factor at this time is the lack of recognition ofthe discipline. Unless there are dedicated job opportunitiesfor specialists in Public Health, good material will not be drawninto the discipline and the Institutes of Public Health will notaffect the health situation in the country.

If the objective is to bring the advantages of the skills andknowledge of the modern science of Public Health to the com-

munity and the health care delivery system then persons trainedin Public Health must be available at all levels from the CHCto the Directorate of Health. This will improve the quality ofhealth care to the public and by creating job opportunitieswill draw talent into the discipline.

One can not expect a trained cardiac surgeon to fill the posi-tion where neurosurgery is to be performed. It does not mat-ter that he too is a super-specialist and a surgeon. Why shouldthe health decision makers not demand that every person whodeals with Public Health have the expertise and qualificationin a related discipline?

This suggestion does not depend on a significant enhance-ment of money spent on salary and related staff costs. Whatare needed are the political will and the decision by Govern-ment. What is proposed is that the benefits of the knowledgeand skills of modern Public Health be made available at alllevels from the District to the Ministry of Health. This doesnot entail the creation of many new posts, what is needed ismerely the division of existing positions into either the clin-ical stream or the Public Health stream. All those members ofthe health team, including doctors and nurses, whose primaryjob description requires the treatment of individual patientsshould fall into the clinical stream. All those health careproviders, including doctors and nurses whose primary jobdescription entails the provision of health care to the com-munity, preventive and promotive interventions and first con-tact physicians can constitute the Public Health cadre. Pub-lic Health, just as clinical medicine, needs a team effort tofunction. The Public Health team needs to draw upon expert-ise from medicine, social sciences, communication, engi-neering and environmental sciences to provide the broad can-vas that is required to sketch the scope of interventions requiredto provide a health promoting ambiance for the community.

The difference can be illustrated by spelling out the impli-cation at the district level. The clinical stream at the districtwould be headed by a appropriately qualified person in a suit-ably named position equivalent to what used to be called the‘Civil Surgeon’ of the district. The Civil Surgeon was gener-ally also the chief of the district hospital. In the proposedarrangement, the Public Health stream at the district wouldbe headed by the ‘Chief Medical Officer of Health’, while thecurative care wing would be looked after by the Civil Surgeon.The other health department staff including doctors wouldbe divided between the two depending upon their role. Per-haps one additional position would be required. The Civil Sur-geon and CMOH should be of the same seniority.

The most under-utilised part of the health infrastructureat present is the Community Health Centre. The CHC is sup-posed to be first level of referral for a network of PHCs in itshinterland. They are staffed by 4 specialists (clinical) and onegeneral duty medical officer. This latter post could be desig-nated for the Public Health stream and provide leadershipfor public health related activities in the PHCs.

The principle of differentiation and parity should extendall the way up to the top. It would be necessary to have twoDirector Generals of Health, one for Clinical Services and theother for Public Health. Incidentally this was the practice



earlier when one position was designated the Inspector Gen-eral of Civil Hospitals and the other as the Director of PublicHealth. It also has precedent in that the Ministry of Healthhas two Secretaries - one for Health and the other for Fam-ily Welfare so there should be no grave administrative reasonwhy there can not be two directors of Health Services. Unlessthe Public Health stream has an equivalent career path it willremain a second choice, lower in status and esteem than theclinical group.

The principle of parity must extend to a realistic assess-ment of remuneration and take home pay between the twostreams, with an eye to the desirability of attracting talent topositions not normally open to medical practice for fees.

The proposed scheme can only work if Public Health qual-ifications are mandated for all Public Health jobs. This willneed an interim arrangement and relaxation until sufficienttrained staff is available. Perhaps an example of what maywork will involve the following decisions:

� A decision at the policy level to re-organise the public sec-tor health care system in the country into two parallel andequal streams - clinical care and Public Health care

� The two streams to be equal in terms of real remunerationand seniority, with two positions of equal seniority at thelevel of Director General of Health Services and lower downtwo positions of equal rank at the district level

�Essential academic qualifications should be defined for eachstream with Public Health and related disciplines being man-dated for all positions in the Public Health stream.

�An interim relaxation for persons opting for the Public Healthstream, perhaps all persons being required to get certifica-tion by the end of the second year, and only persons withdiploma (DPH/MPH) / MD (PSM) / Dr.PH or PhD being eli-gible for posts after 5 years.

Producing the trained staff required.

If the scheme is implemented, provisions will have to bemade to strengthen facilities for producing enough trainedpersons to meet the need for Public Health manpower. I feelthis can be done fairly easily without too large an investmentin training facilities or establishing many new Schools of Pub-lic Health. What is needed is a reorganisation of the post-graduate training present in many medical schools. At pres-ent the MD degree in PSM is a 3 year course. With a littlereadjustment, the intake can be increase manifold for the firstyear. The first year should be devoted to a conventionalDPH/MPH type programme. At the end of the first year,those who qualify should be awarded a DPH or MPH. The bestfew in each class, not exceeding the usual intake for MD, canbe offered the opportunity to go on for another two yearswhere they would learn academic Public Health includingadvanced epidemiology, research methodology and do theirresearch and write a thesis.

A short term measure to tide over the immediate require-ment of trained persons would be to use one or more of theOpen University’s to run distant learning courses offering cer-

tification in aspects of Public Health for in-service candidates.These certificates would permit officers to continue to servewhile they work towards more advanced academic qualifica-tions.

A similar arrangement would be required to strengthen thetraining of other team members for Public Health. In thelong term the number of schools of Public Health wouldhave to be increased from the current one so as to establisha training facility in each region of the country. There is alreadyone at Kolkata and others would be needed for the south,west, central and north zones.

Public Health - a team effort.

Like modern curative care, Public Health too is a team effort.There is an urgent need to draw social scientists, nurses, spe-cialists in communication into the discipline and the PublicHealth service. Public Health training facilities must open theirdoors to related disciplines and not confine their instructiononly to doctors. Such a mix of knowledge and experiencecan only enrich the discipline and benefit the community.

Other Systems of Medicine

Various systems of medicine other than allopathic are pres-ent in the community and play an important role in provid-ing health care to the community. Setting a system in placethat does not take this large army of qualified and unquali-fied health care providers into partnership is wasteful of avaluable resource. While it is neither practical or even legal totrain them in certain aspects of allopathic health care, muchgood can be achieved by using this valuable resource for pre-ventive and promotive health care.

A simple measure such as hand washing after using thetoilet, before cooking or handling food and before eatinghas been demonstrated to have a significant effect on pre-venting diarrhoeal disease. Measures such as these can be asor more effectively propagated by practitioners of IndianSystems of Medicine as by the allopathic team. Most healthpromotive measures are likely to strike a sympathetic chordwith our fellow providers of health care.

Curative Care

Curative care is also required alongside preventive and pro-motive health interventions. The issue is not one or the otherbut the appropriate balance between the two wings. Whilebasis or primary health care is needed at the periphery andbye and large is provided for in the rural areas, there is a markedunfilled need to cater to the requirements of urban slumpopulations. This must be considered a priority health require-ment.

Another shortcoming of the existing health system is thealmost complete absence of a working referral system. Aneffective system of both upward and downward referral willdo much not only to improve the care available to peripheralpopulations but also increase community satisfaction with



the health system.In summary to make sure that health care reaches out to

every citizen of India, the system has to be re-organised. Itmust be ensured that every person, whether living in the poor-est unrecognised slum or the most distanced small village getsthe benefits of health care. The following steps are unavoid-able if the intention is to improve the health status of all ourpeople.�People must be treated as active partners in their own health

care� The messages of health sustaining lifestyles must be incor-

porated into the formal educational curricula and alsoimparted to the public at large

� The focus must change to emphasize preventive and pro-motive health care ie Public Health

�Potable water and sanitation requirements must be addressed

� Positions dealing with health care to the community mustbe occupied exclusively by persons trained in Public Healthwhile those doctors and staff engaged largely in providingcurative care to individual patients should form the cura-tive wing of the health service. This differentiation mustextend from the PHC up to the Directorate of Health Ser-vices

� An appropriate level of curative care must be provided toall those who need it. The financing mechanisms can beworked out

The Constitution of India has given every citizen the rightto expect good health care. This is being denied, not becauseof cost but because of the reluctance to accept that PublicHealth can make health care more efficient. How long canwe avoid accepting what is self-evident.



Appendix 1

The Calcutta Declaration

We, the participants in this Regional Conference on publichealth in South-East Asia in 21st Century, appreciate the sub-stantial achievements made in improving the health statusof the people in the countries of the South-East Asia Regionin the past decades. However, we enter the 21st century withan unfinished agenda of existing health concerns and newand complex challenges that demand innovative solutions.We uphold the centrality of meeting the health needs of thecommunity and our responsibility to preserve, protect andpromote the health of the people.

We commit ourselves to the goals of poverty alleviation,equity and social justice, gender equality and universal pri-mary education, which are all essential elements in the pur-suit of health for all. We recognise that expertise in publichealth and capacity building, as well as experience are essen-tial for sustaining partnerships in designing, developing andproviding health for the community. We emphasise the impor-tance of public health as a multidisciplinary endeavour tomeet the health needs of people.

Having noted the progress in public health practice, edu-cation and training, and research in the countries of South-East Asia Region, and having reviewed the lessons from pub-lic health-related policies and programmes, we endorse thefollowing strategies and directions for enhancing health devel-opment in South-East Asia Region in the 21st century:1. Promote public health as a discipline and as an essential

requirement for health development in the region. In addi-tion to addressing the challenges posed by ill-health andpromoting positive health, public health should also addressissues related to poverty, equity, ethics, quality, social justice,environment, community development and globalisation

2. Recognise the leadership role of public health in formu-lating and implementing evidence-based healthy publicpolicies; creating supportive environments; enhancing socialresponsibility by involving communities; and increasingallocation of human and financial resources

3. Strengthen public health by creating career structures atnational, state, provincial and district levels, and by estab-lishing policies to mandate competent background andrelevant expertise for persons responsible for the health ofpopulations, and

4. Strengthen and reform public health education and train-ing, and research, as supported by the networking of insti-tutions and the use of information technology, for improv-ing human resource development

We urge all Member Countries as well as WHO to continueto provide leadership and technical cooperation in buildingpartnerships between governments and UN and bilateral devel-opment agencies; academia; NGOs; the private sector; themedia, and other organs of civil society, and to jointly advo-cate and actively follow-up on all aspects of this Calcutta Dec-laration on public health

Subsequently The WHO organized a follow up informal con-sultation in December 2003 in Delhi entitled ‘Future Direc-tions in Public Health-Calcutta and Beyond’.



Anand et al. National Medical Journal of India.

Government of India. Report on tobacco control in India.New Delhi: Ministry of Health & Family Welfare, Centresfor Disease Control and Prevention and World Health

Organization; 2004.

University of Sydney, Earth Institute, Columbia Universityand IC Health. A race against time. New Delhi: Secretariatof IC Health; 2004.


People's Partnership for Health Towards a Healthy Public in India SECTION II

References

SECTION III

Drivers of Health CareCosts

S E C T I O N I I I

ODERN TECHNOLOGY HAS THE POWER TO PREVENT SICKNESS AND ASSUREEARLYcure. However, its delivery requires a vibrant health system based on the strong foun-dation of a well–trained, motivated and professional human infrastructure, whichincludes a wide array of community-based workers, nurses and other paramedicsand doctors-persons who actually deliver care and transform inputs into dynamic out-comes. Human resources are the critical variable for the effective implementation ofhealth programmes and delivery of quality health care to achieve the national healthpolicy goals in India. The availability of an adequate number of health personnel toeffectively and efficiently manage and implement health programmes cannot beoveremphasized. However, numbers alone may not necessarily lead to the desiredchange in health status and outcomes.

In keeping with the growth of the health infrastructure and the expanding scopeof the health services human resource needs have been increasing. Several newhealth programmes have been introduced or strategies of existing programmes revised.The changing constellation of health services and strategies have led to an urgentneed to develop new competencies and skills among the health personnel, in addi-tion to increasing the critical mass of human resources at various levels. This sectiondeals with the training, skills, competencies and professional development of the fivecritical categories of human resources for health–the village health worker, nurses,paramedics and finally, doctors and specialists.

The community

Historically, the health of communities in India were in the hands of local healerswho practised holistic medicine. The vaids and hakims combined healing skills withcounselling and concern for the well-being of the family. Modern technology haschanged this and led to the increasing institutionalization and urbanization ofhealth care. The resultant vacuum, barriers of cost and distance, combined with thegradual shift in perception towards allopathy as symbolizing good quality, resultedin the proliferation of a large number of unqualified or unregistered practitioners ofhealth care, estimated to be 36% as per the 57th Round of the National Sample Sur-vey Organization (NSSO).

Individuals and communities play an important role in their own health. Experi-ence, knowledge of their environment and traditional practices form a strong foun-dation for most communities to address minor ailments and short episodes of sick-ness. The low cost of medication for such treatment makes travelling long distancesunaffordable and expensive. Communities also need to be provided information onhealth risks and guided on healthy lifestyles. Such information dissemination aimedat behaviour change strategies have been demonstrated to have a long-term impacton avoiding diseases and well-being. The need to restore the community base for thehealth system has been recognized for a long time (Bhore Committee, Srivastava Com-mittee, NHPI, etc.). These concerns that require active participation of the people,led to the institution of the Village Health Guide (VHG) Scheme in 1977. The VHGwas to be a person from the village, who was imparted a short training and providedRs 50 per month for medicines. The experiment failed as no follow-up training wasimparted and the scheme has since been abandoned.

After the VHG Scheme, the second intervention for community mobilization on acountrywide scale was carried out in 1993. The Department of Family Welfare intro-

Human Resources for Health

M


SHIV CHANDRAMATHUR MBBS, MD

DIRECTOR, STATE INSTITUTE OFHEALTH AND FAMILY WELFAREGOVERNMENT OF RAJASTHAN

JAIPURE-MAIL:

[email protected]

AVTAR SINGH DUAMD, MBA

MEMBER, SUB-COMMISSION,NATIONAL COMMISSION ON

MACROECONOMICS ANDHEALTH, GOVERNMENT OF

INDIA, NEW DELHIE-MAIL:

[email protected]

duced the Mahila Swasthya Sangh (MSS Scheme), under whichwomen representatives from 20 households were made intoa women's health group and the auxiliary nurse midwife (ANM)was provided with seed money for local health education activ-ities. MSS have been constituted since 1990-91 in villageswith a population of more than 1000, or 200 households inthe plains, and for a population of 500 or more in hilly areas.The MSS comprises five grassroots-level functionaries and10 prominent women from the village community. The MSShelps the ANM in educating and motivating the communityfor the welfare of women and children.

The results have been mixed across the country and in sev-eral places defunct. Such initiatives of village-level commit-tees have to be viewed not from the narrow perspective ofprovision of health services, but as part of a wider social mobi-lization process. Some attempts towards community mobi-lization have also been made in different states-Jan SwasthyaRakshaks (JSR) in Madhya Pradesh (MP), Mitanins in Chhatis-garh, Jan Mangal Couples in Rajasthan, community-basedworkers under SIFPSA in Uttar Pradesh (UP) etc. (AnnexureI). There have been other isolated experiments by NGOs todeliver health services to communities through village-basedworkers.

Under the National Rural Health Mission there is now arenewed commitment to provide in every locality a trainedhealth worker-a married woman, preferably educated, trainedto promote good health behaviour, recognize early signs ofthe onset of disease (for treatment if minor or referral if seri-ous), run a drug depot to provide essential medicines for minorailments and help communities access health care services.The vision is for her to be from the community, responsibleand accountable to them.

Evaluations have, however, indicated that community-basedhealth workers need to be periodically trained, closely super-vised and integrally linked to the organized health system toensure sustainability and credibility. As shown in the JSR ini-tiative of MP, absence of such a nurturing framework resultedin the worker losing focus and being reduced to another quackproviding some curative care to make money. Similarly, inareas with a high maternal and infant mortality and wherethe system is unable to provide effective access to professionalservices, it is essential to focus on improving the skills of tra-ditional birth attendants (TBAs). Such training, however, needsto be not for a single six-day loop but intermittent and closelysupervised. Such intensively monitored upgradation of skillsamong community health workers in selected areas throughspecial interventions would require substantially more resourcesthan are now provided but will have greater dividends. How-ever, in the ultimate analysis the success of such interven-tions, so vital to the people particularly those living in remoteareas, is dependent on the support and sustenance receivedfrom the health providers in the health system.

The first health posts: Multi-purpose health workers

The first rung of the professionalized cadre of health services

are the 2 multipurpose workers (MPWs) manning a subcen-tre. The male worker is given 6 months' training in publichealth. With virtually no scope for in-service training, lowmotivation, high absenteeism and over 60% of posts lyingvacant, this cadre is the most neglected.

Of equal importance is the female multipurpose worker, orANM. Though originally conceived to address maternal andchild health care in the community, over the years, there hasbeen a systematic dilution of skills and functions. With sev-eral states (Rajasthan) and categories (STs) opting to reducethe educational qualification to standard VIII pass and noback-up training in human anatomy and basic sciences, theinitial handicap was worsened by reducing the training periodfrom 2 years to 18 months. Training schools were establishedunder political compulsions, without adherence to staffingnorms or quality. Over the years, ANMs lost their clinical expert-ise. Finally, as a multipurpose functionary, her nursing andmidwifery skills got eroded, affecting her credibility with thecommunity–a factor influencing the increased level of absen-teeism.

The low competencies and poor skills among these front-line workers is largely the result of the consistently low pri-ority that was accorded to training, both pre- and in-service.For example, the ANM training centres (ANMTCs) conductbasic training for ANMs/health workers (female). The syllabusis outdated and the physical condition of the buildings pathetic.The training is usually conducted in the district hospitals anddoes not make the ANM skilled enough to handle a deliveryon her own in a house located in a remote village-a reality inmost of rural India.

To understand the knowledge and skill gaps of ANMs, asurvey was undertaken among ANMs and Lady Health Visi-tors (LHVs) in the cadre of supervisors. Results of the surveyrevealed a grim picture of poor knowledge and wide skill gaps(Table 1).

It is clear from the above that there is practically no in-service training of these health care providers. The training isof low quality and inadequate to provide them with the requiredskill base. It also reflects on the effectiveness of the recentin-service clinical training of ANMs and LHVs under the Repro-ductive and Child Health (RCH) Programme, which made noserious efforts to provide hands-on clinical practice.

Given the very high burden of neonatal mortality and theurgency to bring down the levels to make a breakthrough inthe IMR, a similar analysis of skills was undertaken with respectto neonatal mortality. As can be seen from Table 2, the situ-ation is as disturbing. Neonatal deaths are closely associatedwith the obstetric process and require effective obstetric andessential newborn care skills among ANMs and LHVs. Birthasphyxia and birth injuries, important causes of neonataldeath, can be easily avoided by efficient obstetric care andsubsequent newborn care including aspiration of mucus andamniotic fluid. Easy interventions are available for acute res-piratory infections ((ARI), diarrhoea and neonatal tetanus;however, health functionaries and supervisors had limitedskills in preventing and managing these. Hypothermia, animportant cause of neonatal death, was not considered a


SECTION III Human Resources for Health

priority by these functionaries.Is the system prepared to meet the challenges of develop-

ing human resources with the requisite competencies and skills,based on an effective training policy? Is there an adequate andeffective training infrastructure? Is there a functioning andefficient training system and process? The answer is No. Asurvey conducted by the IIHMR, Jaipur for the NCMH, in twostates of Andhra Pradesh and Rajasthan and a review of train-ing policy in India brought out several disturbing facts:

No state has a separate manpower planning division in theState Directorate of Medical and Health Services though mosthave an elaborate training infrastructure-state Institutes ofHealth and Family Welfare (SIHFW), Health and Family Wel-fare Training Centres (HFWTC), District Training Centres (DTC)and ANM Training Centres (ANMTC), etc. However, most ofthese institutions suffer for want of good faculty or ade-quate budgets for any meaningful training. For example, theRajasthan SIHFW, created under IPP-IX as a Society to ensureautonomy and flexibility for planning, designing and coor-dinating training in the state, has had no regular director forabout four years. There is no regular faculty available and

most of the faculty positions are vacant. The physical infra-structure has been created but yet to be developed to thedesired level. The SIHFW does not have its own field practicearea to provide hands-on training and undertake opera-tional research in health systems as well as training interven-tions. There is no training budget in the state and for the Insti-tute. Funding from the World Bank has come to an end thusbringing uncertainty in staff salary and continuation of train-ing programmes. There is no software development activity,such as designing new training programmes and curricula,learning materials development and new training pedagogy.The present situation of the premier training institute reflectsnot only the apathy to training but also the level of priorityaccorded to capacity development in the state. Most SIHFWsare in a similar position.

Male workers get their initial training the HFWTCs, estab-lished and funded by the Government of India. The HFWTCsconduct in-service training of medical officers besides train-ing of trainers of DTCs. These HFWTCs have their own fieldpractice areas but these are scarcely visited or utilized. TheHFWTCs are neglected, suffer from gaps in infrastructure,


Human Resources for Health SECTION III

Table 1

Maternal deaths: Select causes, main interventions and skill levels

Causes of maternal deaths Interventions Current levels of skills of ANMs and LHVs

Antepartum haemorrhage (APH) Early identification of bleeding during pregnancy Poor knowledge of APH

Counselling Poor APH management skills

Continued risk assessment

Referral

Postpartum haemorrhage Prevent and treat anaemia in pregnancy Poor knowledge of PPH

(prophylactic and therapeutic)

(PPH) Early identification and risk assessment Poor skills to diagnose and manage PPH including

manual removal of the placenta

Skilled attendant at birth Poor skills to give blood/IV transfusion

Manual removal of placenta

Prevent/treat bleeding with appropriate drugs

Replace fluid loss by IV drip/transfusion, if severe

Early referral and transport

Puerperal sepsis Skills in aseptic delivery Poor knowledge of puerperal sepsis and its management

Clean practices during delivery

Administration of antibiotics

Pregnancy-induced hypertension (PIH) Early identification of risk in pregnancy Poor knowledge of PIH

Eclampsia/toxemia Counselling Poor counselling skills

Treat eclampsia with the appropriate anticonvulsive drug Poor management skills

Urgent delivery–caesarean section if needed

Obstructed labour Pelvic assessment Poor pelvic assessment

Referral Poor management skills of obstructed labour

Assisted delivery or caesarean section as per indications

Complications of abortion Identify and diagnose complications Poor knowledge and skills in managing complications

Treat sepsis with antibiotics

Fluid replacement if necessary

Referral

Note: Number of teachers estimated on basis of norms from Medical Council of India(1) This is the number of subject-wise faculty members required for imparting undergraduate training in the medical colleges where undergraduate medical education is being imparted (2) There are at least 105 medical colleges imparting undergraduate medical education that also impart postgraduate training. As per MCI's Postgraduate Medical Education Regulations, 2000 for conductingpostgraduate courses, extra staff is required in the departments of Anatomy, Physiology, Biochemistry, Pharmacology, Pathology, Microbiology, Community Medicine, Radiodiagnosis, Radiotherapy, Anaesthesia andForensic Medicine (four additional teaching faculty in each of these departments, in addition to those prescribed for undergraduate education).(3) There are also some institutions that impart only postgraduate training, and information on the faculty requirement of such institutions has not been incorporated in this table.

training equipment and aids, training material, and lack ofqualified and experienced trainers. The libraries are not equippedand virtually non-functional.

Training carried out so far functions on the implicit assump-tion that generating knowledge, rather than building compe-tencies for action, would empower the health care provider todeliver high-quality services effectively. No effort has beenmade to build an appropriate training environment which isconducive to learning, raising concerns and developing com-mitment of health personnel towards health care. There is nobehaviour change. There is no monitoring and follow-up toassess changes in performance and effectiveness of programmes.Training programmes are overwhelmed with the assumptionthat participants' acquisition of knowledge means greater com-petence; learning is a simple capacity of participants to under-stand and the ability of trainers to teach; and individual improve-ment leads to improvement in the organization.

An assessment of the knowledge and training needs asperceived by key functionaries was highly revealing. A ques-tionnaire was administered to all health care personnel toassess their knowledge on health and diseases of public healthimportance; their role, and other related aspects (Table 3).The study revealed that while the level of knowledge regard-ing immunization was almost 100%, it was deficient regard-ing important public health programmes such as tuberculo-sis (TB), HIV/AIDS, malaria eradication, leprosy, etc. Only med-ical officers had knowledge of these aspects. The ANMs, theMPW (M), and almost all pharmacists and laboratory techni-cians did not posses adequate knowledge of national pro-grammes. Further, the majority of PHC staff was not awareof their job responsibilities.

The review revealed glaring inadequacies in the human

resource development process and training of health per-sonnel. Some salient observations are summarized here: �Training institutions and training receive a low priority. There

is a generalized apathy towards training and capacity build-ing. Training is not recognized as an intervention to improveperformance. Owing to lack of nominations, training pro-grammes are frequently cancelled.

� The training function is seen in isolation. There is noproper planning and implementation of training programmes.Training is organized as thrust upon by the Central Gov-ernment or donor agencies. The training needs and expec-tations of the participants are not considered. Most of theprogrammes are lecture-based and didactic in nature. Thereis no focus on practical skills' development. Even in clini-cal skills' development programmes for ANMs and LHVs,there was scant attention on practice to the participants.

� The morale of trainers is low. There is no training cadre inthe states, or system for appointing trainers. Persons areposted or deputed to training institutions as trainers ratherthan regularly selected. There is no career stream in train-ing. There are no facilities for the regular professional devel-opment of trainers.

� The SIHFWs, HFWTCs and DTCs are poorly equipped withhostels, training infrastructure and libraries. The physicalfacilities at ANMTCs are appalling.

� Trainings of various types is offered under different pro-grammes and a health worker is nominated more thanonce to attend different training programmes. This multi-plicity of training has been a constraint in work perform-ance.

� Incompetent trainers and lack of technical guidance to train-ing institutions has resulted in poor quality training, thus



Table 2

Infant (neonatal) deaths: Select causes, main interventions and skill levels

Cause of death Interventions Current levels of Skills of ANMs and LHVs

Birth asphyxia Safe delivery practices Inadequate skills for obstetric care·

Proper newborn care Lack of skills in newborn care

Birth injury Safe delivery practices Inadequate skills for obstetric care·

Newborn care Lack of skills in newborn care

Prematurity Proper antenatal care Inadequate skills to assess foetal growth

Supplementary nutrition (IFA)· Inadequate newborn care skills

Proper newborn care

Congenital malformation Proper counselling Poor counselling skills

Screening during antenatal care (ANC) Inadequate newborn care skills

Newborn care

Neonatal jaundice Proper newborn care Inadequate newborn care skills

Neonatal tetanus Aseptic delivery Inadequate skills in aseptic delivery

Immunization of mother with TT

ARI-pneumonia Proper management of ARI Poor diagnostic and assessment skills for severity of ARI

Diarrhoea Proper management of diarrhoea Poor assessment skills for severity of diarrhoea

IFA: iron-folic acid; ARI: acute respiratory infection; TT: tetanus toxoid

lowering the credibility to training institutions.� Trainers of various training centres feel that there are no

formal linkages amongst these institutions and they feelleft out.

� There are financial constraints. The payment of TA/DA toparticipants, procedures/facilities for inviting guest fac-ulty and lack of funds for developing good quality trainingmaterial are major problems.

� The training is not taken seriously by the trainees as it hasno relationship with the career development of health pro-fessionals; the current appraisal system does not take intoaccount the training received for placement or promotion.

� There is no system of nomination for training. It is highlycentralized and, more often than not, based on personalfancy or preference of the concerned officer.

�There are no norms for in-service training. Some health per-sonnel attend training programmes irrespective of their util-ity in their job.

� The training is not seen as an intervention for improvedjob performance by most trainers. This is because there is amismatch between organizational and personal goals.

� The need for management training is seldom felt by func-tionaries and health administrators. It is thrust upon them.

� There is no linkage between service providers and trainers.Training is viewed as a constraint in achieving programmeobjectives rather than facilitating them.

� There is no training or personnel information system in thestates. As result, there is no proper planning.

� Operational research is not carried out in training institu-tions.

Paramedical personnel

Two critical paramedical functionaries in the primary healthcare system are laboratory technicians and pharmacists. In theabsence of a separate council, the training of most cate-gories of paramedical personnel has been unregulated exceptfor pharmacists, whose functioning is governed by the Phar-macy Council of India.

�Training of most categories of paramedicals has been unreg-ulated as there is no council for regulation of training exceptthe Pharmacy Council of India. The quality of training ofmost of these categories of personnel is poor.

Laboratory technicians

Laboratory technicians (LTs) are an important human resource.Although some institutions offer graduate (BSc) courses forLaboratory Technology Technicians, most institutions con-tinue to impart a nine-month diploma course. However, inthe absence of a regulatory body, there is no information onthe numbers of diploma and graduate LTs. Any XII-standardpass student can take up this course, even students with anArts/Humanities background in the short duration of ninemonths, the student, especially one with an Arts background,will not be able to acquire the skills required of him/her.

There is a need, therefore, to upgrade the training coursesfor LTs to graduate level-BSc (Laboratory Technology).

There are a large number for LTs at PHCs and CHCs althoughas per norms, every PHC and CHC should have one. There isa shortfall of 48.9% in the number of sanctioned posts forLTs, out of a requirement of 25,885 LTs for PHCs and CHCs.Of the sanctioned posts, 15.2% were vacant in 2002. Underthe RCH Programme, funds were provided to states for hir-ing the services of LTs on contract, due to which the gap was



Table 3

Perceived knowledge about skill and actual gap

Area Staff interviewed Perceived awareness (%)

Andhra Rajasthan

Pradesh

National Programme on Doctors 50 47

Women and Child ANM 5 10

Malaria, TB, AIDS, MPHW/LHV (M &F) 16 25

leprosy, etc. Staff Nurse 37 13

LT/Pharmacist 10 8

Maternal health Doctors 93 94

Enumerate the correct ANM 94 90

process for providing MPHW/LHV (M &F) 72 62

anterated care (ANC) Staff Nurse 100 87

LT/Pharmacist 25 —

What do you do in ANC?

Screen for risk factors Doctors 100 100

and medical conditions ANM 55 60

MPHW/LHV (M &F) 72 62

Staff Nurse 100 100

Record BP Doctors 86 88

ANM 55 0

MPHW/LHV (M &F) 0 0

Staff Nurse 100 100

*Weight and height Doctors 64 80

ANM 67 0


Staff Nurse 100 100

Screen for anaemia Doctors 71 88

ANM 55 70


Staff Nurse 100 87

Give Tetanus Toxoid Doctors 100 100

ANM 100 100

MPHW/LHV (M &F) 0 0

Staff Nurse 100 100

Provide education Doctors 43 70

on nutrition ANM 67 90


Staff Nurse 62 87

*Only weight taken

filled to some extent. In the public sector, once an LT is recruitedand placed in an institution, there is usually no in-servicetraining and no system of continuing education for him/her,despite the fact that in-service training and continuing edu-cation is required due to rapid advances in the field of med-icine, e.g. automation of laboratory investigations and pro-cedures. There is no supervision of the work of the LT. Underthe RNTCP, LTs at many CHCs have been trained in standardprocedures for examination of sputum slides for AFB, andthere is a supervisor to supervise the quality of work.

Most institutions for the training of Laboratory Techni-cians conduct a diploma course of nine months. Stu-dents from the Arts or Humanities stream can also takeup this course. There are large number for vacancies ofLaboratory Technicians in the public sector and there isno system of continuing education for them.

At the PHC and CHC levels, the LT usually performs basicinvestigations such as routine blood examination, urine exam-ination, examination of a blood slide for malarial parasite,sputum examination for AFB, etc. However, at the district hos-pital and in medical colleges, there are a number of depart-ments, and for better patient care or research, the LT needsto be posted to different departments by rotation. This helpsto enhance his/her skills in different areas. However, there isusually no such system of posting and a LT posted in a par-ticular department continues to be in that department formany years, in many instances throughout his service.

Pharmacists

The Pharmacy Council of India (PCI) regulates the educationand training of pharmacists under the provision of the Phar-macy Act. The present education regulations framed by it pre-scribe a curriculum of 2 years after the 10+2 (entry) stagefollowed by practical training of 500 hours over a period ofnot less than three months for obtaining the minimum reg-istrable qualification-Diploma in Pharmacy. Consequently,training of most of these categories of personnel has beenunregulated and many centres for training these categorieshave opened up all over India, with permission from the states.

There are over 5.5 lakh registered pharmacists in India giv-ing a ratio of one pharmacist for 1840 population, with wideinter-state variations ranging from 1:567 in Pondicherry to1:43,000 in Madhya Pradesh (Table 4). These pharmacistscould work as community pharmacists or as retail pharma-cists in retail pharmacy outlets. According to the World HealthOrganization (WHO), the average ratio of pharmacist to thepopulation in industrialized countries is 1:2300. The aver-age ratio of registered pharmacists to the population com-pares favourably with that in developed countries. However,these diploma-trained pharmacists are at best equivalent topharmacy assistants or technicians in developed and many

developing countries (Ghana, Fiji, Nigeria, etc.) but performa variety of tasks normally reserved for registered pharmacists.The knowledge and expertise of diploma holders (and thosewith degrees as well) is inadequate for community practice.Thus, while the number of pharmacists may appear adequate,their quality requires urgent attention and upgradation.

The pharmacist working in the pharmacy should have adiploma or preferably a degree in pharmacy, registered withthe Pharmacy Council of the States where he/she is practis-ing, have adequate practical training in community pharmacyand should have communication skills and capabilities toadvise regarding proper use of medicines. The pharmacist musthave the competence to assess prescriptions, advise patientson appropriate selection and use of over-the-counter medi-cines, appropriate use of prescribed medicines, advise on drug-drug and drug-food interactions, anticipate adverse drug reac-tions, comprehend the client's condition and advise on theproper use of the prescribed medication and diet, and decidewhen to refer to a doctor, etc.

In the public sector in rural areas, every PHC and CHC shouldhave a pharmacist. Out of a requirement of 25,885 pharma-cists for PHCs and CHCs, there is a shortfall of 25.8% in sanc-tioned posts at these levels; 10.7% of the sanctioned postslay vacant in 2002.

The major reasons for inadequacies in the quality of andservices provided by the pharmacist could be

� Inappropriate education and training at the college level� Lack of facilities for continuing education� Inadequate remuneration�Unhealthy competition among pharmacies because in most

places they are too many and too close to one another, whichcompels the owners of the pharmacies (often non-pharma-cists) to treat pharmacy as a trade (and not a profession).

� Lack of implementation of existing drug laws, which makeit mandatory for medicines to be sold under the personalsupervision of a pharmacist, and prescription medicines onlyagainst a valid prescription.

Nursing Services*

Shortage of nursesNurses and midwives are major health care providers. Over-all, there is a shortage of nurses and midwives in India. In2004, the nurse to population ratio in India was 1:1264while in Europe the nurse to population ratio is 1:100-200.The nurse to doctor ratio is about 1.3:1 compared to a ratioof 3:1 in most developed countries (Table 5).

In most states, there is no system of re-registration of nurses.As of March 2003, there were 839,862 nurses registered withState Nursing Councils. However, only about 40% of regis-tered nurses are active because of the small number of sanc-tioned posts, poor working conditions, low pay scales andmigration, retirement or death. At the community level there



* Based on background paper on Nursing Services

are no positions for nurses and health services are deliveredmostly by ANMs. There are 502,503 registered ANMs and40,536 registered LHVs in India.

The optimum nurse:patient ratio norms recommended byvarious committees (Annexures II, III, IV and V) for betterpatient care have not been implemented, thereby resultingin overload on the existing nurses, affecting the quality ofpatient care. In many instances, even sanctioned posts are notregularly filled.

Roles and responsibilities

There are small categories of nurses and midwives with over-lapping roles and responsibilities. Nurses in a hospital settingspend most of their time in non-nursing tasks such as inven-tory control, record maintenance, etc. Most nurses in serviceare diploma holders; some are graduate nurses. There are nospecialist nurses in clinical areas in India. In other countries,besides the professional nurse who is a graduate, there is theadvanced practice nurse (APN) who is a postgraduate. APNsare further categorized into Clinical Nurse Specialist (CNS),



Table 4

State-wise number of registered pharmacists

State/Union Territory Number of registered pharmacists Population 2001 Pharmacist: population ratio

Andhra Pradesh 33,938 75,727,541 1:2231Arunachal Pradesh 347 1,091,117 1:3144Assam 2429 26,638,407 1:10966Bihar 4163 82,878,796 1:19908Chhattisgarh NA 20,795,956 NAGoa 255 1,343,998 1:5270Gujarat 20,948 50,596,992 1:2415Haryana 874 21,082,989 1:24122Himachal Pradesh 2818 6,077,248 1:2156Jammu and Kashmir NA 10,069,917 NAJharkhand NA 26,909,428 NAKarnataka 71,736 52,733,958 1:735Kerala 7531 31,838,619 1:4227Madhya Pradesh 1381 60,385,118 1:43725Manipur NA 2,388,634 NAMaharashtra 99,614 96,752,247 1:971Meghalaya 150 2,306,069 1:15373Mizoram 382 891,058 1:2332Nagaland NA 1,988,636 NAOrissa 12,159 36,706,920 1:3019Punjab 35,290 24,289,296 1:688Rajasthan 18,214 56,473,122 1:3100Sikkim NA 540,493 NATamil Nadu 101,240 62,110,839 1:613Tripura 257 3,191,168 1:12417Uttaranchal NA 8,479,562 NAUttar Pradesh 30,276 166,052,859 1:5484West Bengal 89,630 80,221,171 1:895Andaman and Nicobar Island NA 356,265 NAChandigarh NA 900,914 NADadar and Nagar Haveli NA 220,451 NADaman and Diu NA 158,059 NADelhi 20,978 13,782,976 1:657Lakshadweep 3082 60,595 1:19Pondicherry 1716 973,829 1:567Total 559,408 1,027,015,247 1:1840NA. not available

Source of number of pharmacists: Pharmacy Council of India

Table 5

Health manpower (per 100,000 population)across some countries

Country Physicians Nurses Midwives Pharmacists Nurse: doctor

ratio

Australia 249.1 774.8 60.2 72.1 3.1:1

Canada 209.5 1009.9 1.2 79.7 4.8:1

China 164.2 104.2 INA 29 0.6:1

Cuba 590.6 744.2 INA INA 1.3:1

India 59.7 79.1 47.4 52.7 1.3:1

Sri Lanka 42.8 79.1 41.9 4.5 1.8:1

Thailand 30.1 161.7 INA INA 5.0:1

United Kingdom 166.5 496.6 43.3 58.9 3.0:1United States 548.9 772.6 INA 68.8 1.4:1of America

Source: WHO website www.who.int, updated figures obtained from MCI and INC used for IndiaReference year: 2004

Nurse Practitioner (NP), Nurse Anaesthetist, and Midwife. TheAPN has many roles-a clinician expert, educator, researcher,consultant, and manager, with competency of clinical judge-ment and leadership qualities. The APN is an agent of change,and can collaborate and communicate. In the United States,the post of APN has been in existence for more than 20 yearsand it has been found that the APN can make an early diag-nosis so that the patient can receive proper treatment intime, have a shorter length of hospital stay, fewer complica-tions, and satisfaction with the care provided. As part of thehealth care reform in the US, the production of NPs has increasedbecause of a shortage of doctors in general practice. In Aus-tralia, NPs work at the community level as case managers aswell as independent practitioners. In Australia and New Zealand,there are midwives whose training is at the postgraduate level.

Nursing and midwifery education: Inadequacy and poor quality

India has 635 nursing schools and 165 nursing colleges. Somenursing colleges are attached to medical colleges. The IndianNursing Council (DNC) has set standards for education byidentifying curriculum structure and syllabi for all educationalprogrammes and conducts inspection of nursing education insti-tutions every 3-5 years. The quality of nurse training is affectedby an inadequate number of nurse teacher specialists, non-adherence of the INC teacher:student norm, inadequate infra-structure, insufficient budget, lack of commitment and account-ability among educators for clinical supervision and guidance,inadequate and improper clinical facilities and inadequate expo-sure to hands-on experience for students. In 2004, it was foundthat 61.2% of nursing schools/colleges were unsuitable for teach-ing. De-recognition by the INC has no effect on any institutionas it continues to function with permission of the State Nurs-ing Council. The result is the production of nurses and mid-wives with inadequate skills and who later work in an environ-ment of ineffective regulation. Thus, the INC does not have effec-tive control over the nursing services.

Many private health care institutions train their own healthworkers on the job instead of hiring qualified and trainednurses due to a shortage of trained nursing personnel andbecause hiring the services of non-qualified persons is lessexpensive. The INC has no control over such practices, as thisissue is not addressed in the INC Act.

Teaching faculty in nursing schools and colleges and higher education

There is a shortage of teachers with master or doctoral degreesand the postgraduate curriculum in nursing is inappropriate.There is limited research with regard to nursing services andnursing education. In Thailand, 30 years ago, the master'sprogramme in Nursing aimed to produce nurse educators andnurse administrators and later nurse specialists. A master'sprogramme for APNs is offered in many faculties of nursingto respond to the growing demand for more competent nurses.

Nurse leaders in Thailand submitted a 10-year nursingand midwifery plan to the government in the early 1970sas a result of which 331 scholarships were granted to thenursing faculty for doctoral study outside the country andsufficient funds were also granted for libraries and computers.

Quality of nursing services and research evidence in nursing and midwifery

In the absence of proper nursing standards the quality ofnursing services in India varies from hospital to hospital. Thereis no system of accreditation of hospitals contrary to whathappens in countries such as Thailand where hospitals are accred-ited by an autonomous organization. The nursing componentis included in the assessment criteria, which focuses on nurs-ing activity, nurse's notes, participation of nurses in the patientcare team, and nursing activity in infection control. Nurses aremembers of the hospital surveyor team. This accreditation activ-ity stimulates nurses for quality improvement. In 2004, theINC conducted a workshop to develop a quality assurance modelfor the nursing services but this is yet to be implemented. Themodel focuses on the code of ethics and professional conductof nurses, nursing standards, the nursing process and nursingcare plan, patient teaching, management techniques, contin-uing education, research and the nurse's role during disaster.

There is, in general, no emphasis on conducting research orcreating evidence that could be cost-effective, or improve thenursing and midwifery services. As a result, there are noadvocacy efforts for increasing the scope of work of nursingpersonnel and empowering them. Although there is a Nurs-ing Research Society of India to promote research and thereare a number of Indian nursing journals, the number of nurs-ing research studies and publications is small. The reasonsfor the nursing staff not conducting research are lack of capac-ity to do research, heavy workload and lack of time, inade-quate resources, lack of support from administrators, andbecause they are not aware of the significance of research.

Continuing education for nurses and midwives

There is no formal continuing education system for thetraining of nurses and midwives to keep them abreast of thelatest developments in the field of nursing and public health.There is no system whereby clinical nurse specialists can beproduced in India. In India, there is also no quality assurance(QA) system for nursing education as opposed to Australia,Thailand and the UK, which have a quality assurance systemfor the quality of input, process, output and outcome.

Leadership in the nursing profession andempowerment of nurses

Nursing personnel lack leadership and negotiating skills andare rarely, if at all, involved in planning and policy formula-tion for nursing services, education, etc. at all levels eventhough they are vital members of the health care team. Nurses



and midwives are not easily accepted and recognized asleaders and administrators. In most Indian states, the Direc-tor of Health Services, a doctor, is the President of the StateNursing Council, and the highest rank to which a nursing per-son can be promoted is up to the level of a Deputy Director.This is ample evidence of suboptimal empowerment of healthpersonnel from the nursing profession. By contrast, in 1988,the New Zealand Government invested heavily in multidisci-plinary, experiential leadership and management develop-ment programmes to create a number of nurse leaders in thechanging health care system. Bangladesh, Myanmar, Nepal,Sri Lanka and Thailand have also provided a leadership andmanagement programme for nurses and midwives.

In India, midwives working in the community setting arenot allowed to administer injectable drugs even in an emer-gency, although they are allowed to inject vaccines to chil-dren. The roles of NPs include health promotion, diseaseprevention, therapeutic nursing interventions and rehabili-tation. Nurses perform some tasks independently and someunder supervision. Independent Tasks include all proce-dures that do not penetrate the body such as providing com-fort, pain relief without medication, suction, education, coun-selling, health assessment, developmental assessment, pri-mary care, midwifery and measurement of vital signs. Depen-dent tasks include giving medications, injections, immu-nization and withdrawing blood.

Regulations in nursing and midwifery

The INC was constituted by Indian Nursing Council Act, 1947to set a uniform standard of regulation for minimum require-ments of courses in nursing education, inspection and accred-itation of institutions for quality of education, and maintain-ing information on nurses, midwives and health visitors bycompiling data from the State Nursing Councils. It has animportant role in accepting and recognizing qualifications orcertificates awarded by universities within and outside India.There are 22 State Nursing Councils whose functions are toinspect and accredit schools of nursing in their state, conductexaminations, prescribe rules of conduct, take disciplinaryaction and maintain a register of nurses, midwives, ANMs andhealth visitors in the state. In some states the ExaminingBody and the Registering Authority are one and the same.The INC has requested State Governments to create or estab-lish separate examining bodies and have a separate register-ing authority. � The Indian Nursing Council has not been able to regulate

the quality of training in nursing schools and colleges becauseit lacks control over the State Medical Councils. Nursing per-sonnel are not actively involved in policy formulation inIndia, even on matters that affect nursing practice, unlikein other countries.The enforcement of provisions of the Indian Nursing Coun-

cil Act, 1947 is poor as there is lack of uniformity in manyState Nursing Council Acts which were enacted prior to theIndian Nursing Council Act, 1947. Some powers prescribedin the Central Act are similar to those prescribed in some of

the State Nursing Council Acts. These are major hindrancesto the maintenance of uniform standards by the Indian Nurs-ing Council.

In Canada, the US, the UK, Australia, New Zealand, Thai-land, Korea, and Norway, nurses and midwives have eitherbeen elected or appointed to Parliament. The President andmembers of the Thailand Nursing Council sit on many nationalhealth committees, such as the National Universal Health Cov-erage Committee to set policies on health care services andreimbursement, subcommittee on quality control of healthcare services, subcommittee on health manpower develop-ment, etc.

Doctors

Availability of doctors

The Mudaliar Committee (1961) recommended a doctor:pop-ulation ratio of 1:3000. Till September 2004, 633,108 doc-tors had been registered with different State Medical Coun-cils in India (Table 6). This gives a doctor to population ratioof one doctor for every 1676 population in India (or 59.7 physi-cians for 100,000 population). In comparison, the number ofphysicians per lakh population in Australia, Canada, the UK,the US and Sri Lanka was 249.1, 209.5, 166.5, 548.9 and42.8, respectively (Table 5). The doctor-population ratio inIndia is, however, skewed, with rural, tribal and hilly areas beingunderserved as compared to urban areas. However, the Med-ical Council of India (MCI) and State Medical Councils do notmaintain a live register with updated figures taking into accountattrition due to death, migration outside the country, or non-practising of medicine by qualified doctors. Various commit-tees set up by the government from time to time have rec-ommended that data related to health manpower should bemade available to facilitate health manpower planning.

Production of doctors: The medical colleges

The Mudaliar Committee recommended establishing one med-ical college for a population of 50 lakh. This comes to 218medical colleges according to the current estimated popula-tion. As of July 2004, there are 229 medical colleges in India,out of which 125 are in the government sector and remain-ing 104 in the private sector (Table 7). Of these 229 medicalcolleges, 67 have been permitted under Section 10A of theMCI Act. There is wide inter-state disparity in the number ofmedical colleges and the admission seats available everyyear. The admission capacity in these colleges is 25,500 stu-dents per year-7700 undergraduate seats in north India com-pared to 18,000 in the south. Viewed from the norm of onemedical college for 50 lakh population, Andhra Pradesh,Karnataka, Maharashtra and Tamil Nadu have an excess ofmedical colleges while states such as Uttar Pradesh, West Ben-gal, Chhattisgarh, Madhya Pradesh, Orissa, Assam and Rajasthanhave a shortfall (Table 8). These are also the states where thehealth indicators are relatively poor.



� As per the norm of one medical college for 50 lakh popu-lation, 218 colleges are required.

� There are 229 colleges in India which 45% are in the pri-vate sector.

� There are wide inter-state variations in the number of col-leges, with Karnataka, Maharashtra, Andhra Pradesh andTamil Nadu having an excess, and Uttar Pradesh, WestBengal, Chhattisgarh, Bihar, Orissa and Madhya Pradeshhaving a shortage.Both private and government medical colleges have a short-

age of teachers. Often governments resort to a mass reshuf-fle of teachers of different specialties from one medical col-lege to another on a temporary basis at the time of inspec-tion by the MCI. Keeping a fake roll of medical teachers andshowing expenditure under the salary head is a commontactic adopted by managements of private medical colleges,which has an adverse impact on the quality of instruction.The problem of shortage of medical teachers is more acute inprivate medical colleges, especially in pre- and paraclinicalspecialties such as Anatomy, Physiology, Biochemistry, Pathol-ogy, Microbiology, Pharmacology, Forensic Medicine, Com-munity Medicine.

Requirement of teaching faculty for impartingtraining in medical colleges

The MCI has laid down Minimum Standard Requirementsfor medical colleges for 50/100/150 Admissions Annually Reg-ulations, 1999, which also contain the requirement of mini-mum number of teachers for imparting training in the col-leges. Based on the MCI Regulations, the minimum numberof teaching faculty required (total, and annually on an assump-tion of 30 years of service as a teacher) for different subjectsis shown in Table 9. However, the current levels of produc-tion of postgraduates in some disciplines clearly falls shortof meeting the present and future needs of the teaching fac-ulty is Anatomy, Physiology, Biochemistry, Pharmacology,Forensic Medicine, Community Medicine, Radiotherapy, andPhysical Medicine and Rehabilitation (Table 10).

Quality of training in medical colleges and factorsassociated with it

One challenge in medical education is to induct and retaincompetent teachers who can transfer their expertise to thestudents. However, under the current system of recruitmentonly the technical knowledge of the person is assessed and



Table 6

Cumulative number of allopathic doctors registered with State Medical Councils till 30 September 2004

State Medical Council Number of registered doctors Projected population on 1 April 2004 No. of registered doctors

per lakh population

With < 50 registered doctors /lakh population

Haryana 1285 21,000,000 6.1

Uttar Pradesh 44,927 186,293,000 24.1

North-eastern states 15,723 49,389,000 31.8

Bihar and Jharkhand 35,110 107,362,000 32.7

Madhya Pradesh and Chhattisgarh 29,003 86,681,000 33.5

Orissa 14,712 37,520,000 39.2

Rajasthan 22,506 57,463,000 39.2

With 50-100 registered doctors per lakh population

Andhra Pradesh 48,402 78,892,000 61.4

West Bengal 52,274 83,079,000 62.9

Gujarat 36,521 514,24,000 71.0

Jammu andKashmir 7,993 10,716,000 74.6

Maharashtra 90,855 94,839,000 95.8

Kerala 32,412 33,444,000 96.9

With >100 registered doctors per lakh population

Tamil Nadu 71,157 64,991,000 109.5

Karnataka 65,789 54,692,000 120.3

Goa 2,332 1,768,000 131.9

Punjab 33,705 25,526,000 132.0

Delhi 28,402 16,047,000 177.0

Total 633,108 1,061,126,000 59.7

Source for number of registered doctors: Medical Council of India

not his/her aptitude for teaching. The medical curriculum ismeant to help decide what knowledge needs to be given tothe students. Due to very high emphasis on passing exami-nations, students tend to focus only on those areas that wouldbe covered in the examination. Often teachers fail to deter-mine what the students should know, what would be inter-esting to know and what the student need not know. Con-sequently, instead of focusing on community needs depend-ing on local health problems, students have no option but tofocus more on recent advances, which are of limited relevanceto the needs of the population at large.

� The medical curriculum helps to decide what knowl-edge needs to be given to students, what skills theyshould acquire and what methodology needs to beadopted to impart these skills.

� Training of MBBS students should be skills-orientedfor dealing with the needs of the community, keepingin view the demographic and epidemiological transi-tion.

� Teachers need to differentiate between what the stu-dent should know, what would be interesting to knowand what the student need not know.

� Training during internship should be oriented towardsthe acquisition of skills.

Another problem contributing to the poor quality of train-ing of doctors is the vacant posts among the teaching fac-ulty. The process of filling up vacant posts is tedious and time-consuming. It takes almost a year from the date of adver-tisement to the appointment of a specialist doctor as a teach-ing faculty by which time the selected person may have joinedelsewhere. Vacancies adversely affect the quality of trainingof doctors and, in many colleges, the position is very seri-ous–there are some government colleges with just two to threefaculty members in pre- and paraclinical departments. AnAssistant Professor may have to work as Head of the Depart-ment; in such cases, often teaching faculty members fromsome other college are deputed as internal examiners for exam-ination purposes. In addition to regular teaching faculty, manymedical colleges have posts of Senior Residents who serve asa vital link for the training of medical students. However, about30% of the posts of senior residents are lying vacant, whichaffects both the quality of training and patient care.

The development and training of the faculty of medical col-leges has been a greatly neglected area. There are no avenuesor incentives for the teaching faculty to undertake research,or introduce innovative methods of training to effectivelytransfer skills to undergraduate and postgraduate medicalstudents. Doctors getting an opportunity to attend confer-ences/workshops abroad without any financial liability on thegovernment, whether Central or State, often undergo theunpleasant experience of obtaining clearance to leave thecountry. Only a few states have time-bound promotions forteaching doctors; there are doctors who have not been pro-moted for over 10-20 years. Because of the mushrooming ofmedical colleges in the private sector which require teaching

doctors and are willing to pay higher salaries with other ben-efits as well, many senior in government medical collegesopt for voluntary retirement and move to private medicalcolleges. As mentioned earlier, it often takes years to fill upthese vacant posts. These have a demoralizing effect.

Large vacancies exist of teaching doctors in pre- and par-aclinical specialties because there are insufficient postgrad-uate seats in these specialties, and students do not find itworth their while to undergo postgraduate training in thesesubjects as they are non-practising branches. Consequently,often students join post-graduation in these subjects as astop-gap arrangement till they get a seat in one of the clin-ical subjects.

In States that have an excess of medical colleges as per normsprescribed by the Mudaliar Committee, almost two-thirds(63.4%) are private medical colleges. Their basic objective isto earn money. These private medical colleges charge exor-bitant fees from students, for which students often raise moneythrough loans. It is understandable that these students treatthe expenses on their training as an investment, and wouldlater want to recover their investment, and are likely to be



Table 7

State-wise number of medical colleges in India(as on 30 July 2004)

State/Union Territory Number of medical colleges Total number of seats

Government Private Total

Andhra Pradesh 10 17 27 3475

Assam 3 - 3 391

Bihar 6 2 8 510

Chandigharh 1 - 1 50

Chhatisgarh 2 - 2 200

Delhi 5 - 5 560

Goa 1 - 1 100

Gujarat 8 5 13 1625

Haryana 1 2 3 250

Himachal Pradesh 2 - 2 115

Jammu and Kashmir 3 1 4 350

Jharkhand 3 - 3 190

Karnataka 4 27 31 3905

Kerala 6 8 14 1600

Madhya Pradesh 5 2 7 820

Maharashtra 19 19 38 4200

Manipur 1 - 1 100

Orissa 3 - 3 364

Pondicherry 1 4 5 475

Punjab 3 3 6 520

Rajasthan 6 2 8 800

Sikkim 1 - 1 100

Tamil Nadu 13 7 20 2315

Uttar Pradesh 9 3 12 1262

Uttaranchal - 2 2 200

West Bengal 9 - 9 1105

Total 125 104 229 25,682

Source: Medical Council of India

disinclined towards primary health care or public health. The Re-orientation of Medical Education (ROME) Programme

was ambitiously launched in 1977 to prepare doctors tocontribute effectively to the improvement of communityhealth. To support this programme each medical college wasassigned three rural development blocks where buildingsand hostels were constructed to provide teaching complexes.It was a very well conceived programme with political willbut before its actual implementation it got lost in oblivion.

Major hindrance to good quality training of undergradu-ate and postgraduate medical students is the private practicethat most States permit. While the MCI and State/Central gov-ernments and most professional bodies have endorsed theneed for teachers of medical colleges to be full-time and non-practising, clandestine or officially sanctioned private prac-tice is commonplace. The logic behind banning private prac-tice was to ensure that medical teachers are available forimproving and sustaining the quality of care in teachinghospitals. However, in several states this objective has beenoverwhelmed by market forces that make clinical practice moreremunerate than teaching.

Skills mix

India is passing through demographic and epidemiologicaltransition. Hence, an MB,BS doctor should be able to pro-vide care for such communicable diseases as TB, malaria,respiratory infections, diarrhoea, etc. and non-communica-ble diseases such as accidents/injuries, hypertension, diabetes,psychiatric illness, other heart diseases. As a minimum, there-fore, a doctor must have the competency to diagnose andprovide basic emergency obstetric care for maternal compli-cations and neonatal care. In addition, he/she should be ableto provide services such as normal delivery, medical termina-tion of pregnancy (MTP), cardiopulmonary resuscitation,etc.

For a student to acquire these skills, he/she has to haveadequate exposure to and interaction with patients. However,with many colleges admitting over 150 students annually, notall students obtain adequate exposure and acquire enoughskills to be able to handle most problems independently in aprimary care setting. Besides, about 45% of medical collegesare in the private sector and many of them do not have a suf-ficient caseload of different diseases for good quality train-ing of medical students. For example, an MB,BS doctor shouldhave acquired the skills to perform vasectomy which impliesthat he/she should be able to perform about two vasectomyoperations under supervision. For over 25,000 admissions tomedical colleges annually, this implies over 50,000 operationsby MB,BS students under the supervision of a surgeon, whileit is well known that only about 1.4 lakh vasectomy opera-tions are conducted every year in India, a large number ofthese District Hospitals.

The quality of training of postgraduates should also be givendue importance. It has been observed that postgraduatedoctors posted as specialists do not perform surgeries, e.g.an ophthalmologist not doing cataract surgeries, or an obste-

trician-gynaecologist not performing caesarean section oper-ations. This is probably because private practice is allowed insome states; thus, private patients of some specialists whoteach in medical colleges are admitted to hospitals in the gov-ernment sector and postgraduate trainees do not get an oppor-tunity to examine or operate upon them. Moreover, the train-ing environment for postgraduate students in medical col-leges is different from what they find in District Hospitals orin CHCs, which have a relatively poor infrastructure.

Duration of training: Is it adequate?

The four-and-a-half years of undergraduate medical educa-tion is followed by 12 months' internship wherein studentsare meant to enhance their clinical skills and understand healthcare delivery in a community/rural setting. Internship is cur-rently implemented only on paper, particularly since variousuniversities have started the Pre-PG (MD/MS) entrance exam-ination, making internship redundant. Throughout his/herinternship, a medical graduate prepares for the MD/MS post-graduate entrance examination.

Increasing trend for postgraduation

It is estimated that almost half the medical graduates opt forpostgraduation and settle in urban areas. So serious is theproblem that currently most states have failed to ensure the



Christian Medical College (CMC), Vellore is an institute of excellence

for medical education that is at par with other national and international

training institutes. It admits 60 students annually through a rigorous

selection procedure that includes an assessment of the aptitude;

suitability of the candidate and the tuition fee is also very low. There is

considerable emphasis on community-based training through the

Community Health and Development (CHAD) programme. Faculty

members of the Medical College go to the field practice area under

CHAD and provide services to people and training to students. In

addition, there is a linkage between CHAD and medical college

hospitals wherein a referral system is functional. This kind of a linkage

does not exist in most medical college areas and community-based

training is also poor.

The training of students at CMC is such that two-thirds of the MB,BS

alumni work in India and 80% of them in non-metropolitan areas of

the country. The students and faculty members are required to stay

within the campus. Although the payment structure for faculty

members is not at par or competitive with the private sector, they are

provided excellent housing facilities and a good working environment,

thereby contributing to their motivation and job satisfaction. This is

evidence that quality of training and non-financial incentives matter

far more than financial incentives to provide better health services to

the masses.

Medical education should remain a charitable enterprise

Box 1

availability of anaesthetists, obstetricians and surgeons foreffective delivery of emergency obstetric care services includ-ing newborn care through the public health facilities. Thereis a shortfall of 10.1% in the number of sanctioned posts fordoctors at PHCs and even out of the sanctioned posts, about13.4% are lying vacant.

Induction training and in-service re-orientationtraining in the public sector

Doctors who join services in the public sector should be ori-ented and indoctrinated so that they can manage the healthservices effectively and efficiently. However, most states donot impart an indoctrination/induction training to fresh



Table 8

State-wise number of required and existing medical colleges

State/Union Territory Population as on Number of medical colleges Existing number of Difference between

1 April 2004 required colleges required of medical colleges existing and required

@ one per 50 lakh population number

States/UTs with more than the required number of medical colleges

Karnataka 54,692,000 11 31 20

Maharashtra 94,839,000 19 38 19

Andhra Pradesh 78,892,000 16 27 11

Kerala 33,365,000 7 14 7

Tamil Nadu 63,755,000 13 20 7

Pondicherry 1,236,000 0 5 5

Gujarat 51,057,000 10 13 3

States/UTs with an adequate number of medical colleges

Delhi 16,047,000 3 5 2

Jammu and Kashmir 10,716,000 2 4 2

Punjab 24,536,000 5 6 1

Himachal Pradesh 7,270,000 1 2 1

Chandigarh 990,000 0 1 1

Goa 1,768,000 0 1 1

Sikkim 621,000 0 1 1

Uttaranchal 9,051,000 2 2 0

Arunachal Pradesh 1,327,000 0 0 0

Manipur 2,798,000 1 1 0

Mizoram 1,061,000 0 0 0

Nagaland 1,884,000 0 0 0

Andaman and Nicobar Island 429,000 0 0 0

Dadra and Nagar Haveli 212,000 0 0 0

Daman and Diu 155,000 0 0 0

Lakshadweep 79,000 0 0 0

Haryana 21,000,000 4 3 -1

Tripura 4,203,000 1 0 -1

Meghalaya 2,705,000 1 0 -1

States/UTs with a fewer number of medical colleges

Chhattisgarh 22,205,000 4 2 -2

Jharkhand 26,315,000 5 3 -2

Rajasthan 57,463,000 11 8 -3

Assam 27,520,000 6 3 -3

Orissa 37,091,000 7 3 -4

Madhya Pradesh 64,476,000 13 7 -6

Bihar 81,047,000 16 8 -8

West Bengal 83,079,000 17 9 -8

Uttar Pradesh 177,242,000 35 12 -23

TOTAL 1,061,126,000 212 229 17

Source of information on existing number of medical colleges: Medical Council of India

appointees and, therefore, they tend to concentrate more oncurative services than on following a preventive and promo-tive approach. In view of the changing demographic andepidemiological situation, and developments in the field ofmedicine, doctors need to be re-oriented from time to timeto keep them abreast of the latest changes in programme man-agement. At present, individual vertical programmes impartin-service training to doctors in the public sector but theseare fragmented. The training is disease-specific and there isno integrated retraining of doctors.

Regulation of training in medical colleges: Theincompletely addressed agenda

The MCI is the apex body for ensuring maintenance of uni-form standards of medical education, both graduate and post-graduate. In 1997, the Council revised Graduate Medical Edu-cation Regulations dealing with eligibility criteria for admis-sion to the MB,BS course, a detailed curriculum for the MB,BScourse as well as internship. The regulations also provide for

integrated teaching, objectives of the study in each subjectand the skills that a student shall acquire at the end of studyof a particular subject. The MCI has also stipulated Mini-mum Qualifications for Teachers in Medical InstitutionsRegulations, 1998, which prescribe the minimum qualifica-tions required for a person to be appointed as an AssistantProfessor, Associate Professor or Professor. However, the basicproblem in the MCI structure is that since education is astate subject, it is the primary responsibility of the states andtheir universities. Effectively, the MCI can only recommendde-recognition of a particular college for the MB,BS course.However, in the prevailing sociopolitical environment no med-ical college has so far been de-recognized on account of thereported deficiencies.

The MCI has recommended to the Government of India tomake the necessary provisions in the MCI (Regulations) Actfor renewal of registration of medical practitioners every fiveyears, linking such renewal with attendance of compulsorycontinuing medical education (CME) programmes. Such CMEprogrammes have been found to be beneficial in keeping med-



Table 9

Number of teaching faculty for Undergraduate Medical education in 229 Medical colleges

Subject For U/G education Additional for P/G education Total Number of new faculty

members required annually

Anatomy 2346 315 2661 89

Physiology 2346 315 2661 89

Biochemistry 1216 315 1531 51

Pathology 3476 315 3791 126

Microbiology 1273 315 1588 53

Pharmacology 1931 315 2246 75

Forensic Medicine 1230 315 1565 52

Community Medicine 2618 315 2933 98

General Medicine 2961 0 2961 99

General Surgery 2961 0 2961 99

Paediatrics 1545 0 1545 52

TB and Chest Dis. 687 0 687 23

Skin and VD 687 0 687 23

Psychiatry 687 0 687 23

Orthopedics 1545 0 1545 52

ENT 687 0 687 23

Ophthalmology 687 0 687 23

Gynaecology/Obstetrics 2003 0 2003 67

Radiodiagnosis 1688 315 2003 67

Radiotherapy 744 315 1059 35

Anaesthesia 2575 315 2890 96

Physical Medicine and Rehabilitation 959 0 959 32

Total 36852 3465 40317 1344

Note: Number of teachers estimated on basis of norms from Medical Council of India(1) This is the number of subject-wise faculty members required for imparting undergraduate training in the medical colleges where undergraduate medical education is being imparted (2) There are at least 105 medical colleges imparting undergraduate medical education that also impart postgraduate training. As per MCI's Postgraduate Medical Education Regulations, 2000 for conductingpostgraduate courses, extra staff is required in the departments of Anatomy, Physiology, Biochemistry, Pharmacology, Pathology, Microbiology, Community Medicine, Radiodiagnosis, Radiotherapy, Anaesthesia andForensic Medicine (four additional teaching faculty in each of these departments, in addition to those prescribed for undergraduate education).(3) There are also some institutions that impart only postgraduate training, and information on the faculty requirement of such institutions has not been incorporated in this table.

ical practitioners up to date with the latest developments inthe field of medicine.

The MCI has a limited role in prescribing regulations forundergraduate and postgraduate education and inspectingthe sites to verify on a set checklist the resources required tostart and continue running a medical college. In the contextof the norms available at present, MCI inspectors tend toconcentrate primarily on infrastructure and staff positionrather than quality/methodology/orientation of medical edu-cation. Hence, even in colleges reputed to impart excellenteducation, the quality is declining because of shortage ofteaching staff, inadequate laboratory facilities and budgetsto update libraries, lack of research, inadequate clinical loadand lack of first-hand experience in examining and manag-ing patients, etc. To compound the problem the facilities atmedical colleges are not upgraded on a regular basis. Whileshortage/non-availability of funds is one important factor fornon-upgradation of facilities, the apathy of the teachingfaculty due to their commitment to private practice is anotherfactor contributing to the continuous decline in standardsof medical education.

Over the past 1-2 years, the MCI observed that a large

number of doctors were claiming employment as medicalteachers in more than one medical college at the same time,apparently to show to the inspection team of the Councilthat the colleges concerned fulfilled the minimum require-ment for teaching staff for seeking permissions/renewals underSection 10A of the MCI Act. To curb this practice, the MCIintroduced Declaration Forms to be signed by doctors claim-ing employment as medical teachers in any given medical col-lege, and a provision for endorsement by the Dean/Principalof the medical college was also introduced. To seriously dealwith the persisting problem, in 2004 the Council unanimouslydecided that the names of 65 erring doctors furnishing morethan one declaration form and claiming teaching employ-ment in more than one medical college at the same point oftime be erased temporarily from the Council up to 31 July2007. Of these 65 doctors 59 (90.8%) are from pre- or para-clinical specialties.

Just as the MCI has not been able to fully discharge itsresponsibilities, so is the case with respective State MedicalCouncils. The scope of work of State Medical Councils shouldbe increased and they should be brought under the purviewof the MCI by amending the concerned Act(s) so that the State

Medical Councils can act as extended armsof the MCI.

Medical and health universities

The professor Rais Ahmed Committee rec-ommended setting up a University ofHealth Sciences to help medical collegesmaintain high standards by upgradingfacilities, instituting faculty developmentprogrammes, adopting a multidisciplinaryapproach to professional development rel-evant to the socioeconomic conditionsof India and vigorous research activity. Inan effort to make medical teachers appre-ciate the basic shift in medical educationand draft an action plan to bring aboutneeded corrections in the curricula at everylevel of medical education, a system ofestablishing separate medical universi-ties in each state was started. AndhraPradesh took the lead in this direction bysetting up a medical university in 1986.Some other states have also recently setup health universities to improve the qual-ity of training in medical colleges as wellas other nursing and paramedical disci-plines.

Accreditation

There is no system of accreditation of med-ical colleges to ensure that that trainingat these institutions meets acceptable lev-els of quality. The Srivastava Committee



Table 10

Teaching faculty requirement and production of fresh postgraduatesannually for Medical Colleges in the countrySpeciality No. of faculty Average No. of Postgraduate Shortfall in teaching

required annually Degrees awarded during faculty required annually1999-2000 & 2000-2001*

Anatomy 89 23 66

Physiology 89 29 60

Biochemistry 51 21 30

Pathology 126 141 -15

Microbiology 53 57 -4

Pharmacology 75 33 42

Forensic Med. 52 11 41

Community Med. 98 39 59

General Medicine 99 346 -247

General Surgery 99 324 -225

Pediatrics 52 162 -111

TB & Chest Dis. 23 32 -9

Skin & VD 23 53 -30

Psychiatry 23 28 -5

Orthopedics 52 123 -71

ENT 23 76 -53

Ophthalmology 23 126 -103

Gynae / Obs 67 286 -219

Radiodiagnosis 67 82 -15

Radiotherapy 35 11 25

Anesthesia 96 197 -100

PMR 32 2 30

* Source: Health Information of India 2000 & 2001, Ministry of Health & FW, Government of India, 2003Many Medical Colleges also impart M.Sc. courses in pre- and para-clinical specialities, but there was no information on these aspects and

these have not been considered for the calculationsAfter obtaining a postgraduate degree a person may join as a teaching faculty, provide health services in public or private sector, or migrate

to another country. There could also be attrition due to non-practicing of medicine. These factors have not been factored. This interpretation isalso based on the assumption that the doctors, after obtaining postgraduate degree, would opt first for a teaching post and only after suchposts have been filled would doctors opt for joining the health care delivery system.

(1975) noted that it was necessary to restructure the entireprogramme of medical education, as the existing system didnot prepare the right type of personnel needed for a nationalhealth services programme. The Committee recommendedthat immediate steps be taken to set up a Medical and HealthEducation Commission, comprising the MCI, INC, DCI, PCI,representatives of Central and State Governments, and lead-ing persons in the field of health services and medical edu-cation. Its role was suggested to be promotive. However, noaction has been taken to establish such a Commission.

Specialist services in the public health care deliverysystem: adequacy and availability

As per norms, at the CHCs, there are four specialists-a gen-eral physician, a general surgeon, a paediatrician and an obste-trician-gynaecologist. There is a shortfall of 61.3% in the num-ber of sanctioned posts of specialists (surgeons, obstetri-cian-gynaecologists, physicians and Paediatricians) at CHCs,and of these, 37.7% are lying vacant. It may be noted thatvery few CHCs have sanctioned posts for anesthetists.

� The number of postgraduate degrees or diplomas beingawarded today in India is not adequate for effective deliv-ery of specialist services (anaesthesiologists, public healthspecialists, paediatricians, gynaecologists and psychiatrists).

� The number of seats for admission to postgraduate degreeand diploma courses should be determined according to thehealth needs of the people and this should be a dynamicprocess.Specialist services could be rendered by a postgraduate

degree or diploma holder. The number of specialists requiredin some fields and those being produced annually are shownin Table 11. There is a severe shortfall of specialists in all dis-

ciplines, and this shortage is more worrying in the case ofCommunity Medicine/Public Health, Paediatrics, Anaesthe-sia and Ophthalmology.

If we are to achieve the Millennium Development Goals aswell as the goals laid down in the National Health Policy 2002,in addition to focusing on primary health care, there is anurgent need to rationally create posts for specialists (Anaes-thetists and ophthalmologists) at CHCs (and of paediatriciansand gynaecologists if they have not already been created).Posts should also be created for public health specialists atall levels from the Centre to the districts, and all vacant postsfilled up. Efforts should be made to keep the specialist work-force motivated, especially by way of non-financial incen-tives. This is essential because brain drain was estimated tohave reached an alarming 30% of the annual output in 1986-87 (IAAME, 1992). The migration of doctors-both external(from India to other countries) and internal (from the publicsector to the profit-oriented private sector) -has shown anincreasing trend.

Integration with indigenous systems of medicine

Ayurveda, Unani, Siddha and Homeopathy are the four broadlyrecognized Indian systems of medicine (ISM). Successive com-mittees set up by the Government have highlighted the com-petitive advantage of ISM doctors due to their easy accessi-bility to and acceptability by the masses, especially in ruralareas. There is a need to 'integrate' ISM&H in the health caredelivery system and national programmes, and ensure opti-mal use of the vast infrastructure of hospitals, dispensariesand physicians.�There are almost 7 lakh registered ISM practitioners in India.� They have widespread availability and better acceptability

in communities.



Table 11

Requirement versus availability of specialists in selected disciplines for delivering health services in thepublic sector in India

Subject PGs available Average number Number of new specialists for the health care delivery system

for health of diplomas Available Net available Total Required Shortfall(7)

delivery system awarded during annually (3) = annually after required(5) annually@ = (6)-(4)

annually (1) 1999-2000 and (1)+(2) migration*(4)= (due to attrition)

2000-01 (2) (3) x 0.6 (6)=(5)¸30

Community Medicine 0 11 11 7 3750 125 118

Paediatrics 111 153 264 158 7952 265 107

Skin and VD 30 29 59 35 1200 40 5

Psychiatry 5 21 26 15 1200 40 25

Ophthalmology 103 71 174 104 4296 143 39

Gynaecology/Obstetrics 219 198 417 250 7952 265 15

Anaesthesia 100 171 271 162 7952 265 103

* Considering migration of 10% of specialists to other countries and 30% of specialists to the private sector in the country, thereby implying availability of 60% manpower for providing service in the public sector@ Considering average length of service to be 30 yearsNumber of specialists required has been based on the following assumptions:a)Community Medicine: One CMO at each district headquarter, assisted by four other public health specialists (5 per district x 600 districts= 3000; 35 States/ UTs- 20 per State / UT Hq = 700; 50 for national level)b)Paediatrics, Obstetrics/Gynaecology, Anaesthesia: 3 at District Headquarters and 2 at CHCs = 3 x 600 + 2 x 3076 = 7952)c)Skin/VD and Psychiatry: 2 at District Headquarters = 2 x 600 = 1200d)Ophthalmology: 2 at District Headquarters and 1 at CHC = 2 x 600 + 1 x 3076 = 4296

� There is enormous scope for integration between the allo-pathic system of medicine and ISM (AYUSH), which couldbe done in a phased manner.

�To begin with, there could be increasing coordination betweenthe system of medicine allopathic and ISM by posting ISMdoctors at the same hospital s/dispensaries as allopathic doc-tors.

� Later, there could be functional integration at all levelsincluding at the level of training.There were 691,470 AYUSH (Ayurveda, Yoga, Unani, Siddha

and Homeopathy) practitioners registered in India as on 1April 2002 (Table 12). If these are added to the number ofdoctors registered under the allopathic system of medicine,the total number of doctors registered in India becomes1,315,296, giving a doctor to population ratio of 1:827 pop-ulation. However, there is no integration between allopathicdoctors and those following ISM. Of late, some coordinationbetween these two systems has been attempted by the Cen-tral Government, and clinics of Ayurveda, Unani and Home-opathy have been set up at some allopathic hospitals anddispensaries. Under the RCH Programme, seven Ayurvedic andfive Unani medicines were included and as a pilot project theywere distributed in nine states and four cities. However, inthe absence of proper orientation of the health personnel,they are not being effectively utilized.

Recommendations

1. To improve the quality of laboratory procedures, the min-imum course for Laboratory Technicians should be upgradedfrom a diploma to graduate degree course-Bachelor in Med-ical Laboratory Technology. This course should be offeredonly to students with a science background and not to stu-dents from an Arts/Humanities background.

2. The existing diploma programme should be continuedtill there are 80%-90% of required pharmacists in the coun-try. Once this is achieved, the diploma in pharmacy educa-tion may be replaced by the upgraded pharmacy practicecourse. Existing diploma holders should be allowed to main-tain their registration to practice only by participating in spec-ified condensed courses so that their knowledge and com-petence are brought as close as possible to the new programmefor registration of pharmacists. By 2015, there should beonly one category of registered pharmacists. Thereafter, any-one not coming up to the mark can at best be categorized asa pharmacy assistant.

3. Every state should have a full-time Director (Nursing) forbetter management and development of this vital humanresource for health. There is a need to formulate and imple-ment a national strategic plan for nursing and midwifery devel-opment as has been done by countries such as Bangladesh,Thailand, Indonesia, Myanmar and Sri Lanka. To develop lead-ership skills among nurses, the Government should invest inmultidisciplinary leadership and management developmentprogrammes for nurses and midwives as has been done incountries such as New Zealand, Bangladesh, Myanmar, Nepal,Sri Lanka and Thailand.

4. A quality assurance system for nursing should be intro-duced to ensure good quality care and nursing outcomes asexpected by clients and according to professional standards.This would ensure commitment of the care provider towardsproviding the best care for consumers-to lessen patient suf-fering, shorten the length of hospital stay, reduce health carecosts, and decrease infection, complications and death. Forbetter care of patients, the posts of nursing staff at all levelsneed to be increased in hospitals as per the recommenda-tions of earlier committees, and all vacancies need to be filled.

5. There should be only two levels of nurses, first, a profes-sional nurse who undergoes a 4-year BSc (Nursing) programmeoffered at university level. Second, an auxiliary nurse whoundergoes a 2-year Auxiliary Nursing (Certificate) programmeoffered at schools of nursing. A Bachelor of Nursing Sciencesshould be offered to nurse from diploma school to upgradetheir qualifications. The auxiliary nurse should be able to pur-sue studies in Bachelor of Nursing Sciences degree. To expandthe role of nurses in India, Advanced Nurse Practitioner(APN) programmes should be established. A Master of Scienceprogramme in nursing should focus on advance nursing prac-tice. A plan for the production of APNs should be includedin manpower planning and their scope of practice and rolesand responsibilities clearly identified by the INC. Posts forClinical Nurse Specialist (CNS) and Nurse Practitioner (NP)should be created first at big hospitals and later in peripheralhealth facilities.

6. The roles and responsibilities of nurses need to be rede-fined by suitable amendments in the INC Act so that theycan administer some injectable drugs in case of emergencies.APNs should be able to deal with complex health problemsand have clinical judgements. They will also be able to pro-vide education and consultation, as well as help to improvepatient care and health (Annexures XVI and XVII).

7. The MCI and INC should be strengthened by amendmentsin the respective Acts to enable them to discharge their roleas regulators and the State Medical and Nursing Councilsshould be brought under the purview of the MCI and INC. Thescope of work of State Medical and Nursing Councils alsoneeds to be increased so that they can function as extendedarms of the MCI and INC. The INC and nurses should be activelyinvolved in health policy formulation, especially those thatwould have an effect on the nursing profession.

8. There should be integrated planning and developmentof human resources in health-doctors, nurses and otherparamedical personnel. As has been recommended by earliercommittees, a live register needs to be introduced for all cat-egories of medical and para-medical personnel. Regularlyupdated information on the number of postgraduates avail-able in different specialties in India and registered in differ-ent State Medical Councils should be maintained.

9. There is a need to regulate and address the interregionalimbalances in medical colleges. The Government must alsotake the responsibility of opening additional medical collegesin the public sector in those states that have fewer medicalcolleges than required.

10. The standards of training in medical colleges, nursing



schools and colleges, and in those institutions that imparttraining to other categories of paramedical personnel haveto be improved. There is an urgent need to establish a Com-mission for Excellence in Health Care and Human Resourcesfor Health so that grants can be provided to medical and healthuniversities and medical colleges to improve the standards oftraining.

11. A system of accreditation of institutions imparting train-ing to various categories of human resources for health shouldbe introduced.

12. Sufficient incentives-financial and non-financial-should

be given to attract medical teachers to join and continue inpre- and paraclinical specialties in medical colleges. As analternative, non-MBBS postgraduate seats could be increasedin these specialties and a record of the number of such peo-ple passing out should be kept for rational health manpowerplanning and production. Teachers in medical and nursingtraining institutions should be provided fellowships to under-take higher studies, and attend conferences and workshops.

13. There should be an increasing focus on rural and com-munity orientation of MB,BS and nursing students. The com-pulsory three months' training of medical doctors in a com-

munity setting during internship shouldbe implemented seriously so that studentsacquire the skills to interact with the com-munity and can effectively and efficientlydeliver services in a community setting.Students in nursing schools and collegesshould also be posted in peripheral healthfacilities to help them develop an under-standing of effective delivery of healthservices in a rural setting. A system of re-registration of doctors and nurses onceevery five years and linking re-registrationwith a minimum number of hours of CMEshould be introduced.

14. The examination system for studentsneeds to be revamped so that evaluationof skills is done on the basis of what thestudent should know for the delivery ofessential health interventions. The entranceexamination for postgraduation shouldbe conducted before the start of intern-ship so that students can focus on learn-ing clinical and housemanship skills dur-ing internship.

15. The number of seats in specialtiessuch as Anaesthesiology, Paediatrics,Obstetrics-Gynaecology, Psychiatry andCommunity Medicine should be increased.Postgraduate students in these clinicalspecialties should be posted in DistrictHospitals for one month in the second yearof their postgraduation and for two monthsin the third year so that they can get ade-quate hands-on experience in managingpatients in District Hospitals/CHCs. Forthis, due amendments in the rules ofrespective universities should be made.

16. For management of public healthprogrammes by public health specialistsat all levels, institutes of excellence fortraining in public health need to be estab-lished, as has already been declared by theCentral Government. There is also a needto introduce an All-India Cadre of PublicHealth on the lines of the All-India CivilServices.



Table 12

State-wise number of registered doctors (allopathic and AYUSH)

State/Union Number of AYUSH Number of allopathic Total number of

Territory doctors registered doctors registered till registered doctors

till 30 September 2004 1 January 2002

Andhra Pradesh 29,238 48,402 77,640

Arunachal Pradesh 0 0 0

Assam 1284 15723 17007

Bihar 161,010 34,975 195,985

Chhattisgarh 0 186 186

Goa 0 2332 2332

Gujarat 22,425 36,521 58,946

Haryana 26,047 1285 27,332

Himachal Pradesh 8466 0 8466

Jammu and Kashmir 505 7993 8498

Jharkhand 0 135 135

Karnataka 18,792 65,789 84,581

Kerala 22,968 32,412 55,380

Madhya Pradesh 56,009 28,817 84,826

Manipur 0 0 0

Maharashtra 83,167 90,855 174,022

Meghalaya 229 0 229

Mizoram 0 0 0

Nagaland 1,997 0 1,997

Orissa 8,781 14,712 23,493

Punjab 33,542 33,705 67,247

Rajasthan 29,261 22,506 51,767

Sikkim 0 0 0

Tamil Nadu 37,053 71,157 108,210

Tripura 0 0 0

Uttaranchal 0 0 0

Uttar Pradesh 94,898 44,927 139,825

West Bengal 45,280 52,274 97,554

A&N Island 0 0 0

Chandigarh 297 0 297

D&N Haveli 0 0 0

Daman & Diu 0 0 0

Delhi 10,221 28,402 38,623

Lakshadweep 0 0 0

Pondicherry 0 0 0

Total 691,470 633,108 1,324,578

Source: Department of AYUSH, Ministry of Health and Family Welfare, Government of India, New Delhi

17. In an effort towards integration of allopathy with ISM,there could be increasing coordination between practition-ers of the allopathic system of medicine with AYUSH practi-tioners by posting doctors of the two systems of medicine inthe same facility as has been done in some CGHS dispensaries.This could be followed by functional integration betweenthe two systems of medicine at all levels-training, placementand programme implementation.

18. Since doctors do not stay at PHCs and the communityis deprived of health services. There has to be an increasingfocus on paramedicalization of primary health care servicesin India. To make the delivery of health and family welfareservices more effective through a primary health care set-up,there should be two ANMs at the subcentre.

19. A pilot should be tried wherein doctors are not postedto PHCs and are instead posted at CHCs, which could havesix specialists (a general physician, a general surgeon, a pae-diatrician, an obstetrician-gynaecologist, an anaesthetist andan ophthalmologist) and four MB,BS medical officers. The

MB,BS doctors could be given transport to provide OPD serv-ices at PHCs and they could stay at CHC headquarters. Rou-tine services and emergency care at PHCs could be providedby nurse practitioners, a separate cadre that would then needto be introduced. In such a case, there would be a need toupgrade the skills of nurse practitioners to provide medicalcare in emergency situations.

20. When one compares the number of undergraduate andpostgraduate seats, it becomes obvious that a vast majorityof doctors do not receive any training after MB,BS. The cur-rent pattern of medical training, often followed by an inad-equate internship, does not provide adequate skills for thedoctor to take up independent practice. When this is viewedin the context of India's need to have a large number ofqualified general practitioners it is clear that adequate oppor-tunities need to be created for MB,BS doctors to undergopostgraduate studies in Family Medicine (General Practice)-a professional rather than academic degree.



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Annexure I

Community-based service providers

Name of community based worker- Training requirements Support provided Services to be provided Evaluation, if any

Village health guide Started in 1977throughout the country

Mahila Swasthya Sangh (MSS) Startedin 1990-91 throughout the country

Jan Swasthya Rakshak (MadhyaPradesh)Started in 1995, but taken upin right earnest in 2001 under the RajivGandhi Mission

Mitanin (Chhattisgarh)Started inDecember 2002

Jan Mangal Couple (Rajasthan)Startedin 1995

Traditional birth attendant (TBA)Startedin 2001 under the RCH Programme inabout 180 districts with safe deliveryrates less than 80%

Community-Based Worker (CBW)(SIFPSA, UP)Started in 1994 in 6districts, now extended to 40 districts

Community worker (Gadhchiroli)Startedin 1995 in 39 villages (39,000population)

Bharatvaidya (Osmanabad)Started in1994 in 50 villages

Village community selected avolunteer to act as a linkbetween the community andgovernment health system.Three months' training wasprovided at PHCs.

Formed in villages with 1000population in plains and 500population in hilly areas. Thegroup comprise 5 grassroots-level functionaries and 10prominent women from villagecommunity. The members weregiven a short training.

6 months' training given to aneducated person in the villageunder TRYSEM.

Women were identified fromvillages and given training onimmuniza-tion, antenatal care,prevention and control ofgastroenteritis, larval control,prevention and management ofmalnutrition.52,000 personshave been trained.

Couples with the wife in thereproductive age identified fromvillages and given 10 days'training on methods of familywelfare.

Varied from state to state fromfour to several days. Under theRCH programme, imparted 10days' residential training topractising TBAs at CHCs / PHCsin two phases of 6 and fourdays respectively at an intervalof 4 to 12 weeks

A woman from among dairycooperative workers. 16,323community-based workerstrained

A IV to X standard pass personfrom the community intensivelytrained for 42 days in six phasesspread over one year for safedelivery and newborn care,including administration of InjGentamicin

350 women from 50 villageswere trained

During training, the villagehealth worker was paid astipend of Rs 200 per month.He/she was given anhonorarium of Rs 50 permonth. A kit containingcommon articles of use,medicines and a manual wasprovided.

Rs 1200 per year allocated toevery MSS member forarranging its monthlymeetings. Information,education and communicationmaterial was supplied. AnANM is the Member Secretaryof the MSS.

Licensed by the zila panchayatto practise in villages. If therewas a Jan Swasthya Rakshakin a village, he / she was thenominated Member Secretaryof the Village HealthCommittee.

Mitanins recognized as depotholders for chloroquin in manyareas, and have also beenidentified as DOTS providers inmany areas.

Bimonthly meetings held atPHCs for which the couple ispaid Rs 200 towards travelexpenses and wage loss.Depot holders for oralcontraceptives, condoms andoral rehydration solution(ORS).

Dai Kit provided a DisposableDai Delivery Kit. Rs 100 perday for 10 days of training,and cost of travel fromresidence to training site andback

Given Rs 1000 per month ashonorarium

Intensive training, follow-upsupervision and guidancewith refresher training for twodays every two months

Trained women supported todiagnose and manage mildillness and minor ailments

Provided health education and createdawareness on maternal and child healthand family welfare services. Kept a trackof communicable diseases and managedminor ailments and provided first aid topatients.

The MSS helps ANM in educating andmotivating community, and obtainssupport from other women colleaguesfor programmes such as immunization,antenatal care and family planning.

Provide curative services and deliverpublic health services in villages.

Create awareness and provide supportfor immunization, create awareness oncontrol of mosquito breeding, opposingirrational practices by privatepractitioners and opposition to domesticviolence.

Promotion of small family norm, andmotivating people to use spacing orterminal methods of contraception.

Antenatal careDelivery care - performsafe deliveriesEarly identification ofcomplications in mother andchildPostnatal careHealth education andcounseling

To assist the ANM in her work for thedelivery of services at the village level.Tomobilize the community to promotespacing methods of family planning andmaternal and child health services.

To conduct safe deliveries, to provideresuscitation to the newborn , tomanage the sick child and to injectgentamicin

Conduct health survey in village,registration of births and deaths, dailyhome visits, creating awareness onSTDs/AIDS, treatment of mild illnesses

Was reviewed by a group of experts. Thescheme was discontinued with effect from 1April 2002.

In some states, the MSS is very active whilein others, it has been formed as a formality.In many states, monthly meetings are notorganized, and meetings held once in 6-8months. In some states, the existence of fakeMSS are reported.

The rate of attrition is90% . Practising JanSwasthya Rakshaks were found to beproviding only curative services andinjecting saline and other drugs.

An evaluation needs to be undertaken toexamine the impact and sustainability of thisscheme.

In many areas, couple protection rateincreased; however, due to erratic supply offunds, this scheme lay dormant for quitesome time. The scheme was revived in thestate last year.

None documented. However, TBAs did notstay at place of training for the period oftraining. Consequently, learnt lesser skills forsafe delivery and early identification ofcomplications

Record -keeping by the ANM improved,while she started delegating most of hertasks to the CBW.

Infant mortality rate (IMR) in the areareduced by 47% and neonatal mortality ratereduced by 62%

IMR reduced from 72 per 1000 in 1995 to 39per1000 in 2004

EALTH AND POVERTY ARE CLOSELY RELATED. IMPROVING HEALTH IS THE fundamental goal of economic development. Nurses and midwives play a major rolein the health care system. The main functions of nurses are health promotion, pre-vention of diseases, nursing therapeutics and rehabilitation. Qualified nurses can con-tribute to achieving positive health outcomes such as reducing mortality, morbidityand disability, promoting healthy lifestyles, improving maternal and child health,and combating HIV/AIDS, malaria, tuberculosis (TB) and other diseases to achievethe Millennium Development Goals. To attain this, policies are required on an effec-tive nursing workforce, appropriate distribution, deployment and utilization, andstrong political leadership and commitment of the government, professional organ-izations and nurse leaders.

This paper attempts to identify how nurses and midwives can contribute to healthcare. It reviews existing situation of nursing and midwifery in India regarding nurs-ing services, nursing education, nursing management, evidence base, nursing researchand regulation. In view of the experiences of other countries, future scenario ofnursing and midwifery in India is suggested. Strategies to meet the challenges andrecommendations are outlined for policy-makers and organizations.

Existing situation of nursing and midwifery in India

According to the National Health Policy (NHP) of India 2002, the major health prob-lems are infectious diseases. These diseases can be prevented by mid-level healthpersonnel such as nurses. However, the quality of nursing and midwifery services, edu-cation, research, management and regulation is inadequate and the workforce insuf-ficient.

Nursing and Midwifery Services

The contribution of nurses and midwives to the quality and efficiency of health serv-ices is insufficient. The nurse to population/patient ratio is low compared to othercountries. In 2004, the ratio was 1:2250 in India and 1:100-150 in Europe. This ratioin African countries, Sri Lanka and Thailand is 1:1400, 1:1100 and 1:850, respec-tively. Many States in India face a shortage of nurses and midwives. Most of theStates have no system of re-registration of nurses. As on March 2003, 8,398,620 nurseswere registered with the State Nursing Registering Councils. Only 40% of registerednurses are active because there is no system of live register in India, the said figureincludes all the nurses who have been trained since 1947. Nursing positions are cre-ated due to financial constraints, poor working conditions, low pay-scales, emigra-tion, retirement or death. Further, the optimum nurse to patient ratio recommendedby the Staff Inspection Unit (Ministry of Finance) is implemented in only 7 CentralGovernment hospitals due to economic constraints. This means that one nurse hasto care for more patients than he/she should.

Nursing and midwifery services do not receive high recognition from the public.The roles and responsibilities of nurses are not clearly defined. As a result, they spendmost of their time in non-nursing tasks. In India, the nurse to doctor ratio is almost1.5:1 while it is 3:1 in developed countries. Most nurses in the service hold a diplomaand some hold a Bachelor's degree in nursing and midwifery. There are no specialistnurses in clinical practice. Nurses and midwives do not have much opportunity for

Nursing for the delivery of essentialhealth interventions

H


S E C T I O N I I I

DILEEP KUMAR PRESIDENT, INDIAN NURSING

COUNCILCOMBINED COUNCILS

BUILDING, KOTLA ROAD,AIWAN-I-GHALIB MARG,

NEW DELHIE-MAIL:

[email protected]

continuing their education as no such system exists in mosthospitals. In the interest of patient care, the NHP 2002 empha-sizes the need for an improvement in the ratio of nurses vis-à-vis doctors/beds. It also emphasizes on improving the skilllevel of nurses and increasing the ratio of degree- holdingnurses vis-à-vis diploma-holding nurses. It further recognizesthe need for establishing training courses for superspecialtynurses required for tertiary care institutions.

In 2004, the Indian Nursing Council (INC) conducted a work-shop to develop a quality assurance (QA) model for the nurs-ing services. It has not yet been implemented. The modelfocuses on the code of ethics and professional conduct ofnurses, nursing standards, nursing process and nursing careplan, patient teaching, management techniques, continuingeducation and research, and the nurse's role during a disas-ter. However, the INC does not have control over the nursingservices. The quality of service depends on the policy andadministration of each hospital. Many private health care insti-tutions provide on-the-job training to their health workersinstead of hiring nurses. The INC cannot control such exer-cise as it is not under the Indian Nursing Council Act.

Working conditions in many hospitals and communities inIndia are poor and unsafe. Medical equipment and suppliesare inadequate. Incentives are limited. Washing and uniformallowances have, however, been revised and increased fornurses in Central Government hospitals. Limited opportuni-ties are available for career advancement due to non-cre-ation and non-existence of clinical specialty nurse and nursepractitioner positions. There is a shortage of nursing person-nel owing to non-implementation of recommended nursingstaffing norms. Promotions are limited to 2-3 times through-out the career and few supervision posts are offered.

The Trained Nurses' Association of India was established in1922 by amalgamating the Association of Nursing Superin-tendents and Trained Nurses' Association and many otherassociations and unions. It aims to uphold the dignity andhonour of the profession, promote cooperation among nursesand provide service for its members.

Community Health Nursing Services

At the community level, there are no positions for nurses.Health care is provided by auxiliary nurse-midwives (ANMs),lady health visitors (LHVs) and female health workers. Thereare 5,025,030 registered ANMs, and 40,536 registered healthvisitors and female health workers. Due to the heavy work-load, nursing care or home health care cannot be properlyprovided. Antenatal and delivery care are mostly provided bytraditional birth attendants (TBAs), which results in high mater-nal and infant mortality rates. The maternal mortality variesfrom 79-135 lakh in better-performing States to 498-707lakh in low-performing States. The infant mortality rate variesfrom 14-52 per 1000 live-births in better-performing Statesto 63-97 per 1000 live-births in low-performing States.

The popular norms for the three-tier rural health care infra-structure were evolved with the objective of comprehensivecare. For delivery care, this meant (i) promoting institutional

deliveries; (ii) providing referral facilities close to the com-munity; and (iii) ensuring that bulk of the remaining domi-ciliary deliveries were conducted by ANMs. However, even afterhaving set up the required number of subcentres, the num-ber of deliveries by ANMs is very low in most States.

In the community setting, it is observed that ANMs/LHVsface problems related to transportation, accommodation, gen-der-based harassment, lack of security, incentives and careerprospects, and inadequate provision for living with theirfamilies and educating their children.

Nursing and Midwifery Education

There are 635 nursing schools and 165 nursing colleges in India.Some are attached to medical colleges. The nursing and mid-wifery education programmes offered are given in Table 1.

The INC has a equivalancy system in accepting and recog-nizing qualifications or certificates awarded by other univer-sities or countries.

The INC has set standards for all educational programmesby identifying the curriculum structure and syllabi, and hasa procedure for the inspection of nursing education institu-tions every 3-5 years. Common problems identified are inad-equate number of nurse teachers and nurse teacher special-ists, non-adherence to the Council's norm for teacher to stu-dent ratio, inadequate infrastructure, facilities and budget,lack of commitment and accountability among educatorsfor clinical supervision and guidance of students, and inad-equate and improper clinical facilities for students.

Between September 2004 and October 2004, 61.2% insti-tutions were found unsuitable for teaching. When the Coun-cil withdrew the recognition of the institutions, they contin-ued with the permission of the State Nursing Council. Thereis an overlap in the functioning of the State Nursing Regis-tration Council and the Indian Nursing Council Act with regardto opening of educational institutions of nursing, which hasresulted in the mushrooming of such institutions in selectedStates.

The postgraduate curriculum in nursing is not adequate.Teachers with Master's and Doctoral degrees are few. Researchand academic work is scarce. There is no national develop-ment plan for nursing and midwifery services to enhance thequality and quantity of nurse educators, students and staffnurses.

Evidence and Nursing and Midwifery Research

The use of evidence and research to improve practice is inad-equate. Data and evidence for research are not managed sys-tematically. They are inaccurate and out-of-date.

Nursing research as a subject is taught at the basic and grad-uate level. There are a number of Indian nursing journals.However, the number of nursing research studies and publi-cations are not many. The reasons for nursing staff not doingresearch are inability to do research, no idea of researchproblems, heavy workload, no time, inadequate resources,no support from administrators, and being unaware of its


SECTION III Nursing for the delivery of essential health interventions

importance. In addition, funds for research in nursing areinsufficient and not provided by the national research fund.

Management of Nursing and Midwifery Services

Nurses and midwives are not well accepted or recognized asleaders or administrators. Nursing management skills, lead-ership, lobbying and negotiating skills are poor. There are aninadequate number of nurse and midwife leaders at the nationaland State levels for nursing practice, research, education, man-agement, planning and policy development. Although thenurse is a member of the health team, she/he is never askedto represent the profession in planning and policy formula-tion for nursing services, education, etc. The nursing chiefonly looks after the nursing personnel and has no authorityto make decisions on pay scales, number of posts, staff devel-opment or new interventions. In response to the demand ofthe Delhi Nurses' Union, the Government of India has sanc-tioned 5 nursing posts at the national level.

Regulation of Nursing and Midwifery Services

The INC was constituted by the Indian Nursing Council Act,1947. The Act was amended in 1950 and 1957 to set a uni-form standard of regulation and practice for nurses, mid-wives and health visitors by specifying the minimum require-ments for courses in nursing education, institution inspec-tion and accreditation for quality of education, and main-taining registration by compiling data from the State Nurs-ing Councils.

There are 22 State Nursing Councils whose functions are to

inspect and accredit schools of nursing in their State, conductexaminations, prescribe rules of conduct, take disciplinaryaction and maintain a register of nurses, midwives, ANMs andhealth visitors in the State. State Nursing Councils ensure thatthe prescribed syllabi are followed and standards maintained.

Nurses and midwives are required to register with theState Nursing Registration Council after successful comple-tion of nursing courses. The policy of renewal of registra-tion every 3-5 years will be implemented soon and 1-2 con-tinuing education programmes will be required for re-regis-tration.

Enforcement of the provisions of the Indian Nursing Coun-cil Act, 1947 is found to be weak as many of the State Nurs-ing Council Acts which were enacted before the Indian Nurs-ing Council Act lack uniformity. The State Nursing Councilsare virtually governed within the jurisdiction of the State Actunder the Constitution of India. The Indian Nursing CouncilAct, 1947 being a Central legislation, should have powers over-riding the State Nursing Councils Acts, by following theMedical Service Act controlled by the Ministry of Health &Family Welfare. Some of the powers prescribed in the CentralAct are similar to those prescribed in some of the State Nurs-ing Council Acts. These are major hindrances to maintaininguniform standards by the INC.

In some States, the examining body and the registeringauthority are the same. The INC has requested State Govern-ments to create or establish separate examining bodies andregistering authorities.

To carry out its functions, the INC works in collaborationwith the State Nurse Councils, schools and colleges of nurs-ing and examination boards.


Nursing for the delivery of essential health interventions SECTION III

Table 1

Nursing and midwifery education programmes in India

Programme Eligibility Duration of training (years) Examination Registration

ANM Matriculation 1.5-2 State Nursing State Nursing Council

Council/DME

GNM 10+2 (arts or science) 3-3.5 State Nursing Council/ State State Nursing Council

examination board/DME

BSc (Basic) 10+2 (science) 4 University State Nursing Council

BSc (post-basic) 10+2,GNM 2 (regular) University

2 years' experience 3 (distance)

MSc BSc 2 University

Mphil MSc 1 (full-time) University

2 (part-time)

PhD MSc/MPhil 3-5 University

ANM: auxiliary nurse-midwife; GNM: graduate nurse-midwife

Major issues

According to the existing situation in India, major issues thatneed to be solved are as follows:

� Insufficient contribution of nurses and midwives to healthcare development due to— few positions for nurses and midwives at the State andnational levels— inadequate nursing leadership and strategic management— inappropriate nurse to population/patient ratio— inadequate preparedness of nurses and midwives— inadequate recognition of the nurse's status in the healthcare system— limited active involvement of professional organizations.

� Poor quality of nursing and midwifery care due to — shortage of nurses and midwives due to(i) inadequate number of nursing positions as per the rec-ommended staffing norms (ii) migration (iii) insufficient number of nurses with Bachelors' and Mas-ter's degrees and in clinical specialties.— limited competency of nurses and midwives due to(i) too many categories of nurses and midwives with over-lapping roles(ii) unclear roles and responsibilities of nurses and midwives (iii) ineffective clinical preparation and supervision duringtraining(iv) inadequate continuing education system(v) limited utilization of evidence and research(vi) insufficient clinical nurse specialists and nurse practi-tioners(vii) inadequate facilities and opportunities for clinical nursespecialists(viii) non-creation of posts for clinical nurse specialists.— inadequate standards and guidelines for nursing prac-tice— ineffective regulation of nursing and midwifery practice— inadequate infrastructure for nursing and midwifery prac-tice— inadequate motivation to provide effective care.

� Poor quality of nursing education to produce qualified grad-uates for service due to— an inadequate national nursing and midwifery educa-tion plan and development— limited involvement of nurses and midwives at the pol-icy level— shortage of qualified nurse educators— inadequate infrastructure for nursing education— too many categories of nursing and midwifery person-nel— limited production of academic work and research.

� Limited role and authority of the INC in nursing develop-ment due to

— limited roles prescribed in the Indian Nursing Council Act,1947— inconsistency in the Indian Nursing Council and StateNursing Council Acts— insufficient information systems in nursing and midwiferyservices— shortage of staff at the INC and State Nursing Councils.

Future of nursing and midwifery in India

Nurses and midwives in India should play a major role inimproving the health and quality-of-life of people. The Mil-lennium Development Goals can be achieved with their activework in the community. Infectious diseases such as HIV/AIDS,TB and malaria can be prevented and health promotionstrengthened for all ages, especially maternal and child health.There should be a sound research base, strong leadership, pol-icy formulation and unity of professional organizations withthe strong commitment and continuous support of policy-makers and the government.

Nurses and midwives should be deployed in the hospital andcommunity as per the recommended staffing norms. Roles,responsibilities and competencies for each category of nursesand midwives are to be clearly defined and implemented.Nurses and midwives should actively provide care based onevidence or research and implement nursing practice stan-dards. They will have to pursue continuing education for self-learning. There should be nurse specialists in various clinicalareas. The working conditions for nurses and midwives shouldbe good and their safety should be ensured. Nurses and mid-wives should be active members of the health care team andwork in collaboration to provide holistic and comprehensivecare for the patient and family.

The gap between nursing and midwifery staff and nurse edu-cators needs be bridged. They should work together to improvenursing services and provide a suitable setting for students topractise clinical nursing. Nursing education programmes mustbe strengthened. Nurses and midwives should have Bache-lors' degrees and those with diplomas or certificates must beupgraded. Masters' programmes aimed at producing advancedpractice nurses in various clinical areas need to be strength-ened and expanded. Doctoral education in nursing must pro-duce good researchers and leaders. Students can learn in anenvironment equipped with qualified teachers, adequate class-rooms, libraries, information technology systems and nursinglaboratories. Student-centred learning, self-learning andlifelong education must be emphasized. A quality assurancesystem for nursing services and education should be imple-mented. The INC should work with State Nursing Councils toregulate quality effectively. Nurses and midwives will be appre-ciated by society because of their good work. Nurses andmidwives should be involved in policy formulation at theState and national levels. The nursing and midwifery devel-opment plan can be integrated in the health care developmentplan. In addition, the government should recognize the sig-nificant role of nurses and midwives in health care and bewilling to support and invest heavily in nursing and midwifery.



Meeting the challenges

1. Strengthen involvement of nurses in health andnursing policy formulation and planning

Nurses need to study policy formulation and planning at alllevels of education. Techniques for negotiation and lobby-ing should be taught. Networking within and outside the nurs-ing profession should be built and strengthened. Data andinformation on nursing and health should be available, updatedand accessible online, if possible.

The INC should take the lead and actively participate inhealth policy formulation, especially policies that will affectand impact the nursing profession. More positions for nursesare needed at the policy-decision level.

The Thailand Nursing Council and nurse leaders partici-pated in the formulation of the National Health Act andNational Universal Health Coverage Act. In Canada, the US,the UK, Australia, New Zealand, Thailand, Korea and Nor-way, nurses and midwives have been either elected or appointedto Parliament. The President and members of the ThailandNursing Council sit on many national health committees toformulate policies on health care services and reimbursement,quality control of health care services, and health manpowerdevelopment.

2. Empower nurse leaders

There should be a nursing division led by a nursing directorin hospitals. The nurse director has to develop leadershipand management skills to enhance the quality of the nurs-ing workforce and nursing care to improve the health of thepeople and achieve the United Nations' Millennium Devel-opment Goals.

3. Establish a quality assurance system for thenursing service

A quality assurance system comprises vision, mission, objec-tives, strategic and operational plans, nursing service activ-ity, nursing manpower management, roles and responsibili-ties, nursing standards, nursing indicators, nursing research,nursing administration and management, resource allocationand financial support. The objective of this system is to ensurequality care and nursing outcomes as expected by clients (lesssuffering, shorter duration of hospital stay, and reduction ofhealth care costs, infection, complications and mortality), andaccording to professional standards. It also indicates the com-mitment of the care provider towards providing the best careto consumers.

Successful development and implementation of the sys-tem depends on the commitment of nursing leaders, hospi-tal administrators, mutual goal-setting, participation of allpersonnel in the process, continuous quality improvementand good communication. The role of the INC in regulatingnursing practice should be strengthened by amending theNursing Act to include maintaining of registration of quali-

fied nurses, renewal of licence, and setting up a nursingservice and nursing education accrediting system. If possi-ble, a hospital QA system should have nursing as an integralpart and involves nurses in a surveyor team.

In Thailand, a hospital is accredited by an autonomousorganization. The nursing component is included in the assess-ment criterion focusing on nursing activity, nurses' notes, par-ticipation of nurses in patient care teams, and nursing activ-ity in infection control. Nurses are members of the hospitalsurveyor team. This accreditation activity stimulates qualityimprovement.

The Thailand Nursing Council is also developing nursingservice standards in addition to nursing care standards foreach level of the health services. For example, at the primarycare level, the structure standard indicates that there shouldbe two professional nurses to care for 5000 people and at leastone of them has to be a nurse practitioner. The outcomes stan-dard gives indicators such as reduction of infection rate,increase of self-care capacity among patients with chronic ill-ness, and enhanced patient satisfaction at the tertiary levelas well as no bedsores, shorter length of hospital stay, reduc-tion of urinary tract infections, etc. The process standard indi-cates that nurses should provide holistic health care usingnursing processes by ensuring a professional code of ethicsand the patient's sociocultural context.

4. Ensure nursing workforce management as anintegral part of human resource planning and healthsystem development

A well-managed nursing workforce requires an effective andefficient nursing workforce policy and planning. As a followup to the Resolutions WHA 45.5 (1992) and WHA 49.1 (1996),Member States were urged to formulate and implement nationalstrategic plans for development of nursing and midwiferyservices. Bangladesh [1994], Thailand [1994], Indonesia andMaldives [1997], Myanmar [1999], Sri Lanka and Nepal [2001]have developed national strategic plans for achieving this goal.

An essential component of the nursing and midwifery devel-opment plan is manpower planning. Planning can preventshortage of nurses and increase efficiency in deployment, uti-lization and development. It is important to include nursingworkforce management in human resource and health sys-tem development.

5. Enhance nursing autonomy in practice

The roles and responsibilities of nurses are identified by pro-fessional organizations, nursing education and nursing serv-ices, and they can be adapted and expanded to meet univer-sal nursing standards.

In India, there are a number of care activities that nursescan undertake because of their educational background butcannot carry out because doctors do not delegate responsi-bility to them. Having nurses take on some of the care thatthey are trained for independently will be cost-effective. Nurseswith a Master's degree in advanced nursing practice can deal



with complex health problems, have a better clinical judge-ment and can select the proper option for the patient by usingevidence-based practice. They can also provide educationand consultation.

6. Enforce implementation of recommended normson nurse to patient ratio

The quality of nursing care also depends on the number andcategories of nurses who provide care. In hospitals and com-munity settings, there should be a norm or standard fornurse to patient ratio. Norms recommended by the HealthManpower Planning, Production and Management Com-mittee in 1986 and INC for different wards and outpatientdepartments should be reviewed. The INC must propose tothe government the need for more posts and develop mech-anisms to enforce the recommended norms for quality of care.

The Thailand Nursing Council has developed norms for nurseto patient ratio; in medical, surgical, paediatric and gynae-cological wards it is 1:4-1:8, in the delivery room or inten-sive care unit it is 1:2-1:1 and 1:150-1:100 in the outpatientdepartment. The nurse to technical nurse or practical nurseratio is 1:3-1:2. This is the standard for all hospitals at thethree levels of the health care services.

7. Create posts for professional nurses at thecommunity level and strengthen the competency ofthe auxiliary nurse-midwife

In India, there is a doctor and nurse at the community healthcentre but at the primary health centre and subcentre, onlythe female health worker, ANM and LHV are there. One ANMhas to take care of 5000 people, which prevents her fromproviding effective health promotion activities, maternaland child care; conducting home visits and preventing illness.Frequently, babies are delivered by TBAs who do not have for-mal training, which leads to a high rate of infant and mater-nal mortality. ANMs sometimes cannot provide comprehen-sive care or make proper judgement due to their limitedtraining.

To ensure quality of service at all community level, a pub-lic health nurse (PHN) should work with an ANM. The ANMshould be qualified to provide effective maternal and childcare to reduce maternal and infant mortality rates, and beable to replace the TBA. The ANM should be taught moreabout infectious diseases and their prevention such as HIV/AIDS,TB, malaria and be responsible for midwifery work in the com-munity. A PHN, who is a graduate in nursing, should learnmore about epidemiology, health promotion, disease pre-vention, primary medical care, alternative medicine, healthand culture, and community nursing. Community nursingshould include community assessment, family health care,school health, home health and long-term care.

The capacity of PHNs and ANMs should be strengthenedso that they can provide health information and education,which are important means to improve the health behaviourof individuals, family and the community. The community

has an equal right to receive quality and accessible care. Com-munity health care workers must understand the communityand work as a partner.

To ensure quality of care, the subcentre, primary health cen-tre, community health centre and district should have theinfrastructure given in Table 2.

8. Produce advanced practice nurses

Advanced practice nurses (APNs) are prepared at the Master'slevel. An APN can be categorized into a clinical nurse spe-cialist (CNS), nurse practitioner (NP), nurse anaesthetist andmidwife. The roles of the APN are clinician expert, educator,researcher, consultant and manager. APNs have the compe-tency of clinical judgement, leadership skills, are an agent ofchange, and help in collaboration and communication.

In the United States, it has been found that the APN canmake an early diagnosis so that the patient receives propertreatment in time, with a shorter length of hospital stay, reducedcomplications and high patient satisfaction. In Australia, NPsare required to work at the community level as case man-agers and may have an independent practice as well. In Aus-tralia and New Zealand, there are midwives whose educationis at the Master's level. In Thailand 30 years ago, the Master'sprogramme in Nursing aimed to produce nurse educators andnurse administrators, and later nurse specialists.



Table 2

Infrastructure required at various levels of thehealth care services

Subcentre · To be manned by 2 ANMs

population 5000 with 2 years' training as per

the revised syllabus

· male health worker and one PHN (PHN-

Graduate nurse/GNM + DPHN)

· Strengthening the infra

structural facilities

PHC · One PHN practitioner (with additional

30,000population training) and one PHN supervisor to

effectively supervise all MCH and FW

services

· 4 staff nurses for 24 hours' service

CHC · 14 staff nurses

1,00,000 population · 3 PHN supervisors

· 1 PHN practitioner

· 1 independent midwifery practitioner

District level · Strengthen the institution of the

DPHN officer to supervise and monitor

the nursing and midwifery system

· 2 PHN officers

ANM: auxiliary nurse-midwife; PHN: public health nurse; DPHN: district public health nurse ; MCH:maternal and child health; FW: family welfare; PHC: primary health centre; CHC: community healthcentre.

To expand the role of nurses in India, APN programmesshould be established and should be included in manpowerplanning. The scope of practice should be clearly identifiedby the INC.

9. Ensure appropriate facilities and adequatemedical equipment and supplies

Facilities, medical equipment and supply form the infra-structure required for providing health service. The health carefacility should have a standard for rooms and space for out-patient departments and inpatient wards, and a standard foressential medical equipment and supplies. Good environ-mental sanitation and waste management can reduce the out-break of infectious diseases such as hepatitis B and C, andreduce injuries and health risks such as needlestick injury. Ade-quate medical equipment and supplies provide the patientwith proper treatment and care, reduce nursing time and therate of infections. However, there should be a good mainte-nance and control system.

The National Infection Control Committee of Thailandsets a minimum standard for health care facilities such asroom, sink, isolation room, incinerator room to prevent infec-tion.

10. Promote evidence-based practice and nursingresearch

Establishment of policies on the use of evidence in practiceis required. Nurses with a Master's degree should be encour-aged to provide evidence, read nursing research and use evi-dence to improve or change nursing practices. An academicatmosphere should be created in the workplace. An informa-tion system and library should be provided. Multidisciplinaryresearch should be encouraged. At the hospital, there shouldbe a person who is responsible for nursing research activityincluding fund seeking for research and building of researchnetwork.

Nurse educators should develop a short-course training onevidence-base and research or to supervise research activity.Resources such as journals and books can be shared. Jointresearch between nurse educators and clinical staff shouldbe encouraged to strengthen the capacity of both groupsand improve education and practice. The INC can be a partof nursing research development.

The INC should set nursing research priorities in collabora-tion with nursing and non-nursing organizations to provideresearch funds and promote nursing activities for policy for-mulation. Establishment of a nursing research informationsystem is encouraged to monitor research work, areas ofresearch and researchers. Dissemination of nursing researchand models for best practices should be established.

11. Establish a continuing nursing education system

Continuing education is an informal study or activity to gainknowledge and learn about new technology. Lifelong edu-

cation is essential for self-development, knowledge-build-ing and learning. In the US as well as in Thailand, nurses arerequired to have continuing education credits for renewal oftheir licences.

Continuing education stimulates nurses to keep up withnew knowledge and technology, to increase their skills andcompetency, and to be able to contribute to the health careteam. The nursing service department or hospital shouldformulate a policy on staff development and set aside a budgetto strengthen their competency in providing quality nursingcare. This is an incentive for nurses.

The existing continuing nursing education programmesshould be strengthened or new units established. The appoint-ment of responsible persons for continuing education activ-ity is needed. Continuing education programmes should getapproval from the INC.

12. Strengthen payment scales, incentive systemsand working conditions

Emigration of nurses has been a critical issue in recent yearsin many countries including India, because developed coun-tries faced with nursing shortages import skilled nurses fromdeveloping countries by offering higher salaries. In addition,there is evidence of nurses resigning from the workforce. Bothevents affect the number of nursing personnel, which is alreadyinadequate. A shortage of nurses and understaffing have beenlinked to many negative consequences including increasedincidence of cross-infection rates, accidents, injuries and poordelivery of services.

Factors encouraging Caribbean nurses to emigrate werefinancial, poor working conditions, lack of opportunities forprofessional development, non-involvement in decision-mak-ing and lack of support from supervisors. Therefore, good pay-ment and incentive systems, and better working conditionsshould be established.

The payment scales of nurses in many countries are lowcompared to other health care workers. Payments should reflecteducation, type of work, roles and responsibilities, and work-load. A nurse's job requires good knowledge, skills, hardwork and commitment. In India, the payment scale was adjustedin 1996 but is still low compared to other professions; it shouldbe increased.

An incentive system for nurses could include allowances,uniform, housing, reimbursement for health care services,extra payment for working in the evening and night shifts orovertime, or working at remote or unsafe areas, and oppor-tunities for continuing education. Transportation and safehousing for nurses who work in the community or remoteareas should be provided for the convenience and safety ofhome care service.

Recognition should be given to good workers at the insti-tutional, local and national levels. Opportunities to obtain ahigher degree, short-course training or to attend nursing con-ferences or workshops should be given to each nurse at leastonce a year for self-improvement and career advancement.Potential nurses should be encouraged to study for a higher



degree and take study leave with pay. Career ladders for pro-motion of nurses should be established at the national level.Therefore, each nursing service must have a human resourcedevelopment plan and implement it effectively.

Good working conditions including adequate and appro-priate working facilities, cleanliness and safety can also facil-itate productive work and the quality-of-life of nurses.

13. Ensure quality of nursing education bystrengthening nursing programmes, increasingqualified nurse educators and allocating appropriateresources to maximize efficiency and effectiveness

Education is a key factor for human resource development.With good education, people can learn and earn money. Edu-cation programmes should be reviewed intensively and revised.There should be only 2 levels of nurses, first, a professionalnurse who studies for four years in the Bachelor of Scienceprogramme in nursing offered at the university level. Theadmission criterion is 12 years' schooling. Second, an auxil-iary nurse who studies for 2 years in the certificate AuxiliaryNursing programme offered at the school of nursing. Thereshould be a continuation Bachelor of Nursing Science sothat those from diploma school can upgrade their qualifica-tion. Auxiliary nurses should be able to continue their stud-ies in the Bachelor of Nursing Science as well. The Master ofScience programme in nursing should focus on advanced nurs-ing practice.

The INC has set standards and syllabi for all nursing pro-grammes. However, the roles and responsibilities of nurses ateach level should be clearly defined, and the curriculum struc-ture and training experience may have to be revised. Inspec-tions for nursing education institutions are being carried outby the INC. A workshop for inspectors should be held to dis-cuss common issues in nursing education, review the inspec-tion process and revise the inspection criteria and guidelines.The Thailand Nursing Council accredits nursing educationevery 1-4 years using criteria similar to the quality criteria usedby the QA system of higher education. The quality compo-nents are (i) vision, mission, objective, strategic and opera-tional plan; (ii) teaching, learning including educators, teach-ing learning activity, evaluation method; (iii) student devel-opment including financial support, student activities, alumni;(iv) research including a number of projects, grants, publica-tions, utilization; (v) community service including projects,outcome; (vi) cultural and environmental reservation; (vii)finance and budgeting; (viii) administration including lead-ership, supportive staff, management system; and (ix) QA sys-tem.

The quality of education depends on the quality of the edu-cators. The teacher for the BSc programme in nursing shouldbe at least a Master's degree holder and have teaching expe-rience as prescribed by the INC. The teacher at the graduatelevel should do research and publish at least one article everytwo years. Educators should coordinate closely with thenursing staff in hospitals to achieve education that is rele-vant to the needs of the service. Educators should collabo-

rate with the nursing service in research and nursing servicedevelopment. The teaching-learning activity should empha-size participatory learning and cultivation of lifelong educa-tion. Infrastructural needs such as a library, information tech-nology system and nursing laboratory should be of good qual-ity. In addition to learning activity in the classroom, studentsshould participate in extracurricular activities such as sports,music, student clubs, social work and community develop-ment projects. The curriculum should be revised regularly, andalumni and stakeholders should be involved in the process sothat the curriculum meets the demands of society.

A nursing development plan should be developed at eachnursing institution and at the national level. Effective nurs-ing education management requires planning to develop agroup of nursing education leaders with the involvement ofpolicy-makers.

14. Expand the role and authority of the IndianNursing Council on Nursing development by revisionof the Act, Restructuring and Networking

To maintain control of the quality of practice, the Indian Nurs-ing Council Act and regulation may be reviewed and revised.Standards of implementation should be enforced. Controlover the State Nursing Councils should be considered and aclear line of command initiated. Networking with other nurs-ing professionals is necessary and should be strengthened tocreate unity and power for nursing development. Strategiesshould be developed to work with the Ministry of Health &Family Welfare, Division of Nursing Service or other organi-zations both within and outside the country to improve thequality of nursing and of nurses themselves.

Recommendations

Policy level

1. Manpower planning and development for nursing mustbe an integral part of human resource planning of the healthsystem and should involve nursing experts and stakehold-ers.

2. A study on nursing manpower should be carried out to sup-port health manpower planning and development. Thiswould include projections on need, production, deploymentand utilization to respond to the required changes in healthcare reforms.

3. Adequate positions must be created for nurses working inhospitals and the community to facilitate population cov-erage, accessibility and quality care.

4. Budget allocation should be done for human resource devel-opment, research and infrastructure.

5. Pay scales, working conditions and incentive systems shouldbe improved

6. A policy on QA system for health care should be estab-lished and implemented.



Nursing education

1. Planning and development for nursing education must bedone at the national level. It should involve the nursing,professional organizations and stakeholders.

2. A collaborative research network should be established tostrengthen research in nursing.

3. The nursing curriculum at all levels should be reviewedand revised based on nursing competencies.

4. Nursing education should be upgraded to BSc, MSc andPhD levels.

5. The qualifications of the teaching faculty should be strength-ened, and facilities and equipment provided to facilitatequality nursing education.

6. Clinical practice and supervision should be strengthened.7. Nurses should be empowered so that they can be involved

in policy decisions by enhancing leadership, communica-tion and public speaking skills.

8. There should be conformity of nursing education standardswith QA systems.

9. APN programmes should be created to train nurse special-ists.

10. Creative, critical thinking and innovation in education andpractice must be encouraged.

Nursing service

1. Identify clearly the roles and responsibilities of nurses ateach level.

2. Establish a QA system for the nursing service and ensureimplementation of care standards and norms.

3. Create the post of Advanced Nurse Practitioner.4. Establish networking among nursing directors and educa-

tors to develop and implement nursing service planning anddevelopment.

5. Strengthen independent nurses' role in the health care serv-ice.

6. Demonstrate to the public the quality of nursing servicesat all levels.

7. Enhance continuing education for nurses to improve qual-ity care.

8. Plan to budget for appropriate equipment and facilities.9. Utilize research findings and evidence-based nursing prac-

tice.10. Establish training programmes for independent nurse prac-

titioners.11. Create positions for independent nurse practitioners.12. Submit a proposal to request for the improvement of work-

ing conditions, pay scales and incentives.13. Improve leadership and management skills of nurses by

continuing education, training or direct experience and amentor system.

Community health nursing

The NHP 2002 states that public health delivery centresneed to make a beginning by increasing the number of nurs-ing personnel. Therefore, to overcome the shortages and asper NHP 2002 plans, there is a need to modify nursing staffingnorms to provide essential health interventions to the com-munity health nursing services at various levels.

Professional organizations and regulation

1. Establish a system for renewal of licenses.2. Amend the Indian Nursing Council Act, 1947 for auton-

omy of functioning so that the INC can enforce the stan-dards for regulating nursing education and service..

3. Develop a comprehensive information system on nursingand midwifery in the areas of education, service, clinicalpractice and management of workforce.

4. Conduct an assessment of the nursing and midwifery man-power according to the need for education and service.

5. Develop an in-service education centre for nursing.6. Ensure active participation of nurses/midwives in multi-

disciplinary teams to advocate health regulation.7. Increase awareness among nurses and midwives on coun-

cils and regulations.8. Strengthen the infrastructure and manpower in the INC,

i.e. create positions of Joint Secretary and Deputy Secre-tary (Nursing).

9. Create positions of Nurse Registrar and Deputy Nurse Reg-istrar in the State Nursing Councils.

Conclusion

Nurses and midwives can make major contributions tohealth care development and achieve the Millennium Devel-opment Goals only if there is strong support at the policylevel to ensure policy implementation. Strong commitmentand close collaboration between professional organiza-tions, nursing service institutes and educational institutesare needed in planning, implementation and evaluation ofnursing workforce management. Maximal use of resourceswithin the country is essential. Best practices from each Stateneed to be shared, learned and recognized. In addition, nursesand midwives should commit themselves to continuouslyimprove the quality of nursing services by strengthening theircompetencies.



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N DEVELOPING COUNTRIES, HEALTH CARE HAS BEEN A NEGLECTED ISSUE INthe overall policy framework. With low public budgets, providing a universal socialsecurity cover to the population is difficult. On the other hand, households spend asizeable portion of their income on food items, leaving little for health care.

The single most vital component of health care is drugs, as they account for a sub-stantial part of household health expenditures. The market for drugs, particularly theallopathic category, has been growing rapidly in India-in terms of production, trade,investment and employment. However, the industry is characterized by supplier-induced demand (and therefore loss of consumer sovereignty), uncertain demand forthe patients, oligopoly elements, monopoly profit, etc. This has far-reaching impli-cations on the health care of the masses, whose essential problem lies in lack of pur-chasing power, lack of access and knowledge of modern medicine.

In view of the above, the specific objectives analysed in this chapter are the following: 1) Provide an estimate of drug expenditure patterns of both the government and

households across States;2) Examine the pattern of drug production;3) Investigate whether the Indian drug industry is highly concentrated across ther-

apeutic classes;4) Assess the price change in drugs over the years, under different policy regimes; 5) Examine issues relating to drug regulation;6) Critically evaluate public procurement of essential drugs, needed for the public

health system;7) Examine the impact of the patent regime since the 1970s and the likely conse-

quences of Trade-Related Intellectual Property Rights (TRIPS) in the post-2005period;

Analysis of state-wise drug expenditure in India

Share of household expenditure on drugs and medicines

Drugs and medicines form a substantial portion of out-of-pocket spending on healthamong households in India. Estimates from the National Sample Survey (NSS) for theyear 1999-2000 suggests that over 5% of the total consumption expenditure of house-holds went into health spending. However, there are significant variations among dif-ferent categories of the population. For instance, Table 1 shows that the share of healthin the total expenditure of households in rural areas is little over 6%, while that forurban India is little less than 5%. An analysis across States indicates that Kerala, whichis one of the highly advanced State in terms of health indicators, spends a relativelylarger share of household expenditure on health, both in rural and urban areas. Biharand Assam, which are the poorest States in the country, spend relatively less. Table 2depicts annual out-of-pocket health expenditure across states in India during 1999-2000.

Household drug expenditure in India

Estimates from the 55th consumption expenditure survey reveal that three-fourthsof the total out-of-pocket (OOP) health expenditure is spent on drugs, in rural andurban areas. Tables 3 and 4 show that drug spending is high in lesser-developed States

Access to Essential Drugs and Medicine

I


S E C T I O N I I I

S. SAKTHIVELINSTITUTE OF ECONOMIC

GROWTH,UNIVERSITY OF DELHI ENCLAVE,NORTH CAMPUS, DELHI 110007



SECTION III Access to Essential Drugs and Medicine

(except Himachal Pradesh) such as Orissa (90.56%), Bihar(88.26%), Rajasthan (87.67%), Jammu and Kashmir (87.09%)and Himachal Pradesh (87.14%). Economically advancedStates such as Maharashtra, Gujarat, Tamil Nadu and Kar-nataka reportedly spend less.

Estimates further show that out of per capita expenditure ofhouseholds amounting to Rs 577 spent annually on health inurban India, Rs 400 goes into buying drugs, accounting foraround 70%. In rural India, however, the share was 77%, whilethe spending pattern has been Rs 380 and Rs 295, respec-tively. Kerala, Haryana and Goa-all small States, appear to bespending over Rs 600 per annum per capita in urban areas whilehouseholds in poor States such as Bihar and Orissa spend rel-atively less. Tables 5 and 6 further indicate that out of Rs 400

� In 1999-2000, 5% of total household consumption expenditure

went into health spending; drugs accounting for the bulk of 4%.

� Rural households spend over 6% and urban households 5%.

� Kerala (4% of GSDP) is at the top of the spenders' list while Bihar

and Assam incur relatively less (<1% of GSDP).

Household health spending in India: Keystatistics

Box 1

�Household drug spending is high in less developed States- - Orissa

(90.64%); Bihar (89.14%); Rajasthan (89.43%); Jammu and Kash-

mir (90.39); while

� Advanced States spent less on drugs-Maharashtra (68.75%);

Gujarat (63.90%), Karnataka (68.75%) and Tamil Nadu (61.41%).

�Urban India spends around 70% of OOP expenditure on drugs and

77% in rural India.

� In India, the share of drugs in total outpatient treatment is 83%

in rural and 77% in urban areas.

� In India, the share of drugs in total inpatient treatment is 56% in

rural and 47% in urban areas.

Household drug expenditure

Box 2

� Approximately Rs 2000 crore incurred by both the Central and

State Governments during 2001-02.

� The share of drugs in the health budget in the Central Government

is around 12%.

� Southern States incurred the highest expenditure, with Kerala and

Tamil Nadu spending around 15% each.

� Assam, Bihar, Uttar Pradesh and Orissa spent about 5% or less on

drugs and medicines.

Government budget expenditure on drugs

Box 3

Table 1

Share of health to total household expenditure

State Rural Urban (in %) Aggregate

Andhra Pradesh 6.56 4.13 5.60

Assam 2.47 4.04 2.83

Bihar 4.40 2.96 4.15

Delhi 4.57 3.34 3.40

Goa 4.28 5.16 4.76

Gujarat 5.03 4.22 4.63

Haryana 6.99 6.56 6.84

Himachal Pradesh 5.25 3.91 5.04

Jammu and Kashmir 2.90 3.61 3.12

Karnataka 4.58 4.17 4.37

Kerala 7.79 7.15 7.59

Madhya Pradesh 6.05 5.25 5.74

Maharashtra 7.50 5.98 6.59

Orissa 5.46 4.51 5.24

Punjab 7.66 5.60 6.87

Rajasthan 4.79 4.70 4.76

Tamil Nadu 5.80 4.45 5.02

Uttar Pradesh 8.20 5.64 7.45

West Bengal 4.64 4.84 4.73

All India 6.05 4.91 5.57

Source: Extracted from the Unit-level Records of Consumer Expenditure Survey, 55th Round of NSS,1999–2000

State Rural Urban Aggregate GSDP/GDP % to GDP/GSDP

Andhra Pradesh 2105 872 2976 125236 2.38

Assam 301 143 444 29263 1.52

Bihar 1609 234 1842 72083 2.56

Delhi 51 706 757 52914 1.43

Goa 35 51 86 6749 1.28

Gujarat 1065 882 1948 106427 1.83

Haryana 901 452 1353 48270 2.80

Himachal Pradesh 262 37 299 11983 2.50

Jammu and Kashmir 182 104 286 13961 2.05

Karnataka 1008 907 1915 96179 1.99

Kerala 1834 763 2597 62514 4.15

Madhya Pradesh 1418 790 2207 99322 2.22

Maharashtra 2639 3154 5793 241410 2.40

Orissa 781 198 979 36283 2.70

Punjab 1135 522 1656 62361 2.66

Rajasthan 1413 654 2067 80019 2.58

Tamil Nadu 1343 1430 2773 126500 2.19

Uttar Pradesh 6323 1804 8127 187641 4.33

West Bengal 1516 1222 2738 127933 2.14

All India 27280 15576 42856 1761838 2.43

Note: Applied per capita figures to mid-year survey population of CensusSource: Extracted from the Unit-level Records of Consumer Expenditure Survey, 55th Round of NSS,1999–2000

Table 2

Annual household out-of-pocket healthexpenditure (1999–2000) (Rs in crore)


Access to Essential Drugs and Medicine SECTION III

spent on drugs in urban India, a substantial part of it is by wayof outpatient payments totalling around Rs 325 and the remain-der (about Rs 75) is on account of inpatient payments. A sim-ilar pattern can be observed in rural India. Out of the total ofRs 295 spent on drugs annually, inpatient expenses accountedfor Rs 45, and outpatient expenses were about Rs 250.

Results from the 55th National Sample Survey (NSS) con-sumption expenditure survey also reveal that the share of drugsin total outpatient treatment is extremely high. In rural India,the share of drugs is observed to be the highest, accountingfor nearly 83%, while in urban India, this worked out to77%, as depicted in Tables 2 and 3. In fact, in a few states,the share of drugs is more than 90% (Bihar, Himachal Pradesh,Jammu and Kashmir, Orissa and Rajasthan in rural areas andHaryana and Orissa in urban areas). On the other hand, theshare of drugs in inpatient treatment is not as high as in theoutpatient category. The respective share of drugs (inpa-tient) in rural and urban India was roughly 56% and 47%.

It is interesting to note that in rural India, if both inpatientand outpatient expenses are taken together, the share of drugsto total household expenditure accounts for roughly around5% while in urban India, it is around 3.5%. Overall, as indi-cated earlier, it appears that little over 4% of the OOP spend-ing of households goes into buying drugs.

Government expenditure on drugs

The magnitude of expenditure incurred on drugs by house-holds does not show a similar pattern in public expenditure.The component of drugs and medicines in the overall budgetof both the Central and State Governments is only a minorshare, as salaries account for the bulk of the health sectorexpenditure in India. The analysis involves 16 major IndianStates, which accounts for roughly 85% of the total healthbudget in the country.

The expenditure pattern on drugs of the State Govern-ment, as depicted in Table 7 shows that there are wide-rang-ing differences across States, from as little as less than 2% inPunjab to as much as 17% in Kerala during 2001-02. Thesouthern States such as Kerala and Tamil Nadu spend over15% of their health budget on drugs. Many backward States,both in economic and health indicator terms, incurred thelowest expenditure on drugs. States such as Assam, Bihar, U.P.and Orissa spent about 5% or less of their health budget ondrugs and medicines.

It appears from the analysis that approximately Rs 2000crore was spent in India by the State and Central Governmentstogether on procuring drugs and medicines during 2001-02.The Central Government’s share of drugs in its total healthbudget is around 12%. In all, roughly 10% of the health budgetgoes into procuring drugs in India.

State Inpatients Outpatients Share of

Drugs to Inp to Drugs to Out to Drugs

Inpatients OOP outpatients OOP in OOP

Andhra Pradesh 52.66 24.06 78.68 75.94 72.42

Assam 46.31 28.66 80.42 71.34 70.65

Bihar 68.46 11.48 91.83 88.52 89.14

Delhi 67.02 15.17 60.90 84.83 61.83

Goa 58.72 24.26 85.75 75.74 79.19

Gujarat 44.11 35.29 74.69 64.71 63.90

Haryana 41.45 25.90 89.16 74.10 76.80

Himachal Pradesh 68.94 25.37 95.76 74.63 88.96

Jammu and Kashmir 77.78 11.76 92.07 88.24 90.39

Karnataka 50.18 26.31 75.39 73.69 68.75

Kerala 49.42 34.21 83.48 65.79 71.83

Madhya Pradesh 67.53 20.52 84.83 79.48 81.28

Maharashtra 52.92 26.70 74.52 73.30 68.75

Orissa 78.88 15.88 92.86 84.12 90.64

Punjab 53.62 23.96 87.62 76.04 79.47

Rajasthan 71.99 20.75 93.99 79.25 89.43

Tamil Nadu 40.45 25.67 68.65 74.33 61.41

Uttar Pradesh 70.25 13.09 89.25 86.91 86.76

West Bengal 58.72 17.55 75.91 82.45 72.89

All India 56.04 21.52 83.17 78.48 77.33

Source: Extracted from the Unit-level Records of Consumer Expenditure Survey, 55th Round of NSS, 1999–2000

Table 3

Share of drugs in inpatient and outpatientexpenditure of rural households (in %)

State Inpatients Outpatients Share of

Drugs to Inp to Drugs to Out to Drugs

Inpatients OOP outpatients OOP in OOP

Andhra Pradesh 40.20 19.67 78.99 80.33 71.36

Assam 45.13 27.35 77.29 72.65 68.49

Bihar 64.16 11.80 84.57 88.20 82.16

Delhi 57.72 37.09 81.52 62.91 72.69

Goa 58.07 34.29 82.12 65.71 73.87

Gujarat 50.34 30.02 77.80 69.98 69.56

Haryana 46.99 34.27 91.55 65.73 76.28

Himachal Pradesh 80.49 24.04 72.46 75.96 74.39

Jammu and Kashmir 62.07 23.55 87.26 76.45 81.33

Karnataka 39.27 32.70 64.07 67.30 55.96

Kerala 40.97 37.21 77.73 62.79 64.05

Madhya Pradesh 60.63 22.03 83.18 77.97 78.21

Maharashtra 48.21 30.18 63.78 69.82 59.08

Orissa 83.26 21.05 92.13 78.95 90.26

Punjab 31.89 26.22 88.83 73.78 73.90

Rajasthan 61.27 18.05 88.86 81.95 83.88

Tamil Nadu 36.63 31.63 72.92 68.37 61.44

Uttar Pradesh 59.61 17.00 85.95 83.00 81.47

West Bengal 39.18 22.72 76.21 77.28 67.80

All India 47.34 26.64 77.10 73.36 69.18

Source: Extracted from the Unit-level Records of Consumer Expenditure Survey, 55th Round of NSS,1999–2000

Table 4

Share of drugs in inpatient and outpatientexpenditure of urban households (in %)


Indian pharmaceutical sector: An overview

The pharmaceutical industry has witnessed tremendous trans-formation since the 1950s. The size of the Indian pharma-ceutical industry, both bulk drugs and formulations is esti-mated at Rs 35,471 crore in 2003-04 (IDMA 2004), which isjust over 1% of the global market (ICRA 1999). This is againstthe value of the production of pharmaceuticals of a mere Rs10 crore in 1950 (Narayana 1984). At present, there are about6,000 units operating in this sector (if only bulk drugs, for-mulations and large parenterals are taken into account)(Mashelkar Committee 2003). Investment in the industry hassteadily grown over the years from a mere Rs 23.64 crore in1950 to a moderate Rs 500 crore in 1980 and went up con-siderably to reach around Rs 4000 crore in 2003.

Propelled by the booming demand, the production of phar-maceuticals has registered a tremendous increase over the years.The growth rate of bulk drugs recorded in the 1970s and 1990sis almost double-around 20%-that of the production regis-tered for the 1980s is evident from the Table 8. The output offormulations has seen a phenomenal increase during the periodunder consideration but is less than 4% as against bulk drugs,in both the 1970s and 1990s. The 1980s is the only period inwhich formulation growth had outperformed the growth ofbulk drugs by a marginal 1%.

The massive growth of the pharmaceutical industry could be

attributed to a few domestic and international developmentsthat took place particularly since the 1950s. At the global level,the industry in general was then experiencing a major overhaulby vertically integrating operations such as production, mar-keting and research. The protection given to the pharmaceuti-cal industry through patents and brand names saw many topcompanies switch over to the production of specialty medicines.


Fig 1

Trends in the production of bulk drugs andformulations in India since the 1970s

State Inpatient Outpatient Aggregate

Drugs Total Drugs Total Total drugs OOP

Andhra Pradesh 49.47 93.94 233.34 296.57 282.81 390.51

Assam 17.70 38.23 76.54 95.18 94.25 133.41

Bihar 17.00 24.83 175.86 191.52 192.86 216.35

Delhi 53.44 79.74 271.55 445.92 324.99 525.66

Goa 73.50 125.16 335.05 390.74 408.55 515.90

Gujarat 56.17 127.34 174.42 233.52 230.59 360.86

Haryana 67.06 161.81 412.81 463.01 479.88 624.83

Himachal Pradesh 86.09 124.87 351.80 367.39 437.89 492.26

Jammu and Kashmir 23.15 29.76 205.54 223.25 228.69 253.01

Karnataka 39.11 77.95 164.62 218.37 203.73 296.31

Kerala 134.07 271.31 435.63 521.82 569.70 793.13

Madhya Pradesh 43.14 63.88 209.94 247.49 253.07 311.37

Maharashtra 68.84 130.09 266.10 357.07 334.94 487.16

Orissa 32.16 40.77 200.56 215.99 232.72 256.76

Punjab 92.89 173.23 481.69 549.77 574.58 723.01

Rajasthan 51.21 71.14 255.45 271.78 306.66 342.92

Tamil Nadu 39.57 97.84 194.50 283.31 234.07 381.15

Uttar Pradesh 45.70 65.05 385.26 431.68 430.95 496.72

West Bengal 27.92 47.55 169.56 223.38 197.48 270.94

All India 45.91 81.93 248.53 298.83 294.44 380.76

Sources: Extracted from the Unit-level Records of Consumer Expenditure Survey, 55th Round of NSS, 1999–2000

Table 5

Percapita annual drugs and other medical expenditure (rural)(Rs.)



State Inpatient Outpatient Aggregate

Drugs Total Drugs Total Total drugs OOP

Andhra Pradesh 34.14 84.91 273.94 346.81 308.08 431.72

Assam 55.39 122.74 251.96 325.99 307.35 448.73

Bihar 19.31 30.10 190.20 224.90 209.51 255.00

Delhi 127.95 221.68 306.51 375.97 434.46 597.65

Goa 162.98 280.65 441.53 537.69 604.51 818.34

Gujarat 76.87 152.70 276.92 355.92 353.80 508.62

Haryana 129.17 274.87 482.63 527.21 611.80 802.08

Himachal Pradesh 128.62 159.80 365.97 505.06 494.60 664.86

Jammu and Kashmir 64.54 103.98 294.49 337.48 359.04 441.46

Karnataka 68.36 174.08 229.55 358.29 297.91 532.37

Kerala 142.83 348.62 457.30 588.28 600.13 936.90

Madhya Pradesh 66.59 109.83 323.41 388.81 390.00 498.64

Maharashtra 118.66 246.14 363.23 569.46 481.89 815.60

Orissa 66.51 79.89 276.13 299.70 342.64 379.60

Punjab 56.31 176.58 441.35 496.85 497.66 673.43

Rajasthan 57.80 94.34 380.54 428.23 438.34 522.57

Tamil Nadu 65.29 178.24 280.93 385.28 346.22 563.52

Uttar Pradesh 55.27 92.73 389.11 452.72 444.38 545.45

West Bengal 50.21 128.13 332.13 435.78 382.34 563.91

All India 72.76 153.68 326.27 423.16 399.02 576.83

Sources: Extracted from the Unit-level Records of Consumer Expenditure Survey, 55th Round of NSS, 1999–2000

Table 6

Percapita annual drugs and other medical expenditure (urban)

(Rs in lakh) Drug Expenditure as %

State Drugs Materials and supplies Total Health Expenditure (Rev.) of Health Expenditure

Andhra Pradesh 7923.09 4781.45 12704.54 131424.08 9.67

Assam 0.00 1530.10 1530.10 32690.82 4.68

Bihar 1996.90 206.29 2203.19 71348.49 3.09

Chhattisgarh 1822.47 680.22 2502.69 22587.10 11.08

Gujarat 1253.76 1440.06 2693.82 71547.95 3.77

Haryana N.A. 3096.12 3096.12 31470.98 9.84

Karnataka 6927.17 856.82 7783.99 98633.19 7.89

Kerala N.A. 12420.68 12420.68 72931.59 17.03

Maharastra 10.00 20295.91 20305.91 178379.51 11.38

Madhya Pradesh 3965.86 3956.04 7921.90 66689.30 11.88

Orissa 1768.98 361.30 2130.28 42135.78 5.06

Punjab N.A. 916.32 916.32 61826.45 1.48

Rajasthan 3952.80 5092.25 9045.05 97311.61 9.29

Tamil Nadu 16428.68 1668.57 18097.25 118432.85 15.28

Uttar Pradesh 5938.25 1166.04 7104.29 135578.81 5.24

West Bengal 5005.25 793.23 5798.48 131948.35 4.39

Central Govt.* 72649.23 72649.23 597700.00 12.15

All India* 56993.21 131910.63 188903.84 1962636.86 9.63

Note: Many states report drug expenditure under the category of Materials and supplies.Materials and supplies include hospital accessories, beding cloth, materials supply, laboratory cahrges. charges, Others and X-ray materials. Here we have included materials supply only. * Includes only 16 states total reported in the table, which account for around 85%.** The drug budget for the Central Government includes expenditure incurred on four National Programmes—Blindness Control Programme, TB Programme, Leprosy Programme and Vector Borne Disease ControlProgramme. Source: Budget documents, respective State and Central Government

Table 7

State-wise government drug expenditure in India (2001–02)

(Rs.)



This resulted in the invention and introduction of products ensur-ing high growth and monopoly profits. Radical invention andintroduction of new drug technologies stimulated the industryto transform massively. Unprecedented attention to ‘wonderdrugs’ through the magic-bullet technology shifted the focusfrom treating the symptoms to healing the disease itself. Onthe domestic front, the government intervened by establishinga few public-owned life-saving and essential drugs-producingcompanies. The Indian Patents Act, 1970, the FERA (ForeignExchange Regulation Act), 1973, acted as a boost to the domes-tic growth of this all-important industry.

Skewed production priorities

Even though drug production witnessed a phenomenal upsurgeduring the past three decades of the century, the productionand sale of products also reflected market potential. [How-ever, the market potential for drugs is largely induced-throughmarketing, advertising and distributional network.] Thus, drugproduction mainly catered to those who have enough pur-chasing power.

Table 9 above exposes skewed production priorities by thedrug industry. Irrational, non-essential and hazardous drugs

have flooded the market. Take for instance, the top twenty-five formulations sold in the Indian market in 1999. Of thetop 10 products, two belong to the category of irrational vita-min combination and cough syrup while the other drug is auseless liver drug. Ten of the top 25 products sold in India in1999 belonged to either one of these categories: blood tonic,cough expectorant, non-drug, analgesics, nutrients, liver drug,etc. which are either hazardous, non-essential or irrational.These ten inessential and irrational drugs together accountedfor nearly 10% of the total value of 300 products.

Table 10 clearly sums in part the changing pattern of drugrequirements according to the shifting disease profile of India.Lifestyle drug categories such as cardiovascular drugs, hor-mones, nutraceuticals are growing in magnitude with everypassing year. These categories together accounted for overone-fifth of the total pharmaceutical sales in 2002.

Expensive pre-digested nutritious supplements such as pro-tein foods, malt tonics, various vitamins, calcium, haemo-globin, iron, etc. form a notable share of the total market salesof drugs.

Similarly, dehydration caused by diarrhoea, particularly inchildren, also accounts for innumerable prescriptions, althoughdehydration can be easily treated with the combination ofsimple household items such as water, salt and sugar or oralrehydration solution (ORS). Similarly, the share of the antitu-berculosis drug market accounts for a meagre 2%, while a sig-nificant burden of disease and death in India is caused bytuberculosis.

In this context, it is interesting to note the contributionmade by different players in the market. Table 11 provides an

Table 8

Growth rate of bulk drugs and formulationsproduction in India since the 1970s

Growth of production 1970s 1980s 1990s 2000–03 1970–2003

Bulk drugs 20.28 10.08 19.49 19.76 12.38

Formulations 16.88 11.07 16.42 14.68 11.05

Total production 17.39 10.91 16.95 15.72 11.17

Note: All values are percentages. Growth rates refer to compound growth rates based on current prices.Source: Computed on the basis of IDMA, various issues.

Table 9

Pattern of pharmaceutical sales in India, 1999

Product Sales Market Product

rank Products (In crore) share(%) description

1 Becosules 79.42 1.39 Irrational vitamin combination

3 Corex 61.27 1.07 Irrational cough mixture

9 Liv-52 62.17 1.09 Useless liver drug

11 Dexorgange 47.40 0.83 Blood tonic

12 Digene 46.69 0.82 Needless antacid

17 Combiflam 43.05 0.75 Irrational analgesic combination

20 Polybion 40.76 0.71 Irrational vitamin combination

21 Glucon-D 39.66 0.69 Useless nutrients

22 Evion 39.19 0.69 Irrational vitamin combination

25 Revital 38.98 0.68 Oral ginseng tonic

Source: Compiled from ORG-Retail Sales Audit, June 1999

Market share of drugs by therapeutic segment (2002)

( Rs crores)

Therapeutic Segments Total retail sales Percent to total market

Alimentary system 2137 12.50

Cardiovascular system 2182 12.76

Central Nervous system 1157 6.76

Musculoskeletal disorders 1367 7.99

Hormones 2362 13.81

Genitourinary system 738 4.31

Infections and infestations 3726 21.79

Nutraceuticals 463 2.71

Respiratory system 1734 10.14

Eye 273 1.60

Allergic disorders 31 0.18

Skin 911 5.32

Metabolism 21 0.12

Total market 17,102 100.00

Source: Calculated from ORG-Retail Sales Audit, June 1999Note: The above analysis is based on the leading 300 products reported in the source. The value ofthese leading products accounts for 46.81% of the total market value.

Fig 10



analysis based on the top 50 products for the period 1985-86 and 1998-99. While examining the leading 50 formula-tions, only products that fall under the categories men-tioned in Table 10 are taken up for consideration here whilethe rest are excluded from the analysis.

The dominant proportion of transnational corporationsin the production and sale of inessential and irrational com-binations of drugs is apparent from Table 11 wherein vita-mins, rubs and balms, and cold and cough preparationsaccount for 100% in the production in 1998-99, mirror-ing almost similar trends witnessed in 1985-86. The strengthof domestic Indian companies lies in categories such asantibiotics, anti-tuberculosis and antiparasitic, anti-infec-tive and antiseptic preparations. The analysis clearly demon-strates that while multinationals concentrate on high-value,low-volume products, the domestic industry, on the otherhand, concentrates on high-volume, low-value products.The former promotes brand names while the latter by genericbrands.

Trends in the pharmaceutical trade

The role of the drug trade assumes importance, as India washistorically dependent on drug imports when the domesticindustry was in a nascent stage. The import of bulk drugshas been considerable and increased during the 1950s and1960s, as formulations were prepared with basic bulk drugs,mainly by transnational companies. For instance, the importof bulk drugs and formulations registered an upward trendfrom Rs 13.17 crore in 1963-64 to Rs 37.54 crore in 1973-74. Nevertheless, export marked a sharp and significant increaseduring this period from a meagre Rs 2 crore to Rs 37.54crore, thereby helping to reduce the trade gap in the phar-

maceutical industry to a marginal Rs 4 lakh during the period. But the strength of the Indian pharmaceutical trade lies in

the formulations market due to its cost advantage. Comparedto bulk drugs, the export of formulations steadily increasedfrom nearly Rs 35 crore in 1980-81 to around Rs 413 crore in1990-91 to a staggering Rs 3038.5 crore in 1998-99. Theexport of Indian pharmaceutical products witnessed a quan-tum jump in the 1990s; the growth rate was 32.85% (Table12). The export of bulk drug items, however, has been on avery small scale for a long period in the history of the drug

trade. However, trends in the late 1990s indicate a reversal ofthis trend. The amount of exports during 1998-99 was esti-mated at about Rs 2400 crore. Indian domestic pharmaceu-tical companies have made major inroads into the highly com-petitive generic segments of the world market. It is this mar-ket which is fetching a high value for Indian companies and

Table 11

Contribution of essential and inessential drugs by domestic and multinationals firms

1985-86 1998-99

Formulations Top 50 companies MNCs Domestic companies Top 50 companies MNCs Domestic companies

Total turnover 1008.7 573.2(56.82) 435.5(43.17) 2113.29 1146.16(54.24) 967.12(45.76)

Turnover of few inessential, irrational drugs 276.2 195.1(70.7 ) 81.1(29.3) 591.68 511.97(86.53) 79.71(13.47)

Antacid, antiflatuent 30.0 19.2(64.0) 10.8(36.0) 157.50 77.99 (49.45) 79.71 (50.55)

Vitamins 91.2 76.1(83.4) 15.1(16.6) 260.35 260.35 (100) _

Anti-anaemia preparation 42.0 18.5(44.1) 23.5(55.9) 47.40 47.40(100) _

Rubs and balms 12.3 12.3(100) _ 32.09 32.09(100) _

Cough and cold preparations 48.7 37.5(77%) 11.2(23) 94.14 94.14(100) _

Turnover of few essential drugs 327.8 128.8 (39.3) 199(60.7) 690.68 198.34(28.72) 492.34(71.28)

Antibiotics 225.4 81.1(36) 144.3(64) 522.51 129.08 (24.70) 393.43 (75.30)

Anti-tuberculosis drugs 20.6 4.0(19.4) 16.6(80.6) 38.88 _ 38.88(100)

Vaccines 1.5 0.5(33.3) 1.0(66.7) 32.59 32.59(100) _

Anti-diabetic drugs 10.4 9.4(90.4) 1.0(9.6) 36.67 36.67(100) _

Antiseptic, anti-infective 21.5 10.8(50.2) 10.7(49.8) 29.14 _ 29.14(100)

Antiparasitic (amoebicides) 16.7 5.8(34.7) 10.9(65.3) 30.89 _ 30.89(100)

Note: Figures in parentheses denote the percentage share between domestic and multinational corporations. The above figures relate only to the top 50 products analysed among 300 products listed in the source.Source: Computed from ORG-Retail Sales Audit, March 1986 and June 1999

(Rs in crore)

Table 12

Growth of trade in pharmaceuticals in India inthe 1980s and 1990s

Growth of pharmaceutical trade 1980s (%) 1990s (%)

Bulk drugs export 50.58 24.20

Formulations export 19.54 30.84

Total pharmaceutical export 30.31 32.85

Bulk drugs import 18.13 27.71

Formulations import 34.54 27.72

Total pharmaceutical import 20.17 32.97

Note: Growth rate indicates the compound growth rateSource: Worked out from IDMA and OPPI Annual Reports



steadily building an excellent infrastructure network aroundthe world.

Bulk drug import has been a significant item in the basketof total imports in the 1950s and 1960s. Although the extentof its significance has undergone tremendous change, bulkdrug still accounts for one-half to one-third of the total bulkdrug consumption. In 1980-81, against the total bulk drugproduction of Rs 240 crore, import amounted to nearly Rs 90crore. Further, trade figures reveal that during 1998-99, thetotal import of bulk drugs was roughly Rs 2000 crore as opposedto the domestic production of around Rs 3200 crore. FromTable 11 it is apparent that the total import growth calcu-lated for the 1990s point to a growth rate of around 33%.

Concentration in Indian Drug Industry

A casual observer might assume from Table 13 that the Indianpharmaceutical market is extremely competitive as even thetop most firm could not garner more than 7% of the totalmarket share, while the share of the top 10 companies is onlyaround 30% (ICRA 1999). A comparative analysis of Table 13 reveals some interesting insights. Over a span oftwo decades, the contribution made by the top 10 playershave come down from around 40% in 1976 to 30% in 1998.The other point that needs to be noted is that a majority ofthe leading companies in 1976 (7 out of 10) were multina-tional drug corporations. A complete reversal of the trendwas seen in 1998, wherein 7 out of 10 top companies weredomestic ones.

However, a simple analysis of the above pattern is mislead-ing because the market for drugs is not a homogeneous, sin-gle-product category but a multiproduct one. Thus, themarket for pharmaceuticals can be subgrouped into a largenumber of independent submarkets (characterized by low

cross-elasticities of demand). This is because the medicinesprescribed for cardiovascular disease cannot be administeredto a patient suffering from cancer. Consequently, one can-not observe drug manufacturers competing on an industry-wide basis. The following paragraphs would give a fair ideaof the concentration in the Indian pharmaceutical market,which is measured by (i) the dominant market share held bya handful of companies, in terms of sales, and (ii) dominanceof a small number of products within each therapeutic class.

Table 14 provides information on the market share enjoyedby leading drugs under each therapeutic class. It also showsthe market share of drug companies manufacturing top prod-ucts. Table 14 displays an extreme concentration persistingacross therapeutic groups in the Indian drug industry. Adetailed analysis by various therapeutic segments of drugsdemolishes the claim of the industry lobby that competitionprevails in the industry. The number of drugs covered in theORG-MARG database under all the therapeutic segments for1998-99 is the top 300 products, which is close to half of thetotal retail market in India. This is against an estimated 20, 000 drugs in the Indian drug market. The table apparentlyestablishes the supremacy of a few companies and corre-spondingly a handful of its drugs in each therapeutic cate-gory. Out of 32 therapeutic classes considered in the analy-sis, in 19 markets, four and less than four companies retaindominant shares. Their respective market shares range from30% to more than 90% in a few cases. For instance, the mar-ket for streptomycin points to an extreme concentration,wherein just one company commands the entire market(93.27%) while the class of vaccines, rubs and other inhalants,antiseptics and other penicillin markets are held by 3-4 com-panies, respectively. The share of top products also follows asimilar pattern in various therapeutic groups.

Closely followed by these patterns, another 13 therapeuticsegments show less extreme concentration. Included in thiscategory are 5-8 companies whose market share in eachtherapeutic market is in the range of 30%-70%. Another note-worthy pattern that emerges from Table 14 is that the ele-ment of oligopoly cuts across the entire spectrum of thetherapeutic class, whether it is the case of essential drugs likeantibiotics, anti-tuberculosis drugs or inessential drugs suchas vitamins, cough and cold preparations, tonics, etc. The drugindustry is extremely concentrated, debunking the theory thatthe drug market in India is competitive.

Price, procurement and regulation ofessential drugs

Drug price control in other countries

Worldwide, drug prices are subject to controls and regula-tions. A host of policy instruments are exercised to rein in drugprices from increasing to unreasonable levels. Such controlstake the following forms, either singly or in combinationwith more than one instrument: cap on mark-ups, fixedmargins to wholesalers/pharmacists, price freezes, reim-bursements, reference pricing, contributions to insurance pre-

Table 13

Retail market share of top 10 pharmaceuticalcompanies in India

Company Market Company Market

share 1976 (%) share 1998(%)

Sarabhai 7.1 Glaxo-Wellcome 6.7

Glaxo 6.2 Cipla 4.2

Pfizer 5.9 Ranbaxy 3.5

Alembic 4.2 Hoechst-Marrion-Roussel 3.2

Hoechst 3.6 Torrent pharmaceuticals 2.4

Lederle 2.5 Alembic 2.4

Parke Davis 2.3 Wockhardt-Merind 2.3

Abbott 2.3 Lupin Labs 2.3

Ciba-Geigy 2.3 Knoll pharmaceuticals 2.3

Sandoz 2.2 Pfizer 2.3

Total for above 39.6 Total for above 31.6

companies companies

Source: Figures for 1976 are adapted from Singh (1985), while those for 1998 have been compiled fromPROWESS Database, Centre for Monitoring Indian Economy (CMIE), Mumbai, 2000



mium, patient copayments, generic substitution, ceiling onpromotional expenditure, differential value added tax ondrugs, etc.

Governments in various countries undertake cost studiesto determine drug prices. While criteria vary from one coun-try to another, countries largely follow comparable methodsof pricing between a new product and that of an existingproduct in a similar therapeutic class. For new ‘breakthrough’products, prices are worked out based on therapeutic merit.France, Canada, Egypt, Mexico follow this pattern of pricefixation.

Most countries have some form of reimbursement mecha-nism to purchase drugs for the benefit of patients. France reg-ulates margins allowed for wholesalers and pharmacists of

reimbursable drugs. In fact, in France, 91% ofmedicines sold by retail drug stores are on thereimbursable list. All reimbursable drugs in Italyare price controlled. Reimbursed generic pricesare allowed to be sold 20% below the originalprice. In Italy the prices of prescription drug thatare reimbursed cannot exceed the ‘European aver-age’ price. In case the reimbursed price of a drugexceeds the European average, the product underquestion will automatically be removed from thereimbursement list. However, non-reimbursabledrug prices can be changed once a year.

Reimbursement drug prices are controlled by areference pricing system in Germany, althoughprescription drug prices are allowed to be changedfreely. Reference pricing is one in which drugs thatare therapeutically equivalent fall into one classand are reimbursed at similar levels. The differ-ence that arises between the reference and mar-ket price is to be paid by patients. All prescriptiondrugs in Japan are effectively on the reimburse-ment list. Reimbursement drug prices are subjectto price control based on the average level of pricesof similar categories. Britain allows for reim-bursement on all drugs unless they are on the neg-ative list. Although newly introduced prescriptiondrugs ones are not controlled at the launch ofthe new product, generic prices are subject to con-trols.

Interestingly, Spain controls even the launchprice of prescription drugs. The criteria for pricecontrol are based on cost of production, profitallowance and anticipated volume of sales. Oneof the highlights of the health care scheme in Spainand Switzerland is that a strict monitoring of thedoctor’s prescribing behaviour is undertaken andthose who are found to indulge in high prescrib-ing are warned by the government. Switzerlandallows manufacturers to freely fix prescriptiondrug prices, which are not on the reimbursablelist. On the other hand, the reimbursable genericdrug price is set at below 25% of the original.

Over-the-counter (OTC) prices are generally freeof price control in most countries. Although drug prices arelargely control-free in the US, the government fixes a speci-fied discount on the market prices of those drugs that are soldto Medicaid programmes. Reimbursement of drug prices inthe US varies, since pharmacies have different agreementswith various insurance companies.

Fixing margins on the profit of pharmaceutical companiesalso forms part of drug price control/management. Egypt setsa maximum limit of 20% and 12% on profit to manufactur-ers of locally produced drugs and imported drugs, respectively.The respective profit margins for wholesalers and retailersare 7% and 20%. While manufacturers are allowed a marginof 7%–10% in Mexico, wholesalers can retain up to 18.5%.Pharmacists in Mexico are provided two options of margins-

Table 14

Concentration in the Indian drug industry

Therapeutic group Leading products Number Number

Amount of sales % of products of companies

(Rs in crore)

Chloramphenicol* 20.84 43.41 1 1

Streptomycin* 14.06 93.27 1 1

Mineral supplements 49.15 39.00 2 2

Tonics 25.76 31.00 2 2

Laxatives 22.81 32.00 2 2

Anticoagulants 21.61 32.43 2 1

All other antibiotics* 39.22 35.62 2 2

Vaccines 66.96 74.65 3 3

Trimethoprim combinations* 65.74 65.31 3 3

Systemic corticosteroids 122.77 71.00 4 4

Antiepileptics 64.05 44.27 4 4

Rubs, other inhalants 100.19 83.41 4 4

Antidiabetic drugs 108.78 38.34 4 4

Antispasmodics, etc. 51.18 41.30 4 4

Antiseptics, disinfectants 71.47 78.63 4 4

Other penicillins* 52.97 86.53 4 3

Sex hormones 73.71 31.23 5 4

Topical corticosteroids 115.22 42.00 6 5

Cough preparations 73.05 41.23 6 6

Tuberculostatics 153.58 44.69 6 4

Tetracyclines and combinations* 79.69 57.73 6 6

Hypotensives 92.56 36.84 7 7

Antiasthmatics 119.61 45.88 7 4

Vitamins 296.91 38.87 8 6

Cardiac therapy 135.96 31.64 8 8

Cold preparations 197.30 41.65 8 8

Antacid, antiflatulents, etc. 158.05 55.71 8 5

Anti-inflammatory, anti-rheumatics 255.04 41.09 8 8

Analgesics 150.17 51.28 8 8

Ampicillin/amoxycillin* 250.37 38.92 8 8

Cephalosporins* 297.41 43.3 8 5

Macrolides and similar preparations* 179.10 69.37 8 6

* broad antibiotics categoryNote: Percentages indicate the value of leading products to total sales in each therapeutic group.Source: Calculated from ORG – Retail Sales Audit, June 1999



one for drugs launched before 1975 and those post-1975.Margin ceilings also exist in Spain with wholesalers availing12.4% and pharmacies getting 43.5% of manufacturers’ retailprice. Switzerland allows wholesalers to avail of a margin inthe range of 11.1% to 17%, depending on the drug price.Margins allowed for pharmacies are in the range of 26% to70%. The margin allowed for wholesalers by the manufac-turer is only around 2% and for pharmacies it is about 15%in the US.

Drug prices in many countries are linked to a ceiling onpromotional spending by pharmaceutical firms. France leviesan impost ranging between 9%and 20% on the proportionof promotional expenditure to sales of drug companies. Britainrestricts promotional spending to a percentage of drug salesto the National Health Service. Spain places a ceiling on thepromotional expenditure for a drug at 12%-14% of the pro-ducers’ sale price.

The health care system in developed market economies hasevolved in such a way that patients need not bear the entireamount OOP. The system is funded mainly byemployee/employer contributions towards insurance pay-ments and patient copayments. France has a system in whicheven copayments are borne either by private or by non-profitinsurance plans. In Italy, however, patients are required topay 50% of the price, depending on the category of drug.While half of Spain’s universal coverage of health care essen-tially comes from taxation, the rest is contributed by socialsecurity schemes, copayments and other OOP payments.

Price control/management becomes cumbersome and impos-sible when the number of formulations is very large. Egyptsuccessfully manages this impossible scenario by approvingonly 4000 medicines. In fact, the number of manufacturersproducing a drug is restricted to four or five. For a new entrantbeyond this level, the new firm is permitted to sell the drug30% below the average price of the drug sold in the market.Similarly, to ensure the rational use of drugs, Mexico encour-ages single-ingredient formulations.

Prescription drugs attract a value added tax (VAT) of only

6% while OTC drugs are imposed a tax of 17.5% in the Nether-lands. Switzerland imposes only 2% VAT on drugs. In Indone-sia, VAT is fixed at 10% of manufacturers’ selling price excepton drugs that are on the essential drugs list (GOI 1999).

The drug price control system in India

In the post-independence period, statutory control on drugswas first introduced in 1962. However, owing to criticism fromthe industry, the Government made changes in the Drug PriceControl Order. Subsequently, the Government identified alist of 18 essential drugs and referred them to the TariffCommission. The Tariff Commission was asked to go intothe various aspects of the cost structure of these essential life-saving drugs and asked it to recommend reasonable prices.Realizing the importance of checking the prices of drugs fromescalating to phenomenal heights, the Drug Price ControlOrder, the first of its kind with a thorough analysis, wasintroduced by the Government of India in 1970. The PriceControl Order was meant to keep the prices of drugs at afford-able limits to the consumers and at the same time ensurethat producers received reasonable returns. The Order cap-tured 347 bulk drugs under its net, which were placed in var-ious categories. The minimum percentage of profit marginwas granted to different categories and producers were allowedto charge a maximum amount of post-manufacturing expenses.The other vital feature of this Order relates to the stipulationof minimum ratio of bulk drugs to formulations.

Objectives of drug price control

A broad-based drug policy was formulated based on HathiCommittee Report of 1975. Based on Hathi Committee’s rec-ommendations, the Government announced Drug (Price Con-trol) Policy, 1979. Some of the key objectives of the Policy were:� to ensure adequate availability of drugs� to provide drugs at affordable prices� to ensure the quality of drugs and check medicines from

being adulterated � to achieve self-sufficiency in production and self-reliance

in drug technology.

Rationale for drug price control

The drug market is unique. Besides market failure, the over-all health condition in India has made it all the more neces-sary to have a stricter price control regime. Detailed discus-sion of these follows:� The demand for medicines is uncertain and consequently

becomes inevitable. A patient with a potential disease can-not afford to ignore taking medicines as the disease mayturn out to be fatal or result in permanent disability,

� In view of the above, it becomes pertinent on the part ofthe patients to buy medicines as advised by their doctorsirrespective of the price. Demand inelasticity of consumersthus provides added advantage to drug firms to charge arent-seeking price and, moreover, the pre-condition of con-

�Analyses show that 11 out of 15 antibiotic drugs witnessed a price

rise in the range of 1%-15% annually during 1994-2004.

� Anti-TB drugs-Eight out of 10 drugs had shown price increases

ranging between 2% and 13% per annum.

� General rise in the prices of drugs across all sub-therapeutic cat-

egories of cardiovascular diseases: cardiac disorders-2%-16%;

anti-anginals-5%-6%; peripheral vasodilators and antihyperten-

sives-1%-7% annually.

� Vaccines and antitoxins registered a meagre price rise during the

period.

� Antimalarial drugs registered mixed price trends and similar con-

ditions prevailed among cancer drugs.

A price declining trend was observed among HIV/AIDS drugs

Drug Price: Headed northwards?

Box 4



sumer sovereignty for perfect competition cannot be ensured.�The market for formulations, particularly if one goes by var-

ious therapeutic categories, is either monopoly or oligop-oly. Price competition does not exist. The above market imperfections apart, with nearly one-

third of the Indian population below poverty line, health con-ditions make it pertinent to allow for price control.

Over the years, however, the controls are being dismantledgradually and the number of bulk drugs that were underprice control has been brought down gradually to a minimumlevel. In 1979, 347 bulk drugs were under the Price ControlOrder, which came down to 142 in 1987. Drastically pruningthe list further, the Drug Price Control Order of 1995 soughtto limit the control list to just 76 drugs. Along with gradualreduction in the number of drugs under price control, cer-tain procedures were greatly simplified and coverage of price-controlled drugs underwent enormous changes over the years. Table 15 shows that the number of categories of bulk drugswas pruned from three in 1979 to just one in 1995. With areduction in the number of categories, the percentage of max-imum allowable post-manufacturing expenses (MAPE) wereunified to 100% in 1995 against 40%, 55% and 100% in 1979.

As the process of globalization and liberalization are inten-sifying in India, controls and regulations on a lifeline indus-try such as the pharmaceutical industry is being lifted. TheDrug Price Control Order of 1995 does away with many con-trols and regulations. The purview of price control was lim-ited to just 76 drugs in 1995. The DPCO delineates certainbenchmarks on which price control will be based. These are (i)sales turnover, (ii) market monopoly, and (iii) market compe-tition. Across the board, the price control order fixed 100%

maximum allowable post-manufacturing expenses (MAPE) toall drugs. MAPE refers to the mark-up on the ex-factory costsprovided to cover all selling and distribution costs, includingthe retail and wholesale trade margins.

Impact of price control on drugs and pharmaceuticals

In India, prices of drugs were once considered to among thehighest in the world. This trend of high prices has tended toreverse since the 1970s in the wake of a series of policymeasures.

The Drug Price Control Order of 1970 brought all drug for-mulations in two categories: essential and non-essential. Whilethose in the essential category were allowed a mark-up ofonly 75% in view of their importance, the latter categorywas allowed 150%. Later, in the 1978 Drug Policy, a slightmodification was made by classifying formulations into fourcategories. The four categories and their respective mark-ups are as follows: (i) Category I attracted only 40% mark-up; (ii) Category II was allowed 55% mark-up; (iii) CategoryIII was permitted to charge 100% mark-up; and (iv) Cate-gory IV was totally exempt from price control.

One of the earliest price analyses at the disaggregated levelwas done by Rane (1990) while attempting to assess the impactof the DPCO, 1987. The study was essentially carried out asimple relative comparison of drug prices between two peri-ods-1986 representing the pre-policy period and 1990 denot-ing the post-price policy regime-as lack of adequate data onweights forced him to settle for this method. The price increasebetween these periods as a result of price policy category-wise show that most of them were in double digits in the

Fig 2

Criteria for inclusion of drugs under price control, DPCO, 1995

Note: (i) Bulk drug turnover includes local production and import values.(ii) A formulator is a manufacturer of a single-ingredient formulation containing the subject bulk drug.(iii) Market share of a single formulator of a single-ingredient formulation of the subject bulk drug marketed in the country (as per Operations Research Group (ORG)(iv) Reference for the market share determination is data reported in ORG, March 1990

Source: Department of Chemicals and Petrochemicals (1999), Report of the Drug Price Control Review Committee, Government of India, October, New Delhi

All drugs with turnover ofRs 4 crore or above

EXCLUDE

All drugs which satisfy existence of sufficient market competition withthe conditions of: a) minimum 5 bulk drugs producersb) minimum 10 formulatorsc) market share of single formulator not more than 10%

All drugs with a turnoverabove Rs 1crore but below

Rs 4 crore and single formulator having 90% ormore of the market share

INCLUDE


period following price decontrol. The highest rise was regis-tered in the case of skin preparations, accounting for nearly50% followed by respiratory system preparations recording a32% price increase. The lowest increase was registered in thecase of musculoskeletal preparations with 9.96%. Therefore,such a disaggregated assessment of increase in drug pricesuncovers many facts which are not captured in the wholesaledrug price index.

Analysis of the impact of the DPCO, 1995

This section comprehensively probes into the impact of theDPCO, 1995 on drug prices. A comparative analysis of pre-and post-DPCO, 1995 price trends of major essential drugsis considered. The analysis basically involves examining pricetrends of essential drugs that are part of the DPCO, 1995 andthose that are outside price control.

Methodology for the analysis

The basis for delineating drugs under price control and decon-trol are derived from the government list of drugs under con-trol (GOI 1995). Further, from this list only essential drugswere considered. Price data for the analysis are basically culledout from various December (except 2004, where the issue ofAugust has been obtained) issues of the Monthly Index ofMedical Specialities (MIMS), India spanning 11 years from1994 to 2004.

The number of essential drugs considered for analysis is asfollows: (i) a total of 152 formulation packs relating to 14 dis-ease conditions from the Essential Drugs List were taken intoaccount. These 152 formulation packs were of similar strengthand numbers (dosages). Out of 152 medicines, a total 115medicines, constituting around 75% of the total medicineswere decontrolled drugs while the rest 37 are price-controlled

drugs, accounting for 25%. Subsequently, the retail price ofthe formulations of each of these drugs was obtained fromMIMS India. Although the number of products consideredinitially was 600 plus, after elimination the number camedown to 152 products. Then we arrived at the annual pricechange (in percentage terms) of formulations under each drug.

Elimination of such a large number of products becameimperative due to the following: (i) for consistency-differentdosages and strengths were ignored and only packs contain-ing similar units, dosage forms and strengths were included;(ii) products that are not listed in MIMS India continuouslyfor 11 years are also ignored from the analysis.

The price change during the period from 1994 to 2004 is cap-tured by working out the year-on-year percentage change

and cumulative 11-year price change. The observedprice change-annual percentage price change-isgiven in Tables 16 and 17.

The observed price change among 12 formula-tions packs accounting for around 8% of totalformulation witnessed more than 10% price riseannually during 1994-2004. Another 38 medi-cines, accounting for 25% of the total formula-tions considered, showed price increases in therange of 5%-9% during the same period. A mod-erate price rise of less than 5% was registeredamong 56 formulations packs, which accountsfor 37% of the total packs considered. Amongthem, 19 formulations are under the DPCO, 1995.Virtually no price change was recorded amonganother 19 formulations during this period, con-stituting around 12% of the packs. Such price riseswas observed across all therapeutic categories.

A general trend that emerges from Tables 15and 16 clearly point out that over one-fifth of the36 price-controlled drugs under considerationhave tended to be either stable or have shown a


� The initial drug price is set high.

� The distribution network is extremely complex.

� Trade margins range from 100% to a whopping 5600%.

� The highest and lowest price differences between market and ten-

der prices in the case of cancer drugs were about 275% and 1166%,

respectively.

� A huge price difference is observed among maternal and mental

health conditions.

� Maternal health drugs are 117% and 4028% for the lowest- and

highest-priced drug category.

� Mental health drugs are 329% and 5102% for lowest- and high-

est-priced drug category.

� Monopsony can save up huge cost.

� Fixing trade margins is another solution.

Exorbitant profit and trade margins: Ismonopoly purchase the answer?

Box 5

Table 15

Comparative chart summarizing various drug price control orders

Items under DPCOs DPCO 1979 DPCO 1987 DPCO 1995

Number of drugs under price control 347 142 76

Number of categories under which the above 3 2 1

drugs were categorized

MAPE allowed on normative/national ex-factory costs to meet post-manufacturing

expenses and to provide for margin to the manufacturers (5)

Category I 40 75 100

Category II 55 100 NA

Category III 100 NA NA

Category IV 60 NA NA

Percentage of total domestic pharmaceutical sales 90 70 50

covered under price control (approximately)

MAPE: maximum allowable post-manufacturing expensesSource: Indian Drug Manufacturers Association (IDMA) Bulletin 1998;XXIX:202



Table 16

Price change in drugs used for the treatment of cardiovascular diseases

Drug name Formulation Therapeutic group % Price change (1994 to 2004)

Bisoprolol Concor Anti-anginals\ -5.55

Carboprost Prostodin Haemostatics -2.74

Atenolol Tenofed Peripheral Vasodilators -0.35

Metoprolol Selopres Anti-Hypertensives 0.00

Hydrochlorothiazide Arkamin-H Anti-Hypertensives 2.05

Ramipril Cardace Cardiac Disorders 2.13

Dopamine Dopinga Cardiac Disorders 3.49

Nifedipine Cardules Plus Anti-anginals 3.74

Enalapril maleate En.Ace. Anti-Hypertensives 4.52

Indapamide Natrilix SR Anti-hypotensives 5.87

Enalapril maleate Enace-D Anti-Hypertensives 5.87

Nifedipine Depin Anti-anginals 6.24

Indapamide Lorvas Anti-hypotensives 6.78

Hydrochlorothiazide Adelphane-Esidrex Anti-Hypertensives 7.00

Atenolol Tenolol Peripheral Vasodilators 7.51

Digoxin Cardioxin Cardiac Disorders 11.28

Digoxin Lanoxin Cardiac Disorders 16.64

Source : Calculated from MIMS India, 1994 to 2004

Price change in drugs used for the treatment of central nervous system disorders

Drug name Formulation Therapeutic group % Price change (1994 to 2004)

Carbamazepine Mazetol Analgesics and Antipyretics -1.36

Lithium Carbonate Licab/XL Antidepressants -1.04

Lorazepam Larpose Sedatives and Tranquillisers -0.42

Paracetamol Disprin Paracetamol Analgesics and Antipyretics -0.26

Trihexyphenidyl Trinicalm Forte/Plus Sedatives and Tranquillisers -0.13

Clozapine Sizopin Sedatives and Tranquillisers 0.00

Haloperidol Serenace Sedatives and Tranquillisers 0.00

Phenobarbitone Gardenal Anticonvulsants 0.00

Phenytoin Sodium Dilantin Anticonvulsants 0.00

Clozapine Lozapin Sedatives and Tranquillisers 1.76

Imipramine Antidep Antidepressants 2.12

Diazepam Paxum Sedatives and Tranquillisers 2.40

Metoclopromide Reglan Antiemetics and Antinauseants 3.57

Diazepam Elcion CR Sedatives and Tranquillisers 4.13

Diphenyl Hydantoin Epsolin Anticonvulsants 4.21

Fluoxetine Fludac Antidepressants 5.35

Lorazepam Ativan Sedatives and Tranquillisers 5.66

Sodium Valproate Epilex Anticonvulsants 5.83

Trihexyphenidyl Pacitane Neurodegenerative Disease 6.70

Phenobarbitone Garoin Anticonvulsants 7.00

Paracetamol Zimalgin Hypnotics 7.48

Phenytoin Sodium Eptoin Anticonvulsants 8.32

Fluphenazine Anatensol Inj. Sedatives and Tranquillisers 12.99




Table 16

Price Change in Drugs of Infections and infestations

Drug name Formulation Price control Therapeutic group % Price change (1994 to 2004)

Ceftriaxone Monocef I.V. DPCO 95 Antibiotics -2.58

Ceftriaxone Oframax DPCO 95 Antibiotics -0.17

Penicillin Pentids DPCO 95 Antibiotics -0.05

Chloramphenicol Reclor Decontrolled Drugs Antibiotics 0.00

Ciprofloxacin Ciprowin DPCO 95 Sulphonamides and other Bact. 0.00

Penicillin Pencom DPCO 95 Antibiotics 0.58

Cefotaxime Claforan DPCO 95 Antibiotics 2.22

Metronidazole Flagyl DPCO 95 Anti-amoebics, anti-giardiasis 2.52

Erythromycin Eltocin DPCO 95 Antibiotics 3.03

Ciprofloxacin Ciplox DPCO 95 Sulphonamides and other Bact. 3.38

Cloxacillin Supremox Inj. DPCO 95 Antibiotics 3.89

Metronidazole Aristogyl DPCO 95 Anti-amoebics, anti-giardiasis 4.74

Chloramphenicol Chloromycetin Decontrolled Drugs Antibiotics 5.73

Amoxicillin Novaclox Decontrolled Drugs Antibiotics 7.19

Erythromycin Erythocin DPCO 95 Antibiotics 8.57

Amoxicillin Novomox Decontrolled Drugs Antibiotics 8.67

Ampicillin Campicilin Decontrolled Drugs Antibiotics 10.90

Cloxacillin Amplus DPCO 95 Antibiotics 12.29

Ampicillin Ampipen Decontrolled Drugs Antibiotics 15.22

Zidovudine Retrovir Decontrolled Drugs Antivirals -8.40

Zidovudine Zidovir Decontrolled Drugs Antivirals -7.67

Chloroquine Melubrin DPCO 95 Antimalarials -2.58

Isoniazid Myconex 600 Decontrolled Drugs Antituberculosis 0.00

Pyrazinamide P-Zide Decontrolled Drugs Antituberculosis 0.00

Primaquine PMQ-INGA Decontrolled Drugs Antimalarials 0.00

Mebendazole Mebex Decontrolled Drugs Anthelmintics and other anti-infestive drugs 0.00

Tetanus Toxoid Dual Antigen Decontrolled Drugs Vaccines and anti-toxins 0.30

Tetanus Toxoid Tripvac Decontrolled Drugs Vaccines and anti-toxins 0.72

Mebendazole Wormin Decontrolled Drugs Antivirals 1.62

Streptomycin Strepto-Erbazide DPCO 95 Anti-T.B. 2.41

Rifampicin Rimactane DPCO 95 Anti-T.B. 2.90

Rifampicin Rifacilin DPCO 95 Anti-T.B. 4.97

Chloroquine Emquin DPCO 95 Anti-malarials 7.29

Amphotericin B Fungizone Intravenous Decontrolled Drugs Antifungals 7.50

Pyrazinamide PZA-Ciba Decontrolled Drugs Anti-T.B. 7.56

Clofazimine Hansepran Decontrolled Drugs Antileprotics 7.85

Streptomycin Ambistryn-S DPCO 95 Anti-T.B. 8.96

Ethambutol Inabutol Forte Decontrolled Drugs Anti-T.B. 9.96

Isoniazid Rimpazid 450 Decontrolled Drugs Anti-T.B. 12.39

Ethambutol Combunex Decontrolled Drugs Anti-T.B. 13.45




Table 17

Price change in drugs of Alimentary, Musculo-Skeletal Disorders, Hormones and Genito-Urinary System


Prednisolone Wysolone DPCO 95 Corticosteroids and related drugs -5.10

Frusemide Frusenex DPCO 95 Diuretics and Antidiuretics -1.03

Nalidixic Acid Gramoneg DPCO 95 Antidiarrhoeals -0.41

Nalidixic Acid Negadix DPCO 95 Urinary anti-infectives -0.38

Oxytocin Pitocin Decontrolled Drugs Drugs acting on uterus 0.77

Insulin NPH Lentrad DPCO 95 Throid and antithroid drugs 1.24

Magnesium Sulphate Pepticaine Decontrolled Drugs Gastro-intestinal sedatives and Ulcer drugs 3.44

Insulin NPH Actrapid DPCO 95 Hyper and hypoglycaemics 3.99

Spironolactone Aldactone DPCO 95 Diuretics and Antidiuretics 4.34

Ibuprofen Brufen DPCO 95 Non-Steroid anti-inlm. Drugs 4.66

Glibenclamide Daonil Decontrolled Drugs Hyper and hypoglycaemics 6.81

Ibuprofen Combiflam DPCO 95 Non-Steroid anti-inlm. Drugs 7.16

Frusemide Frumil DPCO 95 Diuretics and Antidiuretics 8.24

Glibenclamide Euglucon Decontrolled Drugs Hyper and hypoglycaemics 8.35

Magnesium Sulphate Solacid Decontrolled Drugs Gastro-intestinal sedatives and Ulcer drugs 10.60

Beclomethasone Anovate Decontrolled Drugs Drugs Acting on th ecolon and Rectum 16.37


Price change in drugs of Nutrition and Respiratory System


Iron (Salts/complex) Ferradol Decontrolled Drugs Tonics; appetite stimulants -2.06

Salmeterol Salmeter Decontrolled Drugs Bronchospasm -0.67

Theophylline Asmapax Depot DPCO 95 Bronchospasm -0.34

Chlorpheniramine Corex Decontrolled Drugs Expectorants, cough suppressants, mucolytics and decongestants -0.24

Dextrose Electrobion Decontrolled Drugs Mineral and parenteral nutritional suppl. -0.13

Dextrose Leclyte Decontrolled Drugs Mineral and parenteral nutritional suppl. 0.00

Vitamin A Rovigon DPCO 95 Vitamins 0.44

Folic Acid Astymin Forte Decontrolled Drugs Tonics; appetite stimulants 2.05

Salbutamol Salbetol DPCO 95 Bronchospasm relaxants 2.57

Calcium Carbonate Filibon Decontrolled Drugs Mineral and parenteral nutritional suppl. 2.90

Salmeterol Serobid Decontrolled Drugs Bronchospasm 3.40

Salbutamol Salmaplon DPCO 95 Bronchospasm relaxants 4.06

Iron (Salts/complex) Imferon Decontrolled Drugs Anaemia; Neutropenia 4.36

Terbutaline Grilinctus-BM Decontrolled Drugs Expectorants, Cough Suppr., Decongestants 4.67

Chlorpheniramine Piriton Expectorant Decontrolled Drugs Expectorants, cough suppressants, mucolytics and decongestants 5.42

Vitamin A Ossivite DPCO 95 Mineral and parenteral nutritional suppl. 5.62

Terbutaline Bro-Zedex Decontrolled Drugs Expectorants, Cough Suppr., Decongestants 5.69

Theophylline Alergin DPCO 95 Bronchospasm 7.36

Budesonide Pulmicort Decontrolled Drugs Bronchospasm relaxants 8.93

Calcium Carbonate Anemidox Decontrolled Drugs Anaemia; Neutropenia 14.18

Source: Calculated from MIMS India, 1994 to 2004



Table 17

Price change in drugs on ENT, Skin and Surgicals


Ketamine Ketmin Inj. Decontrolled Drugs Anaesthetics -3.58

Hydrocortisone Furacin-S Decontrolled Drugs Topical steroid pre.. 0.00

Ketamine Ketalar Decontrolled Drugs Anaesthetics 0.00

Hydrocortisone Crotorax-HC Decontrolled Drugs Topical steroid pre.. 0.18

Atropine Sulphate Bellpino-Atrin Decontrolled Drugs Mydriatics and Cycloplegics 1.08

Fluticasone Zoflut Decontrolled Drugs Topical steroid Preps 1.22

Lignociane Kemicetine Otological Decontrolled Drugs Anti-infective prep. 1.27

Beclomethasone Beclate/N/C Decontrolled Drugs Local reactants on the nose 1.97

Atropine Sulphate Atrisolon Decontrolled Drugs Anti-inflammatory and anti-allergic prep. 2.31

Bupivaccine HCl Marcaine Decontrolled Drugs Surgical antibacterials 2.38

Gentamycin Genticyn DPCO 95 Anti-infective prep. 3.26

Silver Sulphadiazine SSZ Aplicaps Decontrolled Drugs Anti-infective prep. 3.56

Gentamycin Andregen DPCO 95 Anti-infective prep. 4.19

Adrenaline Xylocaine C Adrenaline Decontrolled Drugs Anaesthetics 6.44

Lignociane Otek-AC Decontrolled Drugs Anti-infective prep. 7.88

Bupivaccine HCl Sensorcaine Decontrolled Drugs Surgical antibacterials 8.44

Heparin Beparine/Beparine Cream Decontrolled Drugs Misc. skin prep. 8.45

Adrenaline Gesicain C Adrenaline Decontrolled Drugs Anaesthetics 9.99

Meglumine Antimonate Urografin Decontrolled Drugs Diagnostic Agents 18.19


Price change in drugs of Cancer and Other Related treatments


Paclitaxel Intaxel Decontrolled Drugs Carcino-chemotherapeutic Drugs -5.06

Etopside Etosid Decontrolled Drugs Carcino-chemotherapeutic Drugs -0.91

Fluorouracil Fivefluro Decontrolled Drugs Carcino-chemotherapeutic Drugs 0.00

Methotrexate Neotrexate Decontrolled Drugs Carcino-chemotherapeutic Drugs 0.00

Tamoxifen Mamofen Decontrolled Drugs Carcino-chemotherapeutic Drugs 0.00

Vincristine Neocristin Decontrolled Drugs Carcino-chemotherapeutic Drugs 0.00

Heparin Thrombophob Decontrolled Drugs Carcino-chemo-therapeutic drugs 0.00

Cisplatin Kemoplat Decontrolled Drugs Carcino-chemotherapeutic Drugs 0.32

Fluorouracil Fluracil Decontrolled Drugs Carcino-chemotherapeutic Drugs 0.71

Bleomycin Bleocin Decontrolled Drugs Carcino-chemotherapeutic Drugs 0.85

Methotrexate Biotrexate Decontrolled Drugs Carcino-chemotherapeutic Drugs 1.04

Vincristine Cytocristin Decontrolled Drugs Carcino-chemotherapeutic Drugs 1.08

Doxorubicin Doxorubicin-Meiji Decontrolled Drugs Carcino-chemotherapeutic Drugs 1.10

Tamoxifen Nolvadex Decontrolled Drugs Carcino-chemotherapeutic Drugs 2.84

Cyclophsphamide Endoxan-N Decontrolled Drugs Carcino-chemotherapeutic Drugs 3.64

Allopurinol Zyloric Decontrolled Drugs Gout 4.80

Chlorambucil Leukeran Decontrolled Drugs Carcino-chemotherapeutic Drugs 8.87




downward movement. These drugs are mostly in the categoryof antibiotics and belong mainly to the class of infections andinfestations. Nearly 50% of controlled drugs have shown amoderate 1%-4% increase in price over the past 11 years (1994-2004), across all therapeutic categories. Eight out of 36 price-controlled drugs have witnessed over 5% rise in price; thesebelong to the category of infections and infestations, bron-chospasm, diuretics, etc.

The change in prices has been uneven across therapeuticcategories. For instance, out of the 15 packs in the antibi-otics category, 11 of them registered a price increase of between1% and 15% per annum, while the other four medicines wit-nessed either stable prices or a decline over the 11-year period.In the case of anti-TB drugs, eight out of ten drugs had showna price rise ranging between 2% to 13% annually during 1994-2004. Among antimalarial drugs, one of them had shown anincrease while the remaining two had registered either a sta-ble price or a price decline. In the class of central nervoussystem drugs, anticonvulsants recorded an increase in priceof 0%-8% annually, while antidepressants witnessed no pricechange in a few categories and others showed a price increaseof around 5% per annum.

Anti-HIV drugs show a general price decline. Vaccines andantitoxins registered a meagre rise of less than 1% duringthis period. One can generally expect this trend as the vac-cines market is mostly controlled by the Government and manyvaccines have been introduced a long time ago and hencetheir price cannot be high. Anti-diarrhoeals have also tendedto show a price decline during this period.

In the class of cardiovascular drugs, there appears to havebeen a general rise across all therapeutic segments. Drugs forcardiac disorders registered a price rise in the range of 2%-16% annually. The observed price rise per annum in the cat-egory of anti-anginals was in the range of 5%-6%. Periph-eral vasodilators and antihypertensives witnessed a price risein the range of 1%-7%. Anti-cancer drugs have remained sta-ble, except one drug under consideration, which had shownmore than 8% price increase annually.

Drug price and retail margins

The analysis above reveals that the drug price rise has dis-played an enormous upswing during the past decade despiteprice controls. The year-on-year annual average price increasefor certain categories of drugs has been more than 10%. How-ever, it must be noted that the initial price per se is fixed withenormous margins. Trade margins are among the highest inthe pharmaceutical industry. The extra sales taxes are leviedby respective State Governments, as drugs come under theState-level taxes. Local sales taxes differ from one State toanother. Recently, efforts are under way by the Departmentof Chemicals and Fertilizers to bring the sales taxes of dif-ferent States under a uniform rate (4%).

The exorbitant trade margins in the pharmaceutical mar-ket have become evident recently from the tender purchase

of drugs by Tamil Nadu Medical Services Corporation (TNMSC).Monopoly price can be challenged by monopsony purchase.Tender purchase of drugs by the TNMSC has revealed post-manufacturing margins running into four digits in retailpurchase while in tender purchase the prices were at rock bot-tom (Srinivasan 1999).

The following analysis gives an idea of the exorbitant trademargins and sky-high profits in the drug industry. A simplecomparison of formulation packs of comparable size andstrength between the market price and tender price is con-sidered here. Therapeutic drugs are basically drawn from theEssential Drugs List. The market price of formulations hasbeen obtained from August issue of MIMS India, 2004 whilethe tender price has been downloaded from the TNMSCwebsite, applicable during the year 2004. Although nearly80 formulation packs were considered earlier, only 30 of themhave been analysed here. Therefore, two formulations for eachof 15 disease conditions (from the Essential Drugs List) weretaken into account - the one with the highest price differ-ence and the one with the lowest.

As can be seen from Table 18, price differences ranged fromaround 100% to 5600%. No systematic pattern in price dif-ference could be deciphered across various health condi-tions. The highest and lowest price difference in the case ofcancer drugs were 275% and 1166%, respectively. The observedprice difference of drugs on maternal health are 117% and4028%, respectively, for the lowest and highest drug cate-gory. In the case of mental health, the respective differenceis 329% and 5102%.

What has been noted above is only the price differenceobserved among one single pack (tablets/capsules). If onewere to convert this price difference and apply it to the entireretail drug market sales, the resulting trade margins/profitwould be mind-boggling. Drug companies are not welfaresocieties and hence one can assume that a normal profitmargin has been included in the quoted tender price. Thepresent-day drug industry is characterized by a complex dis-tribution chain. Therefore, a multipronged strategy needs tobe devised to smash this network. A ceiling on trade marginsis the need of the hour. The monopoly power of drug com-panies can also be challenged by monopsony purchase, as theTNMSC procurement as shown. For the Essential Health Inter-vention package, the necessary drugs could be procured directlyfrom the drug companies by a tender purchase for the entirecountry. Involving 33 States and Union Territories would onlyweaken the monopsony power. States could be persuaded toadopt a centralized procurement mode.

Public procurement of essential drugs*

The Central and State Governments spent approximately Rs2000 crore during 2001-02 on procuring drugs. Apart fromthis, a few international organizations provide funds (or inkind) for drugs either through the central Government ordirectly to the States for specific programmes such as leprosy

* This section is largely derived from Parameshwar, (2004). “Drug procurement systems in India”, paper submitted to National Commission on Macroeconomics and Health, December.



control, etc. The current funding of drugs in the Central and State Gov-

ernments is reported to be grossly inadequate. For instance,in Orissa, the current level of spending per public institutionis found to be extremely low: ranging from Rs 16,000 annu-ally in PHCs to Rs 50,000 in CHCs (6-15 beds). At the sec-ondary care level, with more than 30 beds, the amount spentfor outpatient care works out to roughly Rs 0.50 per patientper day and Rs 9.50 per patient per day for inpatient care(Table 19).

It is clear that public institutions spend grossly inadequateamounts on drugs. Scaling up funds to increase spending ondrugs is extremely important. At the same time, optimumutilization should be made of available resources. Efficientprocurement policies have a significant bearing on ensuringthe right medicines in sufficient quantities procured at low-est price to secure the maximum therapeutic value to thelargest number of beneficiaries with the available resources.

An efficient procurement policy would have an integratedapproach starting from (i) preparation of an essential drugslist, (ii) assessment of the quantity of drugs needed, (iii)quality assurance from suppliers, (iv) procurement process, (v)supply chain management, and (vi) prompt payment to sup-pliers.

In India, Central and State Government institutions followone or more of these arrangements for public procurement:(i) Central Rate Contract System, (ii) Pooled Procurement eitherby the government or through an autonomous corporation,(iii) decentralized procurement, and (iv) local purchase.

The Tamil Nadu Medical Service Corporation (TNMSC) setup in 1994, is a pioneer in the current drug procurement anddistribution system. The success of the TNMSC lies in itscentralized drug procurement and distribution system sup-ported by a computerized system of drug management.

The TNMSC has set up warehouses at all district headquartersfrom where supplies are provided to hospitals and other health

Disease conditions Therapeutic drug Formulation Strength and No. Retail Price TNMSC price Price difference (%)

(Rs.) (Rs.)

Cancer Cyclophsphamide Endoxan-N 50mg;10 36.35 13.218 275

Cancer Fluorouracil Fluracil 5ml 11.67 1.001 1166

Child and infectious disease Chloramphenicol Chloromycetin 250mg;10 30.76 4.4 699

Child health Phenytoin Sodium Dilantin 100mg;10 131.55 9.75 1349

COPD and Asthma Betamethasone Walacort 0.5mg; 10 3.55 1.043 340

COPD and asthma Salbutamol Asthalin 4mg;10 5.21 0.522 998

CVD Verapamil Veramil 40mg;10 5.02 4.392 114

CVD Atenolol Aten 50mg;14 25.75 1.2 2146

Diabetics Insulin NPH Actrapid 10ml 129.28 86.85 149

Diabetics Glibenclamide Daonil 5mg;10 6.60 0.454 1454

Injuries Bupivaccine HCl Sensorcaine 0.5%;20ml 34.34 15.5 222

Injuries Ketamine Ketalar 50mg;10ml vial 89.50 15.15 591

Japanese encephalitis Ceftriaxone Lyceft 1g;vial 90.00 16.11 559

Lymphatic Filariasis Diethylcarbamazine Banocide 50mg;10 3.88 0.707 549

Malaria Chloroquine Melubrin 250mg;10 4.36 2.233 195

Maternal health Carboprost Prostodin 1amp 80.13 68.5 117

Maternal health Ferros Sulphate Ferrochelate-Z 150mg;10 19.94 0.495 4028

Mental health Chlorpromazine Chlorpromazine-NP 25mg;10 5.95 1.81 329

Mental health Alprazolam Alprocontin 0.5mg;10 22.55 0.442 5102

Tuberculosis Rifampicin Rifacilin 150mg;100 99.68 66.6 150

Tuberculosis Pyrazinamide PZA-Ciba 500mg;10 42.46 5.188 818

Others Rantidine Consec 150mg; 10 7.51 2.205 341

Others Dopamine Dopinga 5ml 25.00 6.05 413

Others Ciprofloxacin Ciplox 200mg;100ml 27.00 6.41 421

Others Paracetamol Calpol 500mg;10 8.78 1.24 708

Others Diclofenac Sodium Diclonac 50mg;10 11.03 0.686 1608

Others Diazepam Calmpose 5mg;10 13.70 0.4 3425

Others Dexamethosone Sodium Phosphate Decdan 2ml 10.36 0.222 4667

Others Cetrizine Alerid 10mg;10 31.50 0.561 5615

Source:For Retail Price—Monthly Index of Medical Specialities, India, August, 2004For TNMSC Price—Tamil Nadu Medical Services Corporation (TNMSC). Available from URL: http:/www.tnmsc.com/system.html

Table 18

Drug price difference between retail market and tender purchase



facilities. A passbook system has been introduced where theentitlement of each facility is given in monetary terms. Theinstitution can obtain any drug in the approved list if fundsare available in the passbook.

The TNMSC has also developed a unique Drug DistributionManagement System (DDMS) which is put to use in effectivemonitoring of procurement and distribution of drugs andsupplies. Under this system, each district warehouse is linkedby computer to the central computer in the Head Office.Receipt and issues of drugs have been computerized result-ing in instantaneous adjustments to the stock position. Thishas facilitated movement of drugs from one warehouse toanother based on needs, thus avoiding shortages.

Usually States adopt a ‘two-envelope system’ (technicalbid and price bid being sent in separate envelopes). This sys-tem ensures a speedy and transparent mechanism in pro-curement of drugs. Contracts are awarded to only thosemanufacturing units, which have a Good Manufacturing Prac-tices (GMP) certificate of the WHO and should ideally have aminimum ceiling of annual turnover.

Karnataka and Rajasthan, however, follow a decentralized sys-tem. In the former, a major part of drug procurement, account-ing for 60%, is sourced by zila panchayats at the district levelwhile the remaining 40% is sourced by government medicalstores. In Rajasthan, in the order of priority, drugs are procuredfrom public sector units (Rajasthan Drugs and PharmaceuticalsLtd.). Tenders are invited only for those drugs not supplied by

Public Sector Undertakings and Small Scale Industries. The direct benefits flowing from the TNMSC model seem

to support lower prices contributed by competitive biddingand bargaining power. Table 20 illustrates the phenomenonof stable or declining prices due to centralized tender pro-curement of drugs. A simple comparison of drug price is car-ried out here, involving the procurement system in Delhi andTamil Nadu, of drugs from different therapeutic categorieswith similar strengths and pack sizes. The analysis revealsthat drug prices have tended to decline gradually or evensteeply in some cases, during the period 1996-2003. The ten-der prices are not only declining but the analysis in the ear-lier section shows that even the initial price quoted is wellbelow the market price, indicating a wide drug price differ-

ence. Further, the IT-driven logistics managementsystem facilitates monitoring of procurement, dis-tribution and issue of medicines. Quality controlis achieved through building in quality require-ments in the procurement process and drawingsamples from each batch and testing them.

However, these developments and the successachieved by the States does not appear to haveany impact on the Central Government, whichcontinues to have multiple agencies for procur-ing and distributing drugs to its various healthschemes/programme. This is depicted graphicallyin (Annexure I). While the Medical Stores Depotunder the Ministry of Health and Family Welfarehas seen gradual reduction in its handling ofprocurement and storage of drugs meant for a

few States and paramilitary forces, drugs required under theCentral Government Health Scheme (CGHS) are procuredthrough the Hospital Services Consultancy Corporation (HSCC).Under the CGHS, orders for both generic drugs and propri-etary drugs are placed through the HSCC. As expected, theprice difference between generic and proprietary drugs isextremely high. It is a matter of concern that the Govern-ment of India, which brings out as Essential Drugs List cov-ering only generic drugs is actually procuring and dispensingproprietary drugs for its employees under the CGHS scheme.

The total value of proprietary drugs is many times thevalue of drugs purchased by generic name. Second, the pricedifference not only results in sub-optimal utilization of resourcesbut is also a major drain on Central Government resources.This discrepancy should be resolved and only generic drugsshould be procured and distributed. There is no quality checkon proprietary drugs whereas generic drugs are procured fromprequalified bidders whose products are also subjected to sam-ple testing.

Under different National Health Programmes (NHPs), theCentral Government either provides financial aid or suppliesdrugs to States through centrally procured arrangements. Eachof the six NHPs has its own procurement procedures result-ing in duplication of effort with no attendant benefits of lowerprices that a bulk purchase would entail. Currently, the NHPsare (i) Revised National Tuberculosis Programme, (ii) NationalLeprosy Elimination Programme, (iii) Reproductive and Child

Table 19

Inadequate public spending on drugs in Orissa

Level of public institutions Amount (in Rs)

Public institutions (>30 beds) 0.50 9.50

OPD (per patient per day)

IPD (per patient per day)

Block-level CHC hospital (16-30 beds) 110,000

PHC (6-15 beds) 50,000

Block-level PHC 30,000

Subcentres 16,000

OPD: outpatient department; IPD: inpatient department; PHC: public health centre

Table 20

Centralized procurement price: A comparison

Drug Strength and pack Tamil Nadu Delhi

1996 2003 1996 2003

Paracetamol 500 mg10 tablets 1.18 1.12 1.24 1.17

Norfloxacin 400 mg10 tablets 10.71 5.13 7.98 6.48

Rifampicin 450 mg 10 tablets 28.80 20.90 29.20 20.90

Chloroquine 250 mg10 tablets 3.50 2.37 3.94 2.75

Gilbenclamide 5 mg 10 tablets 0.80 0.52 0.72 0.64

Atenolol 50 mg10 tablets 1.36 1.04 1.45 1.55


Health (RCH), (iv) National Malaria Control Programme, (v)National AIDS Control Programme, and (vi) National Blind-ness Control Programme. The amount spent on drug pro-curement under the first three programmes worked out to Rs480 crore during 2002-03. However, the procedures adoptedin the procurement of drugs in this case appear to be a lengthyone with significant time over-runs. For instance, the actionplan for procurement and supply of PHC kits under the RCHprogramme for the period 2003-04 had envisaged a time-frame of only nine months. However, procedural delays resultedin the entire process being completed in exactly double thetime. Similar delays have also been observed in the procure-ment process involving another agency RITES, which dealswith the Malaria Control Programme.

Much of these delays can be attributed to the absence of asystem of pre-qualification of bidders. As a consequence, lowerbids get rejected on the ground that the bidder does nothave the required qualification or ability. In the absence ofclear and well-defined criteria, the chances of an element ofsubjectivity in making decisions cannot be ruled out. The solu-tion lies in introducing a two-envelope system, one on tech-nical and another on price bids. Once technically unqualifiedbidders are rejected, the selection of the lowest bid becomesautomatic.

Drug Regulation in India

In India, the drug regulatory system has been poor and neg-lected over the years, although much has been written andrecommended by various committees. Poor enforcement mech-anisms and multiple interpretations of the Drugs and Cos-metics Act 1940 have made regulation in this sector an unvi-able proposition (GOI 2003).

In some States such as West Bengal, Rajasthan and Pun-jab, there is no testing laboratory. Assuming a norm of oneinspector for every 50 manufacturing units and one inspec-tor for 200 sales units, the gap between the required normand the actual number of available drug inspectors is woe-fully inadequate.

Given the currently available figure of 935 drug inspectors,one inspector serves around 320 wholesale and retail unitsinstead of a norm of 200. This could be the reason why thenumber of spurious and substandard drugs detected was rel-atively less. With adequate manpower and infrastructure,inspection of manufacturing and sales premises alongside astrong surveillance mechanism relating to the movement ofspurious/counterfeit drugs could be carried out and unearthedmore rigorously.

As far as the manufacturing units are concerned, the Gov-ernment of India noted that roughly around 5900 units requireintense surveillance/inspection and not all the 20,000 units(Mashelkar Committee Report 2003). Further, the Commit-tee noted that the 1333 bulk drug units, 4354 formulationunits, 134 large volume parenterals (LVP) and vaccine man-ufacturing units-accounting for 5877 units-are the ones thatrequire intense inspection. The other major categories are cos-metics, loan licences, blood banks, etc. According to the

Mashelkar Committee, around 120 drugs inspectors are neededto monitor about 5877 units and another 100 inspectors arerequired for the remaining categories.

Other observations and recommendations made by the Com-mittee are as follows: � Strengthen the infrastructure and manpower relating to the

monitoring/surveillance/inspection mechanism, both atCentral and State level.

� Information received by the Mashelkar Committee revealsthat only 17 out of 31 States has a drug-testing facility; of17 only 7 appear to be ‘reasonably equipped/staffed’.

� Measures are needed to tone up the Drugs and CosmeticsAct 1940, providing it with more powers (penalties) againstmanufacturers and distributors.

� The Mashelkar Committee proposes a Central Drug Admin-istration (CDA) to be set up under the Ministry of Healthand Family Welfare with autonomous status. The Commit-tee recommended the setting-up of the CDA by the end of2004 and State-level regulatory systems be strengthenedaccordingly.

�Review C & C1 licenses under the Drugs and Cosmetics Rulesissued against manufacturing and distribution (wholesalers& retailers) to keep abreast with recent developments inthe drugs sector.

� Review the Schedule H drugs which provides a list of pre-scription drugs.

�Comprehensively review Schedule K of OTC (over-the-counter)drugs.

� Curb inter-State movement of spurious drugs, tone up theexisting communication network and freely exchange infor-mation between States.

� As far as the health food/therapeutic foods/dietary sup-plements are concerned, regulation relating to their qual-ity and safety is needed as the demand for such products isincreasing, and producers/sellers are indulging in exagger-ated claims. These products should be brought under thepurview of the relevant food law. However, any product thathas ‘distinct medicinal claims’ would be qualified as a drugand not food products.

� There is a growing market for Indian Systems of Medicine(ISM), herbal products and drugs of natural origin. Con-cern has been voiced over their efficacy and quality. Effortsneed to be made to update the requirements for licensingsuch products. Since for many such products long-termsafety data are not available on their usage, additional safetydata need to be obtained.

� The other area of concern is uncontrolled growth of med-ical devices and equipment. The standards and quality ofmany newly emerging equipment are questionable in nature.

� Clinical research is an area of concern as human lives indeveloping countries has become an experimental theatrefor pharmaceutical firms. The Committee is of the firm opin-ion that responsibility must be shared between all concerned-investigators, sponsors, ethics committees and regulators.According to the Committee, ‘It is absolutely essential toinstitutionalize Good Clinical Practices to achieve credibil-ity for the data generated in India’ (GOI 2003).



� Regarding Phase I clinical trials, the Committee acceptedthe revised Schedule Y, which stipulates that data gener-ated from such trials in foreign countries need to be fur-nished to the Indian licensing authority and permissiongranted to repeat Phase I studies.

� As far Phase II and Phase III trials are concerned, the Com-mittee observes that since the trials undergo rigorous reviewby the International Conference on Harmonization (ICH)signatory countries, approvals could be accorded and expe-dited by the regulatory authorities simply based on the tech-nical documents submitted in ICH countries.

Drug patents in India

The Indian Patent Act, 1970

The Indian Patents Act, 1970 (effective since 1972) soughtto provide only process patents for chemical substances includ-ing pharmaceuticals, agrochemicals and food products, andit granted product patents for non-chemical substances.The duration of process patents was fixed at seven yearsfrom the date of filling of the patent, or five years from thesealing of the patent, whichever is earlier.

Considering the importance of sectors such aspharmaceuticals, the Indian Patents Act, 1970 added a fewprovisions, which sought to significantly restrict the scopeof protection. (i) Under the license rights, a process patentowner is obliged to sell the license to any third party fetch-ing a maximum royalty of 4% in turn. (ii) The Governmentretained the right to issue compulsory licenses (after 3years from the date of sealing of a patent) if the productunder question was above ‘reasonable’ prices or if it didnot satisfy public interests. (iii) Import of patent protectedproducts is not considered to be ‘working of patent’ andtherefore the patentee must necessarily produce the samein the country within three years from the date of sealingof a patent.

Patent protection under WTO, 1995

The Patents Act, 1970 has been instrumental in encouragingand developing the indigenous drug industry and indirectlycontaining medicine prices, but is currently under threatwith the conclusion of the last Uruguay Round of GeneralAgreement on Tariffs and Trade (GATT) negotiations in 1993and the establishment of World Trade Organization (WTO) on1 January 1995. In fact, extension of pharmaceutical prod-uct patents to all member countries was the key and contro-versial issue and also the last issue to be hammered out priorto tabling of the Draft Agreement at the end of 1991.

A gist of the patents system, 1970 and the change-overenvisaged under TRIPS is given in Table 21. The erstwhileGATT (since 1995, WTO) sought to radically transform thepatent Act in many countries. The specific article dealing withpatents-Trade-Related Intellectual Property Rights (TRIPS)-requires that the signatories to GATT must necessarily amendtheir Constitution in accordance with this Article. The Articleon TRIPS requires member countries to change their Act insuch a way that they grant product patent to the pharma-ceutical, chemical, food and agricultural sectors as well. Theperiod of patent rights is to be changed in the Indian casefrom seven to twenty years. A proper amendment needs tobe made to the Constitution of respective member countriesamending the present rules. For developing countries, 1 Jan-uary 2000 was fixed as the deadline for amending the Con-stitution. Developing countries like India have, however, beengranted a five-year transition period till 2005. Until then,exclusive marketing rights (EMRs) would have to be grantedto those companies introducing newly invented products.Domestic production of the patent-protected products isnot mandatory wherein import is to be considered as a work-ing of the patent. Even the Paris Convention specificallynails non-working or import of patent-protected productsas an abuse of exclusive rights. The other retrograde step inthe direction of TRIPS is the restrictions imposed on the freeuse of compulsory licensing provisions, which were hitherto

Table 21

A synoptic comparison of Indian Patents Act, 1970 and TRIPS, 1995

Different provisions of patent acts Indian Patents Act, 1970 TRIPS-WTO, 1995

Type of patents Only process patent allowed in the case of pharma- Product patent allowed in all sectors

ceuticals, chemicals and food

Effective duration of patent Seven years from the date of filing or five years from the Twenty years from the date of filing of patent application

date of sealing, whichever is earlier

Compulsory licensing Compulsory licensing allowed after three years of sealing Restrictive use of the provision of compulsory

of patent if the price of product under question is above a licensing - allowed only when there is national emer-

reasonable level or if it did not satisfy public interests gency/public non-commercial use/government use

Working of patent Domestic production alone is considered as 'working Whether products are manufactured locally or imported,

of patent' it would amount to 'working of patent'

Burden of proof In case of patent infringement, the burden of proof lies The burden of proof would fall on the alleged defendant

with the complainant of the patents of patent infringement




available in the present India Patents Act of 1970. The pro-vision of compulsory licensing (under the new dispensation)can be harnessed only when there is a clear case of nationaldisaster or calamity.

TRIPS and its likely impact

Several issues need attention in the wake of a change fromprocess to product patent. These issues include price rise, mar-ket structure, foreign investment inflows, technology trans-fer, royalty and hence foreign exchange outflow, import-dependence, etc.

A sensitive and a highly controversial issue with regard toTRIPS is the concern about the high price of medicines. Indiawas at the forefront in raising this issue backed by strongevidence. It is natural that many recent findings on this mat-ter focused on likely price trends in India in the event of amend-ing the present patents Act.

Lanjouw (1998) found drug prices in India, particularly inthe post-patent 1970 period, among the lowest in world. Asa sequel to a transition to the product patents regime, drugprices in India are expected to considerably escalate to ahigh level. Simultaneously, however, he and a few others (Vohra1999) argue that given the current market conditions, it isestimated that only 10%-20% of the pharmaceutical prod-ucts are under patent, and hence there is no need to focuson negative trends on the drug price front. It needs to be notedthat once patented products start proliferating in the mar-ket, the composition of patented products in the total phar-maceutical market would undergo a drastic change in favourof the former. This would have a far-reaching influence onprice.

Recent studies, mostly of simulation exercises carried outby Challu (1991), Nogues (1993), Fink (2000) and Watal (2000)all clearly show the extent of price increase that would be

likely in the near future with a changeover from the presentsystem to a patent monopoly era. Table 22 provides a syn-opsis of each of these studies. The study by Fink (2000) sug-gests a surge in pharmaceutical prices in the range of 9%-76% if product patent rights are introduced. However, as faras the impact on various therapeutic categories is concerned,the upsurge in price would depend on the demand for newpatented products or on the available alternative treatments,whichever dominates the market. Interestingly, Fink sug-gests that rapid acceleration in drug prices could be coun-tered by various price control measures available with the localgovernment, a provision allowed in the TRIPS agreement.Compulsory licensing is another tool to counter the adverseimplications of conferring patent protection.

Price ceilings, if put into effective practice, by allowing firmsto charge normal profits in addition to production costs, wouldreduce or eliminate an inventor’s patent-induced marketpower, argue Braga et. al. (2000). They further assert thatwhen normal profits are granted the potential disincentiveto invest would wither away resulting in recouping of R&Dinvestment.

In any case, the price of patented products is bound to behigh. This could be because of several reasons: (i) formula-tion activity would be costly as multinationals would nor-mally set high prices for the bulk drugs imported in view ofglobal reference pricing; (ii) issuing compulsory licensing toany company in India would amount to enormous royaltyfees, in return. This would naturally be reflected in the baseprice of the patented products; (iii) any effort to locally pro-duce the patented medicine is nothing but monopoly pro-duction and consequently monopoly pricing, which will alwaysbe higher than the competitive price.

However, a point worth noting in this context is that onemust actually analyse the entire gamut of issues related tothe pharmaceutical market and one cannot merely take such

Table 22

Summary of Studies: Simulation exercise on pharmaceutical product patents and their impact

Studies Price Capital Transfer Welfare Loss/Gain

Challu (1991) Estimated price increase for the market Money transfers abroad: Consumer welfare loss: US$ 309 million

(Argentina) segment subject to patents: 273.2%. US$ 367 million per year per annum

Nogues (1993) - - The losses from consumer misallocation could be

(developing countries) as high as US$ 7.7 billion

Fink (2000) Given different demand and substitution - Taking the case of quinolones, welfare losses

(India) elasticities, the lower priced among range from US$ 28.7 million to US$ 69.9 million

quinolones such as ciprofloxacin, the per annum, assuming certain elasticity

price could range from 233.5% to

276.7%, while for the highest, such as

ofloxacin, it could range from 318.6%

to 370.5%.

Watal (2000) The price rise could be as high as 242% - Moving from current market structures to patent

(India) with a constant elasticity-type demand monopoly could yield a loss of US$ 140

function. million annually



provision as given. An appreciation of the overall structuraladjustment in economies such as India show that over theyears, particularly since the early 1990s, pharmaceutical priceshave been decontrolled to a substantial degree and in factpresently only a few drugs (75 essential drugs in 1998) areactually controlled. Many more of these are likely to witnesslifting of controls in the immediate future, as made evidentin the intentions of government policy pronouncements (GOI2001).

Compulsory licensing and parallel imports

Merely ten years after the establishment of WTO, the darker sideof TRIPS is unfolding before the world. There has been percep-tible damage to public health particularly in many developingcountries. The controversy over accessibility of cheap drugs tocombat HIV/AIDS in Africa and other developing countries hasput the TRIPS agreement under vigilance. In 2000, Brazil wastaken to the Dispute Settlement Mechanism of WTO for thealleged violation of TRIPS by the US and the next year saw 39drug MNCs aligning against the South African Government fornot conforming to the new global patent regime. The AIDS epi-demic has assumed serious proportions triggering off nationalemergencies, particularly in the African countries, in which 2.5crore people are infected with HIV. The South African govern-ment pressed into service the provision of compulsory licensingand parallel import under its new patent regime. Accordingly,this provision enabled the South African Government to eitherdirect domestic companies to manufacture or import cheapbranded generic drugs from developing countries such as India.

Western pharmaceutical companies have been marketing a cock-tail of antiretroviral drug therapy at unaffordable prices in manydeveloping countries. With the arrival of Indian generic substitutes,drug multinationals raised a protest. For instance, Cipla was thefirst to enter the African market with its triple drug cocktail(Hindu, 16 May 2001) of antiretrovirals-lamivudine, stavudine andnevirapine-offering it at a price of US$ 350 per patient per year, asmall fraction of the US$ 10,000 that a western patient pays. Anunimaginably high price in developed countries and an on-goingcompetition fostered by generic varieties in South Africa has broughtprices tumbling down. Intriguingly, despite an offer of knock-offversions at rock-bottom prices, market prices are far beyond thepurchasing power of an average African. Drug MNCs initiated actionagainst the South African Government. A spirited national andinternational challenge was mounted on these companies, whichforced them to make a tactical retreat.

Another controversial case involves Brazil. Its newly amendedpatent policy allows for local production by providing licenseto domestic companies if the foreign-patented products arenot produced locally. The Brazilian patent law requires a for-eign patentee to manufacture a product locally within the stip-ulated three years of the grant of patent. Importing such patent-protected products is not considered to be ‘working of patents’in Brazilian law. Under this provision, Brazil recently alloweddomestic production of generic anti-HIV/AIDS drugs, whichhas been contested by the US. With the heat of internationalpressure mounting heavily on the US, it withdrew the case reg-

istered at WTO against Brazil (The Hindu, 26 June 2001). Stung by increasing criticism and battered image, drug multi-

nationals have subsequently joined the race to slash anti-AIDSdrug prices. This move is, however, seen as a ploy to retaintheir market share, which is threatened by inexpensive genericcompetition. Merck and other five multinationals (The Hindu,16 May 2001) have since come forward to sell antiretroviraldrugs at lower prices to developing nations.

It is argued that TRIPS allows for certain flexibility in itsclauses to protect public health. The monopoly abuse of thepatent system that emanates from exclusive rights conferredon the patentee could be controlled or restricted by meansof resorting to granting compulsory license or through par-allel imports. The principles articulated under Article 8 andArticle 31 of the TRIPS agreement (www.wto.org/english/tratop_e/trips_e/trips_e.html) appear to enable member coun-tries to adopt measures that would safeguard them in theevent of public health emergencies. The specific instancesunder which compulsory licensing could be conferred are:(i) insufficient or non-working of patents; (ii) failure to produce locally and therefore continuously import

the product even after the issue of patent for 3-4 years;(iii) in the event of charging an unreasonably high monop-

oly price. Unfortunately, it took years for many developing countries

to realize and challenge the lethal provisions of the TRIPSagreement. The toll and suffering that the AIDS epidemicinflicts on impoverished Third World nations triggered the lat-est patent battle. It needs to be reiterated here that apart fromthe devastating AIDS pandemic, there are other killer dis-eases in countries such as India (diarrhoea, malaria, TB, etc.)which require immediate attention and pose a continuedthreat to health security.

Data exclusivity

Article 39.3 of the TRIPS agreement requires that membercountries safeguard the interest of inventing companies fromunfair commercial use of products arising out of disclosureof data submitted by the companies. However, TRIPS allowsfor exception to this rule. Member countries can waive thisarticle to protect public health exigencies and thereby grantgeneric manufacturers the opportunity to produce drugsthereby limiting ‘evergreening’ of patents.

In pharmaceutical industry parlance, data exclusivity isone in which the originator company registers with a regu-latory authority of a country by submitting data demonstratingthe safety, quality and efficacy of the innovative drugs. How-ever, the generic manufacturer need not get such an approval,as, while applying for approval of their drug, they refer tobioequivalence data already established by the originator. Ifdata exclusivity are granted for a specific time period, it woulddeny the generic manufacturer from availing the referencedata of the originator. The period of data exclusivity rangesfrom five years in the US, six to ten years in the EU, etc.



Indian Patents (Amendment) Bill, March2005: Significance and implications

India has moved into a product patent regime in 2005 com-plying with the TRIPS provisions of WTO. In a series of amend-ments to the Indian Patents Act, 1970, the latest and the cru-cial amendment to the Act was made in March 2005. The newIndian patent amendment suffers from ambiguity, technicalloopholes and fails to incorporate some of the flexibilities incor-porated in the TRIPS regime. This has serious implications foraccess to drugs and medicines in India, and the developingworld in general. The issues that still need to be addressed inthe newly amended patent acts are: (i) issues relating to thescope of patentability; (ii) cap on royalty payments; (iii) plug-ging all ambiguities and technical loopholes in the amend-ment to avoid unnecessary and expensive litigation in thefuture; (iv) vesting discretionary powers in the patent officein terms of timelines of rules, making them vulnerable to vestedinterests. Let us discuss each of them in detail.

Definition and scope of patentability

The new amendment does not clearly state ‘what is patentable’.In the amended Act, pharmaceutical substances are described as‘any new entity involving one or more inventive steps’. This couldmean anything involving formulations, pharmaceuticals, isomers,polymorphs and their combinations. Ideally, and for practical pur-poses, it should have been ‘new chemical entity’. While the IndianPatent Act, 1970 clearly defined the terms ‘invention’, ‘patents’,‘inventive step’, and ‘industrial application’, the new amend-ment suffers from ambiguity and leaves several loopholes in defin-ing these terms. The other criterion for patentability in the newAct, namely ‘inventive step’, unnecessarily broadens the scope.Accordingly, the patentee is either required to display that theinvention incorporates a technical advance or has economic sig-nificance, or both. Thus, by simply showing economic significanceof an inventive step over technical advance, patent holders getthe benefit of this broad and ambiguous definition.

Compulsory Licensing

One of the central themes of the Doha Declaration is the issueof compulsory licensing. Patent monopoly abuse is sought to berestricted by issuing a compulsory licence to a generic producerin the pharmaceutical market. The Doha Declaration reaffirmedthe members the right to protect public health and extolled themembers to interpret and implement TRIPS, which would helpthem promote access to medicines for all. According to the newlyamended patent Act, a compulsory licence can be issued onlyduring a national emergency, extreme emergency or publicnon-commercial use, and it will be issued only after three yearsfrom the date of grant of the patent. By leaving out the groundson which a compulsory licence can be issued, the bill barters awaythe flexibility brought in during the Doha Declaration.

Cap on Royalty Payments

Another related issue with compulsory licensing is the cap onremuneration to the patent holders. The amended Act leavesopen this issue and assures ‘reasonable royalty’ to the patentmonopoly. In many countries, there is a cap on royalty pay-ments made to the patent holders, say 4% of the total turnoverof the medicine. Patents monopolies can simply refuse to issuecompulsory licensing by demanding excessive royalty pay-ments. What constitutes ‘reasonable’ is only to be decided inthe court, multiplying litigations.

Mailbox Products

Product patent regime, all over the world, thrives on frivolousclaims for ‘me-too’ drugs of similar chemical entities. This is clearlyin evidence before the advent of product patent regime in India.Under the mailbox provisions (India is accepting applicationsfor product patents in the areas of pharmaceuticals and agro-chemicals since 1999, although not granted any patents sincethe amendment was made only in March 2005), there were report-edly 4792 applications for product patents although during 1995-2004, only 297 new chemical entities have been bestowed withproduct patent status in the world. It is therefore clear that therest of the applications for patents are only frivolous in nature.Moreover, according to the amended Act, any generic producerwho were manufacturing these mailbox products, before Janu-ary 1, 2005 can continue to produce such medicines but arerequired to pay ‘reasonable royalty’. Accordingly, the generic man-ufacturers were required to show that they made ‘significantinvestment’ in their venture. This ambiguity is likely to throw upinfringement suits and more litigation.

Pre-grant and post-grant opposition

Through the present amended Act, initiation of oppositionproceedings against a grant of patents is allowed only by wayof ‘representation’ and not in the form of notice. Further ambi-guity is reinforced as it is unclear whether access to documentsof patent holder is possible. If not, how will any oppositionproceedings be carried forward or to start the process?

Policy suggestions

Out-of-pocket spending on drugs by households in India isextremely high. Given the low purchasing power of the pop-ulation, virtually no health insurance in place and with aninadequate and malfunctioning public health institutions,the need of the hour is to focus on the following: � The present list of drugs under the DPCO, 1995 needs to

be expanded by including all the drugs under the EssentialDrugs List. The criterion of essentiality must form a vitalpart in deciding whether a drug is to be included in thecontrolled category or not.

�The Indian pharmaceutical market is flooded with irrationaldrugs (particularly combination products). Estimates sug-



gest that there are about 20,000 products in the market.With barely 300-plus drugs recommended by the WHOand 268 in the Essential Drugs List as proposed by theGovernment of India, 2003, it would be entirely possible totackle all disease conditions in the country. In one stroke,all combination products could be wiped out by a govern-ment edict. Towards this goal, a committee of physicians,pharmacologists, microbiologists, etc. should be appointedto review irrational combination drugs.

� It is absolutely essential to encourage only generic drugs. � Formulation of standard treatment guidelines is impera-

tive in the backdrop of an essential drugs list. Moreover, aNational Formulary updated on a two-yearly basis also needsto be put in place. We also recommend that a NationalAntibiotics Committee be set up and continuous surveil-lance ensured on the availability of antibiotics.

� Manufacturers and retail pharmacy stores may be providedwith a variety of incentives to produce and sell essentialdrugs. Fiscal incentives such as lower duty, subsidy, etc.could be provided. For instance, in the post-April 2005period, a VAT of 4% is being proposed on drugs and med-icines. Although 4% could be levied on other inessentialdrugs, essential drugs could attract a minimum of 1% VAT.

� Since trade margins are exorbitantly high in the drug indus-try, fixing ceilings on trade margins is necessary. Currently,price-controlled drugs under the DPCO, 1995 attract 8% onwholesale and 16% on retail. This margin can continue at thisrate and uncontrolled drugs should also be brought withinthe purview of margin ceilings. As suggested by the interimreport of the Sandhu Committee (Government of India 2004)we propose wholesale and retail margins on branded drugsto be 10% and 20%, respectively. On generic-generic drugs,the respective margin could be 15% and 35%. This shouldbe inclusive of various trade discounts offered to dealers.

� Monopsony purchase can check exorbitant profit andtrade margins of drug corporates. Centralized public pro-curement is definitely a way to save the public exchequer. i) As a first step, procurement of drugs meant for all

Central Government health programmes and healthfacilities of different ministries and other autonomousbodies need to be centralized. Health institutionsunder the Central Ministry must strictly dispenseonly generic drugs and do away with proprietary drugs.

ii) The success of the TNMSC in drug procurement couldbe replicated in other States as well. During 2003-04, with a total budget of around Rs 120 crore, theTNMSC served nearly 11,000 medical institutions (frommedical college hospitals to subcentres, includingautonomous institutions and other departments inthe State). The administrative cost involved in run-ning TNMSC is in the range of 0.5%-1%. By simplyprocuring in bulk and streamlining the procurementsystem, the present budget spending on drugs couldsave huge resources. This would enable States toprocure more and make them available to the needy.

� Drug regulation has become a complex and neglected

issue over the years in India. Strengthening the drug regu-latory authority, as prescribed by the Mashelkar Commit-tee, is the need of the hour. The drug regulatory authoritycould be provided with an autonomous status to ensuretransparency and effective functioning. To this end, we sug-gest that the government set up a National Drug Author-ity (NDA) with an autonomous status to take up the func-tions of drug pricing, quality, clinical trials, etc. Consequently,the present National Pharmaceutical Pricing Authority (NPPA)could be merged with the proposed NDA. For strengthen-ing the drug regulatory system as suggested by the MashelkarCommittee, the Central Government needs to allocate Rs1.6 crore annually for the additional posts (mostly inspec-tors) that would be created and another Rs 50 lakh as con-tingencies for the creation of additional offices.

� While the Essential Drugs List is prepared by the Ministry ofHealth and Family Welfare, the Ministry of Chemicals and Fer-tilizers is involved in formulating and exercising price controlson drugs. For an integrated approach, it would be a better ideato transfer the functions of both the ministries relating todrugs to the proposed NDA. The NDA must make efforts tocollect, tabulate and disseminate data on drug production, ther-apeutic-wise sales, company level information on drugs, etc. Itis absolutely essential for the government to collect such data.

� To ensure a transparent mechanism for new drug approvals,a Public Hearing could be organized involving physicians,pharmacologists and specialists in that specific therapeuticgroup by the drug controller. The drug company could berequested to furnish data indicating with which of theexisting drugs the new drug has been compared in clinicaltrials and provide justification for the introduction of thenew drug. This would ensure that the new drug in questionis not only safe but also less expensive than the existing ones.

� The new Indian Patent (Amendment) Bill, March 2005 whichwas passed by Indian parliament suffers from ambiguity, tech-nical loopholes and still fails to incorporate some of the flex-ibilities incorporated in the TRIPS, WTO regime. This has seri-ous implications for the access to drugs and medicine in thecountry in specific and to the developing world in general.

� The amendments need to clearly spell out the scope ofsubject matter on patentability.

�The question of ‘reasonable’ royalty to be paid on the issuanceof compulsory licensing should be stated upfront and spe-cific by indicating a cap on royalties to be paid to the pat-entee, say 4% of the total turnover in a year.

� For the ‘mailbox’ drugs introduced post-1995, the Gov-ernment need to specify what constitutes ‘significant invest-ment’ for the Indian companies manufacturing these drugsotherwise it may lead to unnecessary litigation.

� Government should consider incorporating in the immedi-ate future, mechanism for automatic compulsory licensing.Given the fact that the Indian Patent Offices suffer from

lack of adequate manpower and infrastructure, the discre-tionary powers vested on the patent office in terms of time-lines of Rules could make the patent office vulnerable to vestedinterests. This is because Rules can be amended as and when



the patent office deems it fit leading to excessive discretionarypowers. We recommend therefore that the rules be made more

transparent and at the same time strengthen the Patent Officein order to carry out its duties more efficiently.



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References



Annexure 1

CGHS

HSCC(Delhi bulk)

Medical stores depot(Rest of India bulk)

Local purchase(Reimbursement)

Tertiary hospitals

National HealthProgramme

Drug procurement and distributionsystem (Central Government)

Ministry of Health and Family Welfare

Supplies to paramilitary Few States forces

Govt. medicalstores depot

CHCs PHCs Subcentres

States/regional ware-houses

District warehouses

HLL HSCC RITES

HE TERM “MEDICAL TECHNOLOGY” IS GENERALLY TAKEN TO ENCOMPASS THEentire set of attributes associated with inputs that go into the provision of medicalservices. These include pharmaceuticals, medical devices, medical procedures andthe organization of health services themselves (Mohr et al. 2001).1 A change in med-ical technology is usually taken to imply a change in one, or more, of the aboveattributes. Thus, the development of new drugs to treat people with HIV, the emer-gence of angioplasty and coronary-stents for coronary artery disease, and the devel-opment of magnetic resonance imaging (MRI) and Positron Emission Tomography(PET) for diagnostic purposes are all examples of changes in medical technology underthis definition.

In India, policy and research concern with the introduction and spread of medicaltechnology been limited, thus far. The exceptions are pharmaceutical drugs and theregulation of diagnostics for sex determination of the fetus (Balakrishnan 1994; Govin-daraj and Chellaraj 2002; Mudur 1999). Discussions on medical devices, when theyhave occurred, have focused on corruption and other problems in public procure-ment (Johnson 2003; Sudarshan 2003).

In contrast, in developed countries, the subject of medical technology has attractedresearch and policy attention over a considerably wider area. A particularly fruitfulline of inquiry has been the impact of medical innovations on health expenditures,and the pathways through which these expenditure increases occur. An influentialstrand of this literature argues that technological change accounted for more than20 percent of the multi-fold increases in health spending that occurred in the UnitedStates during the period from 1980 to 2000, mainly due to increased volume of uti-lization and higher prices (Mohr et al. 2001; Newhouse 1992).

Following from this, research in developed countries has tended to follow two direc-tions: first, to analyze factors leading to the development and subsequent increaseduse of advances in medical technology; and second, to inquire whether the addedexpenditures yield gains in health that outweigh the costs. Examples of the formerinclude examining the role of provider payment mechanisms, the system of medicaleducation, learning processes among practicing doctors, education levels amongpotential consumers of care, defensive medicine in response to malpractice law andgovernment regulations on the spread of newly developed technology; and on fac-tors that influence the development of malarial drugs (Baker and Wheeler 1998;Bikhchandani et al. 2001; Bryce and Cline 1998; Danzon and Pauly 2001; Finkelstein2003; Jonsson and Banta 1999; Lleras-Muney and Lichtenberg 2002; Kremer andSachs 1999; Ramsey and Pauly 1997; Rosenthal et al. 2001, Weisbrod 1991).

As to the question of whether added expenditures on medical innovations yieldsufficiently large health gains, the central conclusion of the existing literature is thatincreases in expenditures associated with medical technology are not a “social bad”.Thus Cutler and McClellan (2001) conclude that improved heart attack treatments(such as angioplasty with stents) and new methods for neonatal care and depressionhave yielded life-expectancy gains that, when valued in monetary terms, are at leastsix times their increased cost. Lichtenberg (2004) argues that the launch of new chem-ical entities (drugs) accounts for almost 40 percent of the increase in life expectancy

Appropriate Policies for MedicalDevice Technology: The Case of India

T


S E C T I O N I I I

1. Each of these terms can, in turn, be more precisely defined. For instance, the Global Harmonization Task Force (GHTF)defines a “medical device” as “Any instrument, apparatus, implement, machine, appliance, implant, in vitro reagent orcalibrator, software, material, or other, similar … article, intended by the manufacturer… for human beings for … diagnosis,… investigation…supporting or sustaining life…” (GHTF 2003, p.5)




[email protected]

SRINIVAS TAMANBIOMEDICAL ENGINEER

ANDHRA PRADESH VAIDYA VIDHANA PARISHAD

HYDERABAD, ANDHRA PRADESHINDIA


ANIL VARSHNEYHEALTHCARE MANAGEMENTCONSULTANT, HEALTHCARE CONSULTANCY SERVICES



SECTION III Appropriate Policies for Medical Device Technology: The Case of India

in a sample of 52 countries during the period 1986 to 2000.Cutler and Meara (2001) examined the declines in mortalityin the United States during the 20th century, and found thatmost of the declines are associated with technological advances- initially the emergence of antibiotics and later, better pro-cedures for addressing cardiovascular disease and neonatalmortality. A recent survey of 225 U.S. primary care physiciansidentified magnetic resonance imaging (MRI) and computedtomography (CT), along with angioplasty as having con-tributed significantly to the length and quality of life of patients(Fuchs and Sox Jr., 2001); although the value of such diag-nostic devices is contentious because populations of otherdeveloped countries such as Canada, continue to have excel-lent health systems and with much less reliance on MRI andCT-scan technology.

Presumably for the reasons above, Deaton (2004) suggeststhat the rapid transfer of knowledge and skills made possibleby closer global links has the potential of leading to greatimprovements developing country populations' health andconsequently, of reducing inequalities in global health sta-tus. It is also not surprising thus, that Cutler and McClellan(2001, p.12) conclude, “…medical spending as a whole is clearlyworth the cost” (Italics ours).

Relevance of Medical Technology Discussions toIndian Policy Makers

The above discussion ought naturally to be of to concernIndian policymakers, and for several reasons. First, there arelikely to be continued pressures on the demand side towardsadoption of medical innovations. An increasingly open tradeenvironment in India and heightened global interlinkages willlikely increase the awareness of newer medical technologiesin India and rising incomes, along with the spread of volun-tary insurance will make such technologies more affordableto the average Indian. These tendencies towards increaseddemand will be accentuated by an ageing Indian popula-tion. Indeed as its population ages, many of the innovationsin developed countries that have significantly greater num-bers of elderly populations will become increasingly relevantto India's population. These tendencies are likely to be fur-ther exacerbated by “medical tourism” that is currently beingpromoted by the private sector and some government offi-cials in India (Fernandes 2003).

Second, there will be supply side pressures, as medicalinstitutions seek to adopt the latest innovations in a bid toattract not only customers, but also leading medical profes-sionals who might otherwise choose to practice elsewhere, orto migrate abroad (for example, Baru 1998). This will likelyhave a cascading effect on the nature of training provided inmedical institutions - more diagnostic intensive, with pre-sumably less focus on clinical skills. To this one can addincreased efforts of suppliers of medical devices and otherproducts to sell their products in rapidly growing markets suchas India.

It is, therefore, easy to project that with demand- and sup-ply side- effects, the volume of new medical products in

India will expand. Prices may rise as well, as suggested bysome analyses of the impact of India's drug patent regimemoving from process patents to product patents. The limitedpublic resources currently available to spend on health meansthat governments at the center and the state levels in Indiamay need to set priorities regarding the use and adoption ofmedical innovations, and their diffusion, at the very least, inpublic facilities.

One might suspect that, by their very nature, public sectorbudgetary limits force new medical technology adoption inpublic facilities to progress at a slower rate than in privateinstitutions. However, success in this endeavor is not guar-anteed, if there are incentives to obtaining new equipmentand adopting newer procedures, including greater prestige,and the need to prevent poaching of medical personnel byprivate sector institutions. The existence of corruption in pro-curement procedures may also positively influence technol-ogy adoption. A paradoxical situation may arise where healthcare costs could nonetheless be increasing at a fast rate inthe public sector without any corresponding gains in health,if the public sector functions inefficiently.

Effort may be needed to shepherd developments in theprivate sector as well. The large amounts currently spent outof pocket by Indian households on health care do not elimi-nate the need for public policy on medical innovation, givena setting where doctors and suppliers of new technology arein a position to decide health services consumption patterns.Thus, public intervention may be needed, or safeguards intro-duced to ensure that the innovations used yield the highesthealth benefits relative to expenditures; and intervention mayalso be needed to address any inequalities in access that mightresult on account of differential physical and financial accessto innovations.

In thinking about these issues in the Indian context, a majorhandicap is the lack of good information on medical tech-nology flows and the factors driving these flows, and theresulting impact on outcomes of interest - such as the costof care, inequality in access to care, and ultimately, healthoutcomes. This paper is a first step in the direction of fillingthis gap, by bringing together existing data and new infor-mation on the way medical technology is diffusing in India,its use patterns, and in its potential implications.

To keep the discussion manageable, we focus on technol-ogy embodied in medical devices. Four main research andpolicy questions are addressed:

� What do we know about the spread of new medical devicetechnology in India and what are the main factors under-lying this tendency?

� How effectively is available medical device technology inIndia being used in terms of its impacts on the costs ofproviding health care and on inequalities in access to healthcare?

� What is the state of regulations in India with regard tomedical device technology?

� What is the appropriate strategy (including public/privatepartnerships) towards medical innovations and the avail-


Appropriate Policies for Medical Device Technology: The Case of India SECTION III

able basket of medical technology and what can we learnfrom the experiences of developed countries in this regard?

In practice, addressing these questions in research has provedto be difficult even in the United States, a country with richdata sources. In India, where data are sparse it is difficult tomeaningfully address these questions beyond a small-subsetof issues and categories of medical innovations. Thus, in ana-lyzing how modern medical technological innovations embed-ded in devices are spreading and are being used in India, wefocused primarily, but not exclusively, on diagnostic equip-ment such as MRI and CT-scans. An absence of domestic pro-duction for such diagnostic devices means that reasonablyaccurate estimates of the flows of such devices in India canbe constructed from foreign trade data.

Our analysis of import flows of modern diagnostic medicaldevices is supplemented, in the paper, with a discussion aboutthe efficiency with which available medical devices, diagnosticand non-diagnostic, are currently being used in India. Thisanalysis is valuable because it has the potential of highlight-ing the cost and effectiveness implications of the introduc-tion of new medical devices. Inefficient use of existing med-ical devices has implications in that in a regime of changingtechnology, it may be a pointer to rising health expenditureswithout corresponding improvements in health outcomes ofinterest.

We used data from several sources for our analysis. Theseinclude import statistics (on both quantity, and unit prices)from official foreign trade data of the Ministry of Commerce,utilization and expenditure information from household con-sumer expenditure surveys and health care utilization andexpenditure surveys of the National Sample Survey Organi-zation (NSSO). These data were supplemented by selectedcase-studies of the utilization of imaging equipment in thepublic and private sectors, recently undertaken by one of theauthors on behalf of the National Commission on Macro-economics and Health (NCMH); and by a detailed analysis ofthe functional status of medical equipment in public sectorhospitals operated by the Andhra Pradesh Vaidya VidhanaParishad (APVVP).

Flows of Medical Devices into India

Tables 1 and 2 present data on the volume, and the value,of imports of a selected set of diagnostic medical devicesinto India, such as CT-scanners, MRI systems, the linearultra-sound scanner; angiograph, endoscopes and electro-cardiograph (ECG).2 These devices all have the characteristicthat they are predominantly manufactured outside India, sothat import flows offer a reasonably accurate picture abouttheir pace of diffusion into India.

The data in these tables were obtained from commodity-level foreign trade statistics compiled by the Ministry of Com-

merce, and careful readers will note a number of obvious short-comings in the information presented. First, the categoriza-tions used are potentially overlapping - for instance “wholebody scanners” as recorded by Indian customs can be boththe X-ray (CT-scans), or of the magnetic resonance imagin-ing (MRI) variety; unfortunately, the official trade statisticsdo not make a clear distinction between the two. Moreover,the distinction between a “CT apparatus” and a “CT-scanner”is not obvious, since these terms are used interchangeably inthe profession.3

Second, it seems that the volume units used for “MRIApparatus” in the trade statistics data are not identical to a“full MRI system” since a quick calculation using the infor-mation the two tables reveals that doing so would lead tounrealistically low unit cost estimates for, say the most recentyears 2000-3. Now some of this could be the result of importsof older MRI models and/or imports of used equipment. It isalso possible that the term “MRI apparatus” refers to indi-vidual components of the MRI system, including major replace-ment parts, so that several such components make up a fullyfunctional system. Thus these statistics cannot allow us toimmediately infer how many completed MRI systems havebeen imported into India. Presumably, a similar concern holdsfor items under the term “CT Apparatus” as well.

Despite these obvious data issues, the information in Tables1 and 2 is still quite illuminating. Note that with perhaps aslight blip during the period 1994-7 both the volume, how-ever measured as well as the real value of imports of medicaldevices have experienced sharp increases in the 1990s. Foritems that serve essentially as consumables, or have well definedunits, such as catheters and endoscopes, there is a clear increasein utilization. For devices such as MRI's and CT-scans, theincrease could also be due to the increased rate of imports ofspare parts, as the cumulative number of devices present(installed) in the country increases over time, or new equip-ment. Both factors are likely to be associated with increasedutilization. The data in Table 1 on trends in CT-scan importsand the extremely sharp rates of increase in CT Apparatus unitsis not inconsistent with this claim.

Although we do not provide the calculations here, it canalso be easily checked from the numbers in tables 1 and 2that per unit cost (value/volume) for almost all of the devicesexamined here has either remained stable, or declined dur-ing the period under consideration. There are three possiblescenarios consistent with this: (a) lowered prices of older mod-els and their spare parts with medical innovation in developedcountries; (b) newer models becoming available at pricesthat are essentially similar to the past prices for what nowhave become “older” models; and (c) changing compositionof the “Apparatus” category for MRI and CT scans. Since (c)applies only to the case of categories “CT Apparatus” and“MRI Apparatus”, we conclude that innovation in the med-ical device sector is accompanying price declines in medical

2. A cardiac catheter is used as a diagnostic device. But unlike other devices discussed in Tables 1 and 2, it is a consumable (thrown away after use). 3. Nor can one simply guess that a CT-scanner (non-whole body) and a whole body scanner is a subset of “CT apparatus” because it can be readily checked that in some years the sum of thevalue of the two types of scanners, exceeds the value of the “CT apparatus” category.



devices, or quality improvements, or some combination ofboth. Notice that our results would be even stronger if theprices were expressed in US$ terms, since the Rupee depreci-ated against the US$ during this period at a rate much greaterthan the rate of inflation (Government of India 2004).

The Demand Side

So far we have looked at the supply-side picture and inferredtrends in the spread of medical diagnostic technology in India- both in terms of units, as well as in terms of actual utiliza-tion of the equipment from import data. Corroborating evi-dence is available, even if not sufficiently device-specific, fromhousehold survey data on the use of diagnostic services. Tables3 and 4present information from household surveys on healthcare utilization and consumer expenditures in India. Datafrom two large household health care and utilization surveyssuggest (in Table 3) that the likelihood of undergoing adiagnostic test, by an average inpatient, or by an average out-patient, increased during the period from 1987 to 1996, thetwo points in time at which the two surveys were respectivelyconducted. To be sure, the different categories of diagnos-tic tests (ECG versus ESG versus CT-scans, say) were not dis-tinguished by the household survey questionnaire; but thethrust of the data seems clear enough.

Similarly, table 4 shows that diagnostic expenditures byhouseholds nearly doubled during the period from 1993-94to 1999-2000, whether taken as a proportion of aggregatehousehold spending, or as a proportion of aggregate healthcare spending by households. Even more remarkably, diag-nostic expenditures accounted for one-fourth (25 percent) ofthe increase in the share of health care spending by house-holds that occurred during this period. The evidence in table3 on the increased per patient usage of diagnostic servicessuggests that at least some of the increase in expenditureswould have been accounted for by increased use of diagnos-

tic services. Taken together these bits of information in tables 3 and 4

suggest that: (a) Diagnostics use is increasing over time inIndia; (b) that people are paying more often for diagnosticservices; and the net result of these tendencies is that the over-all share of diagnostic care spending (which is the result ofsome mix of increased use and increased payment) in totalhousehold budgets is also increasing over time.

Why did this happen? There are a number of candidatereasons. For a start, the spread of new diagnostics can beexpected to be the natural outcome of scientific progress. Thisprocess would also likely have been facilitated by the liberal-ization in the foreign trade regime in India, a process that tookroot in the early 1990s. Unfortunately, it is not straightfor-ward to test this latter hypothesis since the definitions ofvarious commodities in foreign trade records were not spe-

Table 1

Import of selected medical devices to India byvolume, 1991-2003

Device type Three year totals

1991-94 1994-97 1997-2000 2000-03

CT apparatus NA >73 206 1810

CT scanner (NW) 113 167 181 176

MRI apparatus NA 78 113 807

Scanner (whole body) 68 61 49 116

Cardiac catheters (000s) 1092.54 1000.35 1171.03 1774.93

Electrocardiogram 171 231 3713 9347

Linear ultrasound scanner 742 1135 1737 4733

Endoscopes 1862 2114 2526 9590

Fibroscopes NA 627 1049 2691

Angiogram NA NA 72 176

Note: NW = CT scanner other than for the whole body; measurement units of CT and MRI apparatusare based on Indian Customs definitions.Source: Foreign Trade Statistics of India

Table 2

Import of selected medical devices to India byvalue, 1991-2003 (Rupees in millions)

Device type 1991-94 1994-97 1997-2000 2000-03

CT apparatus NA >53.81 544.01 1647.47

CT scanner (NW) 357.08 187.41 234.58 464.46

MRI apparatus NA 557.75 713.67 2687.96

Scanner (whole body) 422.94 213.04 312.33 436.45

Cardiac catheters (000s) 542.32 473.47 1621.18 2364.04

Electrocardiograph 102.12 109.60 289.03 226.43

Linear ultrasound scanner 388.63 689.66 816.16 2477.50

Endoscopes 97.00 125.33 108.65 399.02

Fibroscopes NA 47.55 71.53 90.42

Angiograph NA NA 567.05 804.11

Note: NW = CT scanner other than for the whole body; measurement units of CT and MRI apparatusare based on Indian Customs definitions; GDP deflator used to convert Rupee prices into 1993-94prices.Source: Foreign Trade Statistics of India

Table 3

Proportion of patients getting an X-ray/ECG/ESGscan in India, 1986-87 and 1995-96

Care type and residence X-Ray/ECG/ESG/ scan

1986-87 1995-96

Inpatient

Rural 33.63 43.06

Urban 45.16 52.07

Total 36.82 46.39

Outpatient

Rural 2.90 3.61

Urban 5.47 6.34

Total 3.57 4.41

ECG: electrocardiograph; ESG: electrosonogramSource: 42nd and 52nd rounds of the National SurveySample Organization's household surveys.



cific enough to identify imports of specific items such as MRI-and/or CT-scanners in the period prior to 1991.

Other factors are likely to have played a role as well. GivenIndia's health system, where the bulk of health care spend-ing is by households, technology innovation will also be drivenby consumer demand expressed in terms of purchasing power.The period since the early 1980s has been characterized byrapid increases in incomes in India, which may very well havecontributed to the rising demand for better quality care, includ-ing better diagnostic services. Since this period has also beena time of severely constrained government budgets, one mightnaturally expect to see any evidence of such a tendency in agrowing private sector. Thus table 5 which presents surveydata on whether households who obtained diagnostic serv-ices paid for them, or not, indicates that the share of “free”diagnostic services has declined over time. This is entirelyconsistent with the evidence in table 4which shows increasedproportions of household spending directed to diagnostics.

Into the above mix, one can add the role of medical prac-titioners and diagnostic service suppliers themselves in pro-moting the use of diagnostic services. It is well-known, forinstance, that many medical practitioners in both the publicand private sectors have informal contracts with private providersof diagnostic services and pharmacies that yield them a com-mission on each referral made to the concerned pharmacy ordiagnostic service provider. Financially large investments indiagnostic equipment put extra pressure on diagnostic serv-ice providers to offer incentives to individuals (qualified andunqualified practitioners) who may be in a position to offersuch referrals. Baru (1998, pp.112-4) cites evidence fromHyderabad that this commission could be as much as 10-15percent of the cost of a diagnostic test. Varshney (2004) foundthat an average of 10 percent of total expenditures of diag-nostic service providers consist of “business development”payments to doctors; and the share may be as high as 30percent for high-end diagnostics such as MRI and CT scans.

Table 4

Diagnostic, health and total expenditure of Indian households, 1993-94 and 1999-2000

Expenditure categories 1993-94 1999-2000

Rural Urban Rural + Urban Rural Urban Rural + Urban

Inpatient

Diagnostic Exp /Total HH Exp (%) 0.05 0.05 0.05 0.09 0.10 0.10

Diagnostic Exp /Total IP Exp (%) 5.47 3.99 4.85 6.82 7.16 6.95

Total IP Exp/Total HH Exp (%) 0.89 1.19 1.00 1.37 1.44 1.40

Outpatient


Diagnostic Exp /Total OP Exp (%) 1.23 2.52 1.60 3.08 4.21 3.43

Total IP Exp/Total HH Exp (%) 4.55 3.42 4.15 4.72 3.62 4.31

Inpatient + Outpatient


Diagnostic Exp /Total OP+IP Exp (%) 1.92 2.90 2.23 3.92 5.05 4.29

Total IP+OP Exp/Total HH Exp (%) 5.44 4.60 5.15 6.09 5.06 5.71

HH = Household; IP = Inpatient; OP = Outpatient Source: Consumer Expenditure Surveys of the National Survey Sample Organization, 1993-94 and 1999-2000

Table 5

Patients getting an X-Ray/ECG/ESG, by payment mechanism, All India, 1986-87 and 1995-96

Care type and residence 1986-87 (%) 1995-96 (%)

Free Part-free Payment Free Part-free Payment

Outpatient

Rural 21.58 5.28 73.14 9.14 0.35 90.51

Urban 29.16 5.49 65.35 11.16 1.09 87.75

Total 24.63 5.37 70.01 9.69 0.55 89.76

Inpatient

Rural 39.69 3.12 57.19 35.75 10.57 53.68

Urban 46.22 3.70 50.08 41.94 13.69 44.37

Total 41.91 3.32 54.78 38.01 11.71 50.28

ECG: electrocardiogram; ESG: electrosonogramSource: NSSO household surveys of 1986-87 and 1995-96



Not all centers give incentives, of course, and commissionsare especially common among unqualified medical practi-tioners. Overuse may also result on account of internal refer-rals in corporate/private hospitals where there may be per-formance targets for consultants.

Cross-country evidence

To supplement the discussion on the role of different factorsin influencing the spread of medical technology, we carriedout a regression of a measure of MRI imports on a set of sup-ply- and demand-side explanatory variables, for a set ofnon-MRI manufacturing, primarily developing, countries.Using data from the World Bank's World Development Indi-cator's database and the United Nations, we inquired whetherinflows of MRI equipment into countries were systematicallyrelated to countries' levels of per capita income (a proxy foreffective demand), doctor-to-population ratios (a catch-allfor supplier driven factors) and the role of foreign-aid (ademand side factor). We used country-reported import dataon MRI equipment flows in a sample of 49 MRI equipment-importing countries (with negligible capacity to produceMRI equipment on their own). The main findings are reportedin table 6. While it is difficult, at this point, to ascribe causal-ity to the relationships for obvious econometric reasons, thefairly strong relationships (in the expected direction) betweenimports of MRI equipment per capita, per capita real GDP andthe doctor-to-population ratios are worthy of note.

Are these flows achieving the desired objectives?

The obvious question is: Did the spread of diagnostic devicesin India improve outcomes valued by policymakers, relativeto the expenditures incurred? Answering this question is not

straightforward, because although one can claim on thebasis of the household expenditure data that medical diag-nostic devices import inflows reflect increased demand andcontributed to increased diagnostic services utilization andspending in India, the impact on outcomes such as access andequity is less clear; even less so for health improvements

One rough method to check for efficiency in resource useis whether the supply of equipment such as magnetic reso-nance imaging systems in India was excessive, relative to somepre-agreed “norm.” Alternatively, one could look to whetherthe equipment is underutilized, relative to some notion of fullcapacity. A study for the state of Pennsylvania in the UnitedStates suggests a norm that ranges between 3,000 and 3,500scans per MRI per year, as appropriate (Bryce and Cline 1998).Alternatively, one can try examining the number of MRI sitesper capita in other countries and take that as the norm.Baker and Wheeler provide an estimate of about 1.45 MRIsites per 100,000 people in the United States in the mid-1990s.The use of United States data to develop a norm is, needlessto say, troublesome given that there are quite legitimateconcerns about excessive medical technology and medicalexpenditures in that country, relative to health outcomesachieved. Thus, the situation in other countries that may havemanaged their health resources somewhat more efficientlyought also to be considered. Rublee (1994) provides estimatesof 0.11 MRI per 100,000 people in Canada. This range ofMRI per-population estimates - between Canada and theUnited States - can serve as a norm for our purposes.

The Radiology Association of India (RAI) website estimatesthat roughly 50 MRI's and 350 CT-scanning facilities cur-rently exist in India, whereas a recent estimate based on dis-cussions with wholesalers of diagnostic equipment assessesthe number of MRI's to be of the order of 70-100, and CTscans to be about 300 (Varshney 2004). However, these appear

Table 6

Correlating MRI imports to potential explanatory variables

Explanatory variable Dependent variable: Average MRI imports (2001-2003) per capita

Model I Model II Model III Model IV

Except Africa Except Africa

Constant -0.395 -0.369 -0.377 -0.365

(0.155) (0.154) (0.184) (0.183)

Per capita GDP (1995 US$) 0.083** 0.070** 0.084* 0.076**

(0.016) (0.018) (0.045) (0.020)

Doctors per 1000 population 0.092** 0.084** 0.086** 0.080*

(0.039) (0.039) (0.018) (0.045)

Foreign aid per capita (US$) 0.021 0.020 0.011 0.011

(0.020) (0.020) (0.027) (0.027)

Average MRI imports 1998-2000 per capita 0.300 0.253

(0.202) (0.226)

N 49 49 40 40

R2 0.508 0.531 0.488 0.506

Note: Regressions are based on data from the United Nations and World Bank. All major exporters of MRI products were excluded from the sample.** Statistically significant at the 5-percent level of significance.



to be serious underestimates of the number of CT scans,since Table 1 suggests at least 931 CT-scans in India (wehave included only whole-body scanners in our list of CT-scans), even if we ignore items listed under “CT-apparatus”.4

That would suggest that the actual number of CT-scans exceedsRAI estimates by nearly 166 percent. If we assume similarrate of RAI underestimation for MRI's, the estimated numberfor magnetic resonance imaging sites in India is 133, whichtranslates into 0.0133 per 100,000 people. If we combineour estimates of the number of CT-scan and MRI facilities,that still comes to only about 0.11 CT/MRI units per 100,000people. Overall, therefore, the number of CT-scan and MRIdiagnostic facilities in India does not seem to be excessive,even in comparison to Canada.

There may be an issue about distribution of diagnostic equip-ment sites though, since high-end diagnostic facilities suchas these are typically located in urban areas, particularly majormetropolitan areas. Taken as a proportion of India's totalurban population only, the estimated number of MRI/CT-scans in India constitute about 0.39 per 100,000 people. Eventhis is substantially lower than just the number of MRI sitesper capita in the United States, and is almost certainly likelyto be lower than the combined MRI/CT per capita numbersfor Canada.

Another way to try to infer excessive supply (or otherwise)of diagnostic equipment is to examine utilization rates in rela-tion to some standards. For instance, if utilization rates aretoo low, one may judge that there are “too many” medicaldevices in the market.5 A recent study obtained informationon two Delhi hospitals, one public and one private, and onestand-alone private diagnostic facility in Delhi, for this pur-pose (Varshney 2004). The findings of the Varshney case stud-ies are rather stark. In the private sector, the MRI unit con-ducted 7,500 scans per year while being operational for a totalof 360 days a year. In contrast, the public sector MRI facilitywas used for only 740 scans, and the facility was operationalonly 300 days per year. Clearly the public MRI unit appearsto be seriously underutilized. Whether this indicates excesscapacity, relative to need, is unclear since the poor may forgodiagnostic services altogether if there are problems of access.The functioning of this unit at below capacity, if symptomaticof a broader problem with public sector facilities, wouldsuggest that poorer groups have unequal access to newtechnology, even when subsidized by the public sector.

There are good reasons to believe, however, that there isgeographic inequity in the location of diagnostic sites, andthat may indicate spatial inequity in access as well. Data for70 MRI sites identified in Varshney (2004) suggest a lopsideddistribution: 63 percent (44) of the sample MRIs were locatedin 5 major cities (Bangalore, Chennai, Delhi, Hyderabad andMumbai) with a combined population of no more than 45million (or 4.5 percent of India's population), and composedof the most well off individuals in India. Thus, one adverseoutcome of the introduction of state of the art diagnostic

services, at least at the present time, is inequity in access tohigh technology health care, whether valuable or not for healthoutcomes. The cross-country evidence in table 6 suggestssimilarly that modern diagnostic technology is likely to bedirected towards richer countries/areas with high doctor-to-population ratios.

Another area of concern is misuse of technology. Policy-makers in India have been particularly concerned about theuse of diagnostic services such as ultrasound for sex deter-mination, and implications for female feticide. While the prac-tice has been banned in India, it is commonly understood thatit still continues illegally, given that both the user (deman-der) and the supplier of diagnostic services gain from it, andmonitoring is potentially costly.

Efficacy of Medical Equipment Use in thePublic and Private Sectors

The previous section focused on advanced medical diagnos-tics and suggests that in the aggregate there may not be anexcess of diagnostic devices such as CT-scans and MRI sitesin India. It presented some evidence of regional inequity inlocation; and it briefly pointed to a problem with an existingmechanism (public sector provision) to partially addressinequities related to financial access. That is, governmentfacilities that are often the sole affordable source of advancedtechnological devices to the poor do not keep their equip-ment functional, or are otherwise unable to preferentially pro-vide services to the poor. How policymakers handle the entryof new technology obviously has important health policy out-comes.

The above discussion also suggests that thinking on policyapproaches to address medical devices and the technologythey embody needs to go beyond the effective harnessing ofthe new technologies. In particular, an examination of theeffectiveness with which health facilities in the public and pri-vate sectors currently use their equipment is potentially veryvaluable. This would help focus attention on health systemfeatures that might lead to wastage of resources if left unat-tended at a time of technological change, and refocuses atten-tion on the challenge of efficiently providing public sectorhealth services to the less well off.

Equipment Use in the Public and Private Sectors

We use two sources of information on the public sector uti-lization of medical devices, mainly durable equipment: forthe state of Andhra Pradesh from the Andhra Pradesh VaidyaVidhana Parishad (APVVP); and from a study undertaken forthe National Commission on Macroeconomics and Health byVarshney (2004). Information on the private sector is pri-marily from Anil Varshney (2004).

The data from APVVP covered 74 community health cen-ters, 55 area hospitals and 21 district hospitals run in Andhra

4. We assume that all CT-scans purchased prior to 1991 are no longer in use.5. Of course, assessing utilization rates of equipment may be tricky in assessing optimal capacities if there is supplier induced demand.



Pradesh. Unfortunately this data cannot always be sepa-rately broken down by diagnostic and non-diagnostic equip-ment. A priori, however, there is no reason to believe thatfindings for the two sets of equipment ought to be different.This data highlights several areas of concern to policymakerswith respect to equipment in government health facilities. Inparticular, (a) government facilities face an acute shortage ofbasic equipment; (b) the equipment on the premises is notalways functional; (c) and there are potentially serious prob-lems with regard to time taken for installation and repairs.Similar findings for a selected set of developing countries arepresented in Mavlankar et al. (2004).

Consider availability. If even the most basic equipment isunavailable, the introduction of newer technologies, if it wereto occur, would lead to inefficient use of resources, espe-cially if cheaper investigations were substituted by more expen-sive ones. As of 2004 the value of medical equipment atcommunity health centers, district and area hospitals underAPVVP ranged between 70-85 percent of that required undernorms focused on acquisition of basic, not the most advancedtechnology. Notice that this “superior” situation occurredafter a long period of stewardship and World Bank support,and unlikely to be representative of other, more backwardstates in India. Their situation would be more akin to APVVPhospitals in 1993 - when available equipment ranged from25 percent to 75 percent in value relative to norms set by thegovernment.

Even when equipment was available, it was not fully func-tional. This possibility raises questions about whether thenew technologies, if introduced, can effectively be used atall. In 2002, between 45-51 percent of “major” medical equip-ment at area hospitals and community health centers, wasclassified as either non-usable, idle, or with low utilizationrates. Only at the high-level district hospitals was the situa-tion better, with an average of 15 percent for the three cat-egories; in 1993, the situation was, of course, much worsewith 28 percent of the major equipment, even in districthospitals, being either underutilized, or not functional.

There are other kinds of wastage as well. For instance, ittook an average of between 2-4 months to install X-ray andultrasound equipment at the from the time it was received ata APVVP run district hospital during the period 2000-2, withthe lag being substantially greater for lower-level area hos-pitals and community health centers. Even these lag timeswere substantial improvements over previous periods.

The findings for APVVP hospitals are reflected in the case-studies undertaken by Varshney (2004) of diagnostic devicesat public hospitals in New Delhi. For instance the time fromordering to actual commissioning of MRI, CT-scan and Ultra-sound equipment at the public hospital was four times thatof comparable private facilities. Delays occurred at every-stagein the ordering and delivery process at the public hospital -deciding upon the type of equipment needed, clearance ofpayments to the supplier of the equipment, incomplete elec-trical and other pre-installation preparatory work at the timeof receipt of the equipment. This does not include the timetaken for “needs assessment” a process that could poten-

tially take years at a public hospital. In addition, utilizationrates following installation were not always up to the mark,as indicated by the number of cases scanned by the MRI unitat the public hospital. The latter may reflect more than justa breakdown of equipment - as we discuss in some more detaillater. Varshney (2004) also undertook an analysis of publicand private diagnostic facilities in one district in Rajasthan.The findings are similar to those from Andhra Pradesh andNew Delhi: that relative to private facilities, the “down-time”in public hospital equipment was greater, reflecting feweroperational hours as well as the poor functional status ofequipment.

The obvious implication of the inefficiencies outlined aboveis that the cost of production of diagnostic services (and indeedfor all other types of equipment) and the overall quality ofservice is likely to be different under public and private sec-tor managements and operation. Table 7 reports unit costfindings that have been derived from data presented in Varsh-ney (2004, Table 4.2.1). Even ignoring the costs of delays andconsequence foregone benefits in improved health in the pub-lic sector, the evidence suggests that private sector investi-

gation costs are somewhat lower than in public facilities, withthe case of MRI being especially stark in this regard. Unitcost calculations based on data from Rajasthan are similar inspirit to the results from New Delhi, and in some ways high-light the unique problems faced by lower-level public healthfacilities in India. The ultrasound equipment at the facilitywas non-functional, so that even though technicians werebeing paid and space occupied, no diagnostic investigationswere done.

But these unit cost estimates form only a part of the pic-ture, since there are significant quality differentials in serv-ice provision. For instance, an outpatient visitor scheduled foran ultrasound had a typical waiting time of 2 months, and amonth or more for a CT-scan in the public hospital in NewDelhi. The wait list for an inpatient ranged from 3-10 daysfor diagnostic services in the public hospital. Moreover, fol-lowing completion of an examination, the report was avail-able typically after a delay ranging from 3 to 5 days, andhard copies of the report were not usually accessible to thepatient. This is to be contrasted with private services wherethe services and the report were typically available on a

Table 7

Unit cost calculations of diagnostic investigationsin New Delhi

Institution Estimated average cost of investigation

Ultrasound CT Scan MRI scan Others

Public hospital 589 2700 50250 29

Private hospital 350 3333 NA 45

Stand alone

diagnostics centre 503 1999 4285 26

All figures in INR (total cost includes fixed consumable cost) Note: Estimates are based on calculations and numbers reported by Varshney 2004.



“same day” basis. In addition, the mode for reserving slotsfor undertaking the tests, making payments and completingother administrative activities appear to be considerably morecomplicated in public facilities (Varshney 2004).

Why are there such differences in quality and cost inthe public and private sectors?

The proximate causes are obvious: non- or partly-utilizedequipment, resulting in fewer investigations, with personneland other costs either similar to, or higher than in the privatesector. But what are the underlying reasons for this state ofaffairs?

The causes of the poor functioning of equipment in thepublic sector, relative to the private sector range cover a widerange - from the unavailability of personnel needed to oper-ate it (the absence of a radiologist in the district hospital inthe Varshney study explains the lack of utilization of the ultra-sound machine), poor co-ordination of procurement andinstallation processes, poorly trained staff and a general lackof accountability. Many of these same factors, together withfinancial constraints explain why when equipment in publicfacilities runs into a shortage of spare parts or otherwise expe-rience technical problems, it takes a long time to get runningagain. For instance, suppliers of medical equipment point outthat, public sector facilities take a long time to pay outstandingdues and there are problems with corruption. Moreover, per-sonnel in these facilities tend to delay the reporting of prob-lems with equipment. Poor follow-up and/or financial short-ages mean that government agencies sometimes do not insureequipment once the warranty period has expired - and thatmay render equipment non-functional without any finan-cial redress as soon as it runs into a technical hitch. Theseproblems are particularly severe in public facilities that lie out-side the major metropolitan areas, since their financial andhuman resource constraints are even greater.

In contrast, Varshney (2004) points out the obvious advan-tages that arise on account of a clear line of accountabilityand financial risk bearing in the private sector. He compellinglyargues that the direct consequence of financial accountabil-ity are that response time to potential problems is much faster,getting better trained staff and careful handling of equip-ment gets high priority and maintenance and insurance con-tracts that minimize financial risk are common, particularlyfor major pieces of equipment.

Problems with the medical device supply andmaintenance industry in India

Of course, the private sector has its own problems, as reflectedpreviously in the discussion on the possible overuse and mis-use of diagnostics and other medical devices in India. Theseconcerns often lie at the root of policymakers' efforts to reg-ulate private providers.

Then there are problems further down the supply line.First, there is effectively no quality regulation on the sale ofhigh-tech medical devices, with existing ISI (Indian Bureau

of Standards mark) standards limited to a small subset of low-cost medical equipment. This is in contrast to strict qualitycontrols on what can be sold/imported in the countries ofthe European Union and the United States (see below), andeven China. Imports of second-hand medical devices in somecategories of up to 10 years old are also allowed into India(Harper 2003) with the consequence that a lot of substan-dard second-hand medical devices are currently flowing intoand around the country. The only regulation that currentlyexists relates to protections relating to radiation. But thereis little or no control on what the equipment does relative toits claimed effects, its technical specifications and the like.

In addition, however, both private and public health facil-ities and diagnostics providers face problems related to thecontinued operation of medical equipment in India, so thatcosts of medical device operation are higher than they wouldotherwise be. Availability of good quality spare parts is aserious problem faced by both the public and private healthservice providers in India. While especially acute for olderequipment spare parts for which are no longer made by theoriginal manufacturer, the absence of any sort of oversightin the medical device market means that there are a lot ofequipment suppliers who simply do not deliver follow-upservices, making it costly search exercise for purchasers to sortthrough alternative providers. This is an important issue,because the expenses on spare parts of diagnostic equip-ment typically tend to exceed by several times, the originalcost of the equipment over its lifetime; and because of therapidly changing imaging technology which makes new mod-els obsolete almost as soon as they begin operation.

A related challenge is a severe shortage of technical expertsfor repair work when needed, on medical equipment. Varsh-ney (2004) notes that companies selling the equipment haveprobably the best engineers, but they often engage thirdparties, whose personnel are not as skilled, to help with theexecution of maintenance contracts. The shortage of “com-pany” engineers means that only the very persistent clientsare able to get hold of them for maintenance and repair needs.In general, and for reasons mentioned above, the privatesector is able to manage this process better than the publicsector. Public sector facilities located in areas outside majorcities are the most severely hampered, thereby contributingto long idleness times for equipment and a resulting wastageof resources. The option of engaging company engineers isnot even available to those who obtain second-hand equip-ment.

One might reasonably argue that the market will do the sort-ing, with more reliable suppliers pushing out the less-reliableones. Over time this may well turn out to be the case. Butthe adjustment process may well be long and costly, as appearsto be the case in India. And it is unclear how and whether aresource-constrained public sector, and its facilities in remoteareas, will be able to adequately respond to these adjustmentsas they occur. With rapidly changing technologies, the processmay be even more arduous as purchasers are asked to sortthrough increasingly complex technical specifications.



What needs to be done?

The set of recommendations proposed here are intended toserve only as a guide for more detailed policy responses, andmainly reflect the concerns outlined in the preceding sections.

We divide our discussion on policy recommendations relat-ing to medical devices into two: (a) regulatory recommenda-tions on the new and second-hand medical devices market;and (b) recommendations on health systems aspects of themedical device use, including the potential for public-pri-vate partnerships.

As noted above, in India there is essentially very little reg-ulation of the medical device industry; even less by way ofquality-, or benefit-cost assessment. In thinking about theappropriate policy steps to take, note that countries in theEuropean Union, the United States, and Canada have, at theminimum, regulations that require devices perform as claimedby their manufacturers, or sellers, before any product can bemarketed. In the United States this regulatory responsibilityis executed by the Food and Drug Administration (FDA). Inthe European Union, this function is essentially that of anautonomous implementing agency, known by different namesin various countries (e.g., Medical Device Agency in the UnitedKingdom). Typically the process involves suppliers beingrequired to produce documentation on performance, and itmay also involve verification, such as by independent (pri-vately run) “notified bodies” that undertake this for the EUin consideration for a fee. The assessment also typically includesmeeting the requirement that any harmful effects of the device(adverse health outcomes) are an “acceptable” risk.

Next, there are requirements that ensure that any harmfuleffects that come to light after approval of market entry arealso covered by regulation, including possible withdrawal ofthe permission to enter the market. Typically, this processinvolves some form of record-keeping in the form of a his-tory of adverse incidents, and associated steps and sanc-tions. It may also involve voluntary reporting by patients andusers of the equipment, or statutory reporting by manufac-turers and diagnostics service providers. The regulatory author-ity is also responsible for putting out safety notices for infor-mation to the general public.

These two requirements appear sensible. However, it isarguable whether an India-based regulatory authority and/orautonomous entities are capable of undertaking the qualitychecks required at this point in time. We understand that acommittee of the Indian Council for Medical Research (ICMR)recently proposed the setting up of an Indian Medical DevicesRegulatory Authority (IMDRA) along these lines. This recom-mendation needs to be acted upon, but as an independentauthority, and NOT under the Director General of HealthServices (DGHS), as proposed by the government. When formed,the IMDRA may find it worthwhile to piggyback on publiclyavailable information on licensing status and medical deviceperformance from either the European Union, or the FDA, orboth.

There are, however, areas where the proposed Indian Med-ical Device Regulatory Authority can potentially be extremely

useful. This is in the area of ensuring some order in the med-ical device market - to distinguish fly-by-night operators frommore reliable sellers of devices, to ensure that sellers of equip-ment provide adequate levels of spare parts and technicaltraining, to maintaining price lists and the like. Presumably,the effectiveness of this effort may require working in col-laboration with the buyers of such equipment and its sellers.In particular information on the different sellers and theirterms and conditions ought to be available at this regulatoryagency. This could be linked to some compulsory registra-tion mechanism, again developed in consultation with thesellers of equipment and purchasers.

Once we are past basic quality requirements and the require-ments of clinical efficacy, issues of cost-effectiveness becomepertinent - that is, are the outcomes achieved by the medicaldevice worth the cost? This raises questions about whetherthere need to put limits on the number of medical devicesoverall, across regions and the like. It also raises questions asto how to rank different medical devices by health sector pri-ority; whether the public sector ought to purchase them;and ultimately what to do once priorities have been defined.The technical method of addressing such questions comesunder the rubric of “technology assessment,” and severalcountries do departments undertaking medical technologyassessment. To set up such offices means having personnelwith a collective range of skills in bio-engineering, law, med-icine and social sciences, and they are often politically extremelysensitive because of the potential impact their recommenda-tions may have on medical device markets. For partly thesereasons, the office of technology assessment in the UnitedStates was a casualty in the early 1980s, having been set upjust a few years earlier. The role of technology assessment isobviously valuable, however. In a resource constrained set-ting such as India's, relying solely on the market to guide thegrowth of medical technologies may lead to a lot of wastage.Nor is it easy to focus on the public sector alone, if doing soleads to manifest inequities in access; or, a loss of high-quality personnel to the private sector.

Several countries have experimented with (and many con-tinue to do so even today) on various additional restrictionson the number of medical devices. These include “certificateof need” (CON) requirements, which require establishing aneed for a facility in an area, prior to getting a license for it.Some provinces in the United States, such as Pennsylvania,as well as countries such as Australia, Canada and Nether-lands do have CON requirements, although the effectivenessof such measures in curtailing the spread of technology hasbeen questioned (Cline and Bryce 1998). It might also beargued that in India, it is much too early to be thinkingabout CON requirements given that many major diagnosticmedical devices such as MRI's and CT-scans are barely mak-ing their entry into the market. Another issue of concern isthat CON requirements might restore the “license-permit”raj with its concomitant implications for corruption.

Thus attention has been directed to other, market-centered,mechanisms by which the objectives of cost-effectiveness canbe met, fully or partially. One option is to create incentives



for the integration of the role of health care providers (includ-ing diagnostics service providers) with that of health insur-ers, in conjunction with a prospective payment (capitationfee) system. This combination ought to reduce incentives forover-consumption of health care generally, including diag-nostic care. HMOs are an obvious example of this phenome-non, and there is some evidence that HMO concentrationhas curtailed the pace of MRI diffusion in the United States(Baker and Wheeler 1998).

Another method may be to educate physicians better aboutmedical technologies, including not only their benefits alsotheir economic and potentially harmful side-effects; similarefforts could be directed at students in medical schools inIndia. There is some evidence that physicians do respond toinformation of this type in a way as to reduce the use of harm-ful expensive technologies, although relying on this optionis probably not the preferred option.

Recommendations on health system features

In addition to a better regulatory approach to the medicaldevice market, there are other health policy-related activitiesthe government could do, to address several of the ineffi-ciencies discussed earlier in the paper. In thinking about appro-priate strategies, we are guided by the consideration thatexcessive reliance on regulation and outright bans is, in lightof the Indian experience historically, unlikely to work effec-tively.

As our first example, consider the challenge of the misuseof diagnostic medical devices. The use of ultrasound scan-ning equipment for sex determination continues till todaydespite a government ban in India. With both the demander(consumer) of services and supplier of services in a mutually-beneficially arrangement, the government is unlikely to beeffective with purely punitive measures. Plus, overly strict reg-ulation tends to be abused by authorities to harass serviceproviders and doctors. Government policies may thus needto take the form of small steps that ensure that only trainedradiologists operate such machines; that there are educationcampaigns against this practice (currently ongoing); andperhaps ensuring that better information is available on thespread of ultrasound equipment, so that policy efforts canbe more effectively directed to geographic areas and com-munities deemed to be most at risk.

Now consider the issue of overuse. It is generally difficultto pinpoint “overuse” as defensive medicine is likely to becomeincreasingly prevalent in the future, patients are typically infavor of more technology intensive interventions, and thereare no “set norms” for optimal use. As the Indian market

increasingly opens up to insurance companies, however, it isentirely possible that instead of the expected increases, diag-nostic use may be limited by insurance audits. For instance,Ramsey and Pauly (1997) found that even fee-for-serviceinsurance plans led to curtailing of excessive diagnostic equip-ment use. To this one may add a policy of extending the med-ical code of ethics to establishments that employ doctors (evenif not owned by doctors), and grievance cells that involvesprofessional associations and the medical device regulatoryauthority. One may also want to think about developing modelguidelines for doctors to follow in assessing patients, althoughthis again relies on self-regulation that has not worked wellin India thus far.

A final issue revolves around ensuring that resources investedin medical equipment in public hospitals are not wasted owingto non-use, particularly in smaller towns and cities. Thesemean first that procurement and installation processes haveto improve. The example of APVVP cited above suggests thatthis can be done, by hiring technically proficient staff and byempowering them. Decentralized financing authority to hos-pital committees would also help. Finally, at least in smallertowns, the need for better trained staff to operate and repairequipment is critical. Perhaps large scale contracts with solesuppliers, in return for extensive skills training and mainte-nance support may be the way to go. Varshney (2004) sug-gests that one could explore the training of local district-level staff who could serve as franchisees to the supplier.This could help avoid the costs that result from delayed responseto repair requests from the government hospitals. In con-nection with training, there is obviously also a great need totrain clinical engineers through courses offered at, say theIndian Institutes of Technology. Such curricula are readilyavailable at institutions in the United States and elsewhere.6

In the concern for more effective usage of medical devicesin India, one could consider an alternative scenario wherebythe public sector could hand over some of its responsibilitiesto private providers. Varshney (2004) gives examples ofthree case studies (in Delhi, Meerut and Kolkata) of private-public partnerships in the provision of diagnostic servicesalong these lines - with the private partner operating theequipment in space made available in the premises of the pub-lic hospital. The chief gain to the private provider was in termsof a ready clientele, whereas the public sector hospital ben-efited in terms of proportion of patients getting free servicesand a functioning facility. The experience has tended to bemixed, owing mainly to a shortage of patients going to thefacility - a combination of doctors referring patients to out-side facilities in return for a consideration, patients seekingsecond opinions prior to get the diagnostic done, and the like.

6. We are grateful to Dr. Valiathan for this point.

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G


edical equipment: Present status

MEDICAL EQUIPMENT CONSTITUTES A MAJOR PART OF THE INVESTMENT INthe health care sector. It adds up to more than 60% of the capital cost. Dependenceon medical equipment for diagnosis and management is increasing day by day. Withrapidly advancing technology, digitalization, increasing computing powers, techno-logical devices, equipment and non-equipment technology is becoming a necessityfor early diagnosis, intervention, and prolonging and improving the quality of life.

Studies conducted by WHO showed that 25%-50% of all health equipment in devel-oping countries cannot be used for one reason or another, seriously impending effortsto improve heath services to the people. The main reasons for this are (i) difficulty inacquiring consumables and spare parts, (ii) lack of trained operators and servicetechnicians, (iii) inadequate infrastructure for installation and operations, (iv) exces-sive amount of sophisticated equipment and insufficient basic equipment, and (v)obsolete and unsafe equipment.

The above reasons are mainly due to inadequate management, which is result oflack/deficiency of policies and procedures for comprehensive technology manage-ment in the health system, both in the public and the private sectors, involving plan-ning, acquisition, operations, maintenance and retirement. Decision-makers are sel-dom trained or have the awareness/knowledge of modern technology. Equipmentare typically specified by department or doctors more for prestige, craze for the lat-est and best. These persons may not be responsible for its eventual operation andmaintenance. There is a lack of coordination among agencies involved in variousprocesses, from demand generation to procurement, finance and maintenance. Invest-ment and recurring costs are non-sustainable. Manufacturers are only keen to sellthe latest and the ‘greatest’.

Equipment selection is not done as per the morbidity pattern or skills available tomake the best use of the equipment.

The total cost concept termed TCO (total cost of ownership) is not evaluated inboth the public and the private sectors; only the purchase price is taken into accountwhile making financial projections. Thus, the cost of installation, operations, main-tenance, human resources, training, spares, support furnishings, calibration instru-ments, end-user cots, patient costs (charges + other expenses) and return on invest-ment (ROI) are rarely given consideration, while these indirect or invisible costs con-stitute more than the purchase price, up to 80%-90% of the TCO.

Utilization rates

Both quantitatively and qualitatively, medical equipment is better utilized in privatesector diagnostic centres as compared to the public sector and private hospitals. Uti-lization per machine is high in the private sector as to compared public sector hos-pitals; this is in spite of the fact that the latter have more manpower and a higherpatient load.

Qualitatively, in terms of early investigation, early reports and minimum patient visits,the private sector shows better utilization. Also, private sector doctors and techniciansdo more number of investigations per machine in a year than in the public sector.

At the district level, utilization in both the public and the private sector is less, dueto fewer requests, and a lower morbidity pattern as compared to Delhi hospitals

Annexure 1: Medical equipment usepattern in the public and private sectors in India: Policy implications

M

S E C T I O N I I I

ANIL VARSHNEYHEALTHCARE MANAGEMENTCONSULTANT, HEALTHCARE CONSULTANCY SERVICES



Medical equipment use pattern in the public and private sectors in India: Policy implications SECTION III

which are referral hospitals. Utilization of ultrasound in thepublic sector (district studied) is nil due to non-availabilityof a radiologist in the hospital. Utilization of other equipmentin public hospitals, especially surgical departments, is betterthan in the private sector.

Misuse and overuse

Despite the existence of the Pre-natal Sex Determination TestAct, ultrasound machines are being used clandestinely for sexdetermination, driven by the demand from seekers and greedfor money. Most insured patients are over-investigated anda similar trend is seen in large corporate hospitals. This trendis comparatively less in general practice.

Medical equipment market

The sale of medical equipment in India is worth approximatelyRs 1500 crore annually. Fifty per cent of this is purchased fromIndian manufacturers; 70% of the imported equipment iselectronic medical equipment. Most high-end medical equip-ment are installed in cities with tertiary care hospitals. Con-centration of equipment in a particular area has resulted inprice competitiveness and the practice of incentives. Most ofthe equipment costing above Rs 10 lakh are installed in themetropolitan and large cities. Medium-level equipment isthere at the district level for secondary care in both the pub-lic and the private sector. At the subdistrict level public sec-tor equipment has poor installation and poor functioning ascompared to the private sector.

Servicing of and spares for medical equipment are majorissues in terms of poor services, non-availability of trainedtechnicians at district and subdistrict levels, planned redun-dancy by companies, non-availability of an annual mainte-nance contract (AMC) after 5 years by the companies, non-availability of spares and their high cost, and monopoly ofcompanies with respect to spares.

Procurement, maintenance, down-time andconsumables

Procurement of medical equipment is faster and more effi-cient in the private sector, averaging 3 months from demandto commissioning; in the public sector it takes 18 months.Breakdown of medical equipment is very low in the privatesector, averaging 3 days in 5 years per equipment, due toproper handling and better maintenance practices. The num-ber of unusable equipment is also low in the private sector.

Consumables are managed at minimum inventory carryingcost. Consumable supplies are faster (within 24 hours) due tobetter vendor compliance, as they are paid in time and regularly.

Unit cost of diagnostic services

The unit cost (cost to establishment) of the investigation ofCT scan and MRI in a private sector diagnostic centre is lowerthan the cost in public and private hospitals. The cost of ultra-

sound is barely at break-even point in private diagnosticcentres, lower in private hospitals and high in public hospi-tals. The unit cost of ultrasound in a private hospital is 60%that of a public hospital and 70% that of private diagnosticcentres. The price of as MRI is extremely high in public hos-pitals as compared to private ones (twelve times high).

Unit costs for biochemistry are low in private diagnosticcentres as compared to both private and public hospitals.

Costs in the private sector are high due to interest, rentalsand other establishment costs, as well as return on invest-ment. Costs in the public sector are high due to human resources.As the unit cost is high, more investigations are required toachieve the break-even number in both sectors. For bio-chemistry services the unit costs are low in both the sectorsas compared to the patient price, and the volumes of inves-tigations are high.

Public hospitals provide a subsidy (cost to hospital less patientprice) of Rs 439 on ultrasound, Rs 1203 on CT scan, and Rs 46,750on MRI to the public, and 100% subsidy in biochemistry tests(calculated for blood sugar). In private sector diagnostic centresthere is no subsidy thus they break even at a high volume load.In private hospitals, there is a marginal element of subsidy of Rs333 for CT scan. Patient charges are more flexible in privatediagnostic centres as compared to private hospitals. Private diag-nostic centres with a low patient load do not recover their costsat the present patient price; centres continue to provide theseservices, hoping to become viable in 4-5 years. Their income isaugmented by laboratory medicine services.

The percentage utilization in relation to break-even num-bers (number of investigations required to recover fixed costsat the current patient price) are as follows:� for ultrasound, it is 90%-120% in the private sector, 20%

in the public sector� for CT scan, it is 53% in public hospitals, 90% in private

hospitals, 190% in private diagnostic centres� for MRI, it is 7% in public and 120 % in private diagnos-

tic centres� for auto-analyser (calculated for sugar-biochemistry test)

it is 360% in a private laboratory, 150% in a private hospi-tal, since it is free in the public sector, a break-even pointis never reached. (Breakeven number is the number of inves-tigations required to recover the yearly fixed cost of estab-lishment at the existing price to the patient.)

� At the district level, break-even numbers are not reached inboth sectors in biochemistry. Ultrasound is cost-effectivein the private sector.

Financing operation cost, tax benefits and incentives

Approximately 25%-30% of public hospital patients get theirinvestigations done from private diagnostic centres. The inves-tigation load in private diagnostic centres is 20% from pub-lic hospitals, 10% from private hospitals, and 70% from pri-vate practitioners. The price in the private sector is driven bywhat the market can bear as well as public sector prices. Costcalculations in the private sector are on an ad hoc basis.Operation costs in the private sector are borne by collections


SECTION III Medical equipment use pattern in the public and private sectors in India: Policy implications

from patients, loans, depreciation funds, and instalmentamounts (rescheduling bank payments).

The only tax benefit available to the private sector is lowcustom duties on imported medical and life-saving equip-ment. The other sops for private players (large hospitals) areland at subsidized rates (so a lower rental value). Privatediagnostic centres pay commercial rentals, property tax andcommercial charges for electricity and water.

Incentives play a key part in referrals to diagnostic centresinitially. The expenditure on these incentives accounts for10% of the expenses of diagnostic centres, which is lower thanthe electricity bills, rental and depreciation. Incentives arereceived by 40% of private sector and public sector doctorsalike. However, only 30% of diagnostic centres (owned bydoctors) are forced into this incentive-based referral networkby competition from businessmen-owned centres where thispractice is 100%. Old and established centres do not indulgein this practice. The code of medical ethics on splitting feesapplies to doctors and not to business houses.

The private sector, said to be highly priced relative to the pub-lic sector, is patronized by the upper- and middle-income groups,and insurance patients. This leaves the poor socioeconomicgroup to patronize public health facilities that are alreadyoverburdened resulting in poor quality and long waiting times.

Policy steps needed

Misuse

The demand for pre-natal sex determination needs to becurbed through change of mindset, incentives for the girlchild, counselling centres for parental education and social-cultural-behavioural changes. This should be managed bywomen’s organizations and heavy penalties should be leviedon persons seeking foeticide. It is also recommended that ade-quate records be maintained at the diagnostic centre and strictsurveillance done of centres with ‘Medical termination ofpregnancy’ facilities.

Overuse

This should be controlled through medical audit by the insur-ance companies as well as internal audit by the hospitals,and a grievance redressal cell for patients should be set up inthe State medical councils.

Regulation of diagnostic facilities

Just like the National Accreditation Body for Laboratories(NABL) (voluntary) for registration and accreditation of Pathol-ogy and Biochemistry services, a similar body should be cre-ated for Radiology and Imaging, by the IRIA/IMA /PRSF andother professional bodies.

Standards should be implemented by States (health beinga State subject) for diagnostic centres, after categorizationby size, type and range of services provided. The CentralGovernment should provide the standard guidelines and this

should be developed in collaboration with professional bod-ies. The WHO publication medical device overview and guid-ing principles provides suggestions for standards.

Norms for high-end medical equipment may be devel-oped, based on the population or morbidity load. This willreduce excessive installation, which results in blocked invest-ments both in the public and private sectors (e.g. 1 MRI 3 CTscan units in a population of 10 lakh).

Public-private cooperation

There exists an opportunity to develop public-private part-nerships that will benefit all sections of society. There aredifferent kinds of partnerships, from investment to mainte-nance and management. However, outsourcing all public sec-tor investigations to the private sector seems to be the bestoption. This will reduce the burden on public hospitals, andenable the Government to reallocate funds for drugs, improvethe quality of existing health services and strengthen deliv-ery. Patients will also benefit from the quality of private sec-tor services, and investigation time will be reduced with earlydiagnosis and treatment. Currently, public-private experi-ments are in a nascent stage and private service providers donot seem to benefit much from this relationship.

Regulating the equipment market

Setting up a Medical Equipment Devices Regulatory Author-ity, on the lines suggested by WHO should be done so as toensure quality equipment with adequate spare parts, andprioritize installations in undeserved areas as per needs.

Procurement in Government hospitals needs to improve andvarious options should be evaluated to minimize the time.WHO’s Essential healthcare technology package (EHTP soft-ware) should be utilized.

Hospital and biomedical engineering should be promotedfurther as a specialty, to ensure the availability of trained tech-nical experts for good quality repairs and maintenance ofequipment. Long-term equipment management programmesshould be initiated in all healthcare institutions for properfunctioning of the equipment.

There is an urgent need to make sure that equipment mustbe able to serve at least 15 years and companies should pro-vide spares and AMC for the period. Third-party training ofengineers who can handle various equipment needs to beencouraged and sourcing of spares from original subvendorsshould be initiated for equipment that are not attended toby the manufacturing companies.

Local production of more sophisticated medical equipmentneeds to be given a priority, by way of limiting imports and impos-ing a manufacture in India clause in medical device regulation.

Equipment invoicing

Manufacturers should regularly update themselves on the lat-est developments in medical equipment technology, and pro-vide pricing lists in trade journals.



Conclusions

Medical equipment is essential for optimal healthcare at alllevels of the health services. Their judicious installation andmaintenance is the key to ideal healthcare delivery. Medicalequipment are better utilized in the private sector as com-pared to the public sector in terms of number of investiga-tions per machine, number of investigations per doctor andstaff, unit cost per investigation, which are lower than thatin the public sector despite the high interest rate and ROI. Thisis achieved by employing an optimal number of staff, moreworking hours and better quality in terms of early and timelydelivery of reports.

Since medical equipment constitutes a major part of theinvestment in any hospital, it would be advisable to out-source the high-end diagnostic services to the private sectormanaged by professionals, at charges that are lower but finan-cially viable to the establishment. The capital money thus savedin the public sector could be utilized for improving the qual-ity of services, and supplies of medicines and injectables.

Installation of costly medical equipment in the private sec-tor should also be regulated by encouraging group practice

(professionally owned), lower interest rates on the lines ofhousing loans, and encouragement to practise in underservedareas.

The medical equipment market needs regulation on the linessuggested by WHO (Medical device regulation to safeguardprofessional and patient interest).

Overuse of diagnostics needs to be curtailed through med-ical audit in large corporate hospitals and through internaland external audit by insurance companies/professional agen-cies.

Research and analysis on essential health technology shouldbe given priority and encouraged so that limited resourcescan be better utilized, by way of appropriate technology forthe level and type of health care services being rendered atany institution. Equipment selection must be done in a sci-entific manner by looking at the total cost of ownership (TCO)rather than the purchase price alone.

To get the best out of equipment, a management programmemust be initiated in all institutions in both the public and theprivate sectors. This will increase the life and performance ofthe equipment and have less down-time.

Table 1

Summary of utilization and costs in Delhi

Particulars US US US CT CT CT MRI MRI Auto - Auto - Auto -

private public private private public 1 private private public analyser analyser analyser

hospital hospital private Public private

hospital

No. of machines 1 3 2 1 1 1 1 1 3 5 2

Cost of equipment(in lakh) 30 62 15 180 213 145 750 810 25 80 40

Number of investigations/ year 9000 26,784 18,438 10,000 7392 4000 12,000 742 500,000 800,000 300,000

Number of Investigations/ machine/year 9000 8928 9219 10,000 7392 4000 12000 742 166,667 160,000 150,000

Number of doctors or professionals/ modality 2 8 5(pt) 2 7 4(pt) 3 3 2 3 2

Number of investigations/ 4500 3348 3688 5000 1056 1000 4000 247 250000 266667 150000

professional/ year

Number of investigations to break 9070 13,3674 15,486 5080 14,030 4518 10,083 11,286 136,682 Infinity 198,816

even fixed costs

Percentage utilization compared to 99 20 119 197 53 89 119 7 366 -61 151

break even point

Fixed cost per investigation (in Rs) 403 549 265 1549 2543 2903 3739 50040 9 18 29

Consumable costs/ investigation(in Rs) 100 40 85 450 160 430 550 210 17 11 16

Cost per investigation (fixed + consumable) 503 589 350 1999 2703 3333 4289 50250 26 29 45

Patient charges(in Rs) 500 150 400 3500 1500 3000 5000 3500 50 0 60

Collection received to offset fixed costs/ 397 110 315 3050 1340 2070 4450 3290 33 0 44

investigation(in Rs)

Subsidy in real terms (in Rs) 3 439 Nil Nil 1203 333 nil 50,250 Nil 29 nil

Booking time Same 2 month Same Same 1 month Same Same 3 days Same 3 days Same

day day day day day day day

Reports delivered Same Same Same Same 3 days Same Same 2 days Same 3 days same

day day day day day day day day



Fig 1

Investigation per machine per year in each category of institution studied

Fig 2

Investigation per doctor per year in each category of institution studied



Fig 3

Numbers required to break even at present utilization and patient price

Fig 4

Percentage utilization at present in relation to break-even numbers



Fig 5

Fixed and consumable costs per investigation (unitized) and comparison with patient price (in Rs)



Fig 6

Financial cost components per unitinvestigation in INR (ultrasound investigation)

Fig 8

MRI investigation per unit component financial costs

Fig 7

Investigation costs per unit

Fig 9

Biochemistry financial cost component

Inner Circle – Public Hospital Middle Circle – Private Hospital Outer Circle – Private Diagnostic



Varshney A. Concept paper on Technology in Health [to NCMH2004]

Wang B. Acquisition strategies for medical technology. WorldBank Health Technology Forum. 2003.

WHO. Medical device regulatory guidelines. 2003-4.

References

SECTION IV

Financing of Health Carein India

INANCING IS THE MOST CRITICAL OF ALL DETERMINANTS OF A HEALTH SYSTEM.The nature of financing defines the structure, the behaviour of different stakehold-ers and quality of outcomes. It is closely and indivisibly linked to the provisioning ofservices and helps define the outer boundaries of the system’s capability to achieveits stated goals.

Health financing is by a number of sources: (i) the tax-based public sector thatcomprises local, State and Central Governments, in addition to numerous autonomouspublic sector bodies; (ii) the private sector including the not-for-profit sector, organ-izing and financing, directly or through insurance, the health care of their employ-ees and target populations; (iii) households through out-of-pocket expenditures,including user fees paid in public facilities; (iv) other insurance-social and commu-nity-based; and (v) external financing (through grants and loans).

While taxation is considered the most equitable system of financing, as tax is a meansof mobilizing resources from the richer sections to finance the health needs of thepoor, out-of-pocket expenditures by households is considered the most inequitable.Under a system dominated by out-of-pocket expenditures, the poor, who have thegreater probability of falling ill due to poor nutrition, unhealthy living conditions,etc. pay disproportionately more on health than the rich and access to health care isdependent on ability to pay.

Assessing how pro-poor a system of financing is again depends on how the differ-ent types of financing interact with each other. For example, a country may have asocial health insurance policy but may not cover public hospitals as they are in the-ory expected to provide free care. In such a situation there may be greater incentivesfor patients to go to private hospitals as expenses are covered by insurance resultingin no incentives for the public hospitals to function well. In that case, the poor whohave no immediate access to insurance or private hospitals may stand to lose withpoor quality public care.

In India, as in most countries, there is a clear urban-rural, rich-poor divide. Afflu-ent sections, urban populations and those working in the organized sector coveredunder some form of social security such as the ESIS or CGHS, have unlimited accessto medical services. The rural population and those working in the unorganized sec-tor have only the tax-based public facilities to depend on for free or subsidized care,and private facilities depending on their ability to pay. The impact on equity thengets determined on whether the tax-based public facilities are able to provide a sim-ilar quality of care as provided under the Social Health Insurance Scheme. Because,if funding is low and the quality of care falls below expectation, is inaccessible,entails informal payments, etc. then the benefit of free care at the public facility getsneutralized with the second option of paying out-of-pocket to a relatively hassle-free private provider available close by, making the system of financing inequitableas well as inefficient. How and why this is so will be discussed in this section, as anunderstanding of the current structure of financing is important to identify futureoptions for a better system.

Health Spending in India

Health spending in India is estimated to be in the range of 4.5%-6%. These esti-mates are based on a weak methodological background. Therefore, an exercise wasundertaken to construct estimates of health spending based on a National Health

Financing of Health in India

F


S E C T I O N I V

K. SUJATHA RAO SECRETARY

NATIONAL COMMISSION ONMACROECONOMICS AND

HEALTH, GOVERNMENT OFINDIA

NEW DELHIE-MAIL:

[email protected]

S. SELVARAJU

SOMIL [email protected]




SECTION IV Financing of Health in India

Account (NHA) framework. Such an approach enables a bet-ter and more reliable understanding of the size and structureof health financing in India.

Results from the NHA show that the estimated health expen-diture in India for the year 2001-02 was approximately Rs108,732 crore, accounting for 4.8% of the GDP at currentmarket price (Fig. 1). while health expenditure as a percent-age of the GDP measured at factor cost works out to 5.2%.Out of this, Central, State and local Governments togetherspend one-fourth of the total health expenditure. The shareof other central ministries, which include railways, defence,posts and telegraphs, other civil ministries, etc. is estimatedto be about 2.42% of total health spending in the country.The estimate is based on direct spending by the ministries aswell as reimbursements provided to its employees. Localgovernments’ resources for health are through transfers fromState Governments and their own resources. An estimated 2.2% of total health spending comes from the local govern-ment. The estimate involves only spending by municipalitiesand not Panchayati Raj institutions. It is to be noted thatmunicipalities (in metros and particularly Mumbai Munici-pal Corporation) are major contributors among local gov-ernments while the share of Panchayati Raj institutions are aminiscule part of the health budget, since a substantial partof the panchayat’s are mostly composed of either Central orState transfers.

Regarding private spending on health, the NHA matrix revealsthat 71% of the health budget is contributed by private sec-tor, of which households alone spend 69%. As a percentageof the GDP at current market prices, households spend an esti-mated 3.3%. Spending by private firms is in various ways:either through their own health facilities, or by providing alumpsum amount to the employee for health, or reimburs-ing a part of the health expenditure incurred or by contribu-tions to insurance schemes such as ESIS or voluntary privateinsurance schemes.

External aid to the health sector, either to the Governmentor NGOs, taken together forms 2% of the total health budget.

Although the emergence and growth of NGOs have receivedmuch attention in India in recent years, their contributionto the health sector is a negligible 0.3% of the total healthexpenditure.

As financial intermediaries, social insurance accounts foraround 2.36% of the entire health budget in the country, witha significant contribution by the ESIS. While community insur-ance is a non-starter in the country, the share of private vol-untary insurance schemes has a share of less than 1% of thetotal health budget.

Household Out-of-Pocket Expenditure onHealth

The dominant role of the private sector in Indian health caresystem is well known, both in health provision and financ-ing. India is one among the developing countries where house-holds spend a disproportionate share of their consumptionexpenditure on health care, with the Government’s contri-bution being minimal. Household consumer expenditure dataof various rounds of the National Sample Survey Organiza-tion (NSSO) suggest that households spend about 5%-6% oftheir total consumption expenditure on health and nearly 11%of all non-food consumption expenditure.

The analysis here shows the estimate of household expen-diture on health for the year 2001-02, using the NHA frame-work. The estimate is based on the utilization pattern of healthfacilities and the expenditure involved by different sourcesof care and services provided.

However, the mean expenditure and utilization pattern ofmorbidity for the year 1995-96 has been extrapolated (assum-ing a similar pattern of expenditure by different providers)and anchored to the 2001 Population Census and applyingcurrent growth rates worked out from the 50th and 55throunds of Consumer Expenditure Surveys (CES) by both rural-urban and inpatient-outpatient populations. This growth ratetakes into account both the price factor and growth of serv-ices during the period under consideration.

Results from the survey suggests that for the year 2001-02, households’ out-of-pocket health expenditure is esti-mated to be Rs 72,759 crore which accounts for 3.2% of theGDP at current market price.

Since 1995-96, household expenditure on health has beengrowing at the current rate of approximately 14% overall. In1995-96, households in India spent an estimated Rs 33,253crore at nominal prices which is then estimated to have increasedto Rs 72,759 crore in 2001-02. With an overall growth rateof 14%, household spending is likely to be close to Rs 100,000crore in nominal terms during 2003-04. Except the categoryof childbirth/delivery, all other categories registered a cur-rent growth rate in double digits. The growth in inpatientexpenditure has been highest, in the range of 16%-18%during 1995-96 to 2003-04. (Table 1)

In per capita terms, household expenditure measured innominal prices has almost tripled from Rs 364 in 1995-96 toRs 905 in 2003-04, while real per capita household expendi-ture is expected to only marginally increase from Rs 265 to


Fig 1

Sources of finance in the health sector in Indiaduring 2001-02


Financing of Health in India SECTION IV

Rs 347, respectively.State-wise analysis (of only major 15 States in India) reveals

that Kerala, which is a leading State in terms of health indi-cators, also accounts for the highest household spending inIndia, with a little over Rs 1700 per annum (Fig. 2). This isfollowed by Haryana and Punjab whose households spendan estimated Rs 1000 annually. It is interesting to note thatthese States comparatively have higher levels of public spend-ing on health. Although Tamil Nadu’s public expenditure onhealth is high, household spending is among the lowest. InStates such as UP, MP and Orissa, both public expenditure

and household expenditures are relatively low. It is disquieting to note that nearly 70% of the total health

expenditure in India comes from households, while around25% is financed by the Central, State and local Govern-ments. If we consider only out-of-pocket and State andCentral Government spending, then households in Bihar and

UP met almost 90% of their health care needs by out of pocketmeans. In other States, which have strong public health sys-tems such as Tamil Nadu, Delhi and Karnataka, households’spending is relatively lower than the public expenditure,accounting for about two-thirds of the total health expen-diture in these States. (Table 2)

Public Financing of Health

Even though public sector spending accounts for less than aquarter of the total health spending in India, it has a majorrole in terms of planning, regulating and shaping the deliv-ery of health services. Such public provisioning is consideredessential to achieve equity and to address the large positiveexternalities associated with health. As a result, a vast andwidespread public health system grew over time across thecountry; there were 137,311 subcentres, 22,842 PHCs, 3043CHCs, 4048 hospitals and a workforce of 345,514 in 2001-02. The way in which the sector is financed determinesthe effectiveness of service delivery and requires an under-standing of the financing mechanisms in this sector.

Health being a State subject, the sector is financed prima-rily by the State Governments. The per capita total healthspending was estimated to be around US$23 during 1997-2000 (World Bank 2003). As compared to the levels of spend-ing by countries such as Sri Lanka (US$31) and Thailand(US$71), the spending in India is substantially low. A break-down of health expenditure reveals that expenditure by thepublic sector in these countries is twice that of India. Sub-stantially higher levels of health outcomes in these countriesas compared to India clearly indicate that there is a strongcase to markedly increase public sector spending on health,as stated in the National Health Policy 2002 and the NationalCommon Minimum Programme (CMP) 2004.

The primary source of public financing is the general taxand non-tax revenues. These include grants and loans receivedfrom both internal and external agencies, which face com-peting demands from various ministries and departments.This pool of resources is used to finance the Centre’s andStates’ own programmes. The Central Government plays a cat-alytic role in aligning the States’ health programmes to meetcertain national health goals through various policy guide-lines as well as financing certain critical components of cen-trally sponsored programmes implemented by the State Gov-ernments. In addition to tax revenues, a meagre amount isalso raised through user charges, fees and fines from the sec-tor, and further supplemented through grants and loansreceived from external sources. In the case of local govern-ments, the respective State Governments largely financetheir health programmes. Local governments do raise resourcesthrough user charges and certain fees though the quantumvaries widely from States to States. Overall, the sector is under-funded, not without consequences.

An issue that is often raised in the context of inadequacyof resources to the sector is the efficiency of the resourcesallocated. The current level of funding to the sector is grosslyinadequate as brought out by various studies over the past

Fig 2

Household spending in Indian States

Table 1

Household health expenditure by differentsource of care in India, 1995-96 to 2003-04

Type of service 1995-96 2001-02 2003-04 Growth rate

Outpatient-rural 16,692.96 34,290.99 43,590.87 12.75

Outpatient-urban 7251.45 16,904.82 22,415.01 15.15

Inpatient-rural 3030.04 8536.86 12,057.25 18.84

Inpatient-urban 2092.90 5150.72 6954.10 16.19

Childbirth 1654.22 2258.14 2504.97 5.32

Antenatal care (ANC) 1053.90 2383.27 3128.22 14.57

Postnatal care (PNC) 390.85 1028.10 1419.21 17.49

Immunization 241.02 535.61 698.95 14.23

Contraceptives 207.14 422.74 536.22 12.62

Self-care 638.83 1247.47 1559.23 11.80

Total 33,253.31 72,758.71 94,457.19 13.94

Source: Estimated from the 52nd Round of the NSS, using 2001 Population Census and applyinggrowth rates worked out from the 50th and 55th rounds of the NSS

(Rs in crore)



decade or so. A concern that is equally voiced is how judi-ciously the funds allocated currently are utilized. Countriessuch as Bangladesh and Indonesia spend about US$14 andUS$19, respectively, per capita on health; relatively less thanthe per capita spending by India (US$23). But the healthoutcomes in terms of child mortality are considerably betterin these countries-74 for Bangladesh and 45 for Indonesiacompared to 93 for India (World Bank 2003). This clearlyreveals that the current level of spending has the potential toimprove the outcomes if properly allocated. In the followingsections an attempt is made to understand the present trendsand structure of public spending on health to critically eval-uate the above issues in detail.

Trends in public spending on health in India

Public spending on health in India gradually accelerated from0.22% in 1950-51 to 1.05% during the mid-1980s, andstagnated at around 0.9% of the GDP during the later years(ie. spending by only Central and State health departments)(Table 3). Of this, recurring expenditures such as salaries andwages, drugs, consumables, etc. account for more than 90%and is on the rise in recent years. In terms of per capita expen-diture, it increased significantly from less than Re 1 in 1950-51 to about Rs 215 in 2003-04. However, in real terms, for2003-2004 this is around Rs 120. Estimates, irrespective ofthe definition, reveal that the per capita spending by the

Table 2

Household, public and total health expenditure in India (2004–05)

States Household Exp. Govt. Exp. Other Exp. Aggregate PC HH PC G. PC Other PC Exp. HH as % PE as % of OE as %

(Rs. Crores) (Rs. Crores) (Rs. Crores) Exp. Exp. (Rs.) Exp. (Rs.) Exp. (Rs.) (Rs.) of THE (%) THE (%) of THE (%)

(Rs. Crores)

Central Govt. 0 14819 730 15549 0 137 7 144 0 95.3 4.7

A. P. 6441 1696 640 8777 820 216 82 1118 73.38 19.39 7.29

Arun. Pradesh 430 67 0 497 3776 589 0 4365 86.51 13.49 0

Assam 3054 672 52 3778 1089 239 19 1347 80.84 17.78 1.38

Bihar 11854 1091 202 13147 1021 124 23 1497 90.17 8.3 1.53

Delhi 1004 721 55 1780 664 476 37 1177 56.41 40.48 3.11

Goa 524 116 22 662 3613 798 153 4564 79.17 17.48 3.35

Gujarat 4893 996 424 6313 920 187 80 1187 77.51 15.78 6.71

Haryana 3385 421 175 3981 1518 189 79 1786 85.03 10.56 4.4

H.P. 2126 306 40 2472 3377 486 64 3927 85.99 12.38 1.63

J & K 1759 471 47 2277 1609 431 43 2082 77.26 20.69 2.05

Karnataka 3847 1267 353 5467 702 231 64 997 70.36 23.18 6.46

Kerala 8373 1048 281 9702 2548 319 86 2952 86.3 10.8 2.9

M.P. 6432 1051 228 7711 746 164 35 1200 83.41 13.63 2.96

Maharastra 11703 3527 726 15957 1156 348 72 1576 73.34 22.1 4.55

Manipur 420 89 8 517 1680 356 32 2068 81.24 17.2 1.56

Meghalaya 58 94 8 160 242 388 34 664 36.45 58.37 5.18

Mizoram 38 58 0 96 405 623 0 1027 39.39 60.61 0

Nagaland 1024 84 7 1116 4897 404 37 5338 91.74 7.57 0.7

Orissa 2999 684 111 3795 786 179 29 995 79.04 18.02 2.93

Punjab 3493 827 273 4593 1379 326 108 1813 76.05 18 5.95

Rajasthan 3399 1190 267 4855 565 198 44 808 70 24.5 5.5

Sikkim 72 55 0 127 1274 965 0 2240 56.89 43.11 0

T.N. 3624 1590 760 5974 566 248 119 933 60.67 26.61 12.72

Tripura 253 100 13 366 760 301 40 1101 68.99 27.35 3.66

U.P. 17158 2650 550 20359 924 150 31 1152 84.28 13.02 2.7

W.B. 7782 1715 433 9929 931 205 52 1188 78.38 17.27 4.36

U.Ts. 3160 325 227 3712 11168 52 37 598 85.13 8.74 6.12

State Totals 109308 17965 5906 133178 1012 167 54 1233

GT [GOI+State] 109308 32784 6636 148727 1012 304 61 1377 73.5 22 4.46

Source : Based on National Health Accounts (NHA), 2001-02Notes : i) Household Expenditure Based on NHA for the year 2001-02 and extrapolated for 2004-05ii) Central Govt. expenditure includes transfer to states, other central ministries and central PSUs; and data obtained from Demand for Grants (Provisional), Govt. of India. iii) Govt. Expenditure includes Central, States, Local Govt., and PSUs; data obtained from States Finances (Provisional), RBI, Various issuesiv) Others include foreign agencies, private firms and NGOs; data relates to 2001-02, which is subsequently extrapolated for 04-05. v) PC HH Exp. – Per Capita Household Expenditure; PC G Exp. – Per Capita Govt. Expenditure; PC Other Exp. – Per Capita Other Expenditure; HH as % of THE – Household as % of Total Health Expenditure; PE as % THE –Public Expenditure as % of Total Health Expenditure; OE as % of THE – Other Expenditure as % of Total Health Expenditure; C. Govt. – Central Govt.; U.Ts – Union Territories.



Government is far below the international aspiration of US$12recommended for an essential health package by the WorldDevelopment Report 1993 (World Bank) and, again by theCommission on Macroeconomics and Health (World HealthOrganisation 2002) CMH (WHO) for low-income countries.

As a result of stagnant budgetary allocations, the qualityof care suffered substantially and adversely impacted on theutilization of government services by households. Besides,health services that were earlier being provided free were insome cases charged, forcing patients to seek private healthcare.

Impact on equity due to low public spending

The results of the NSS of 1986-87 and 1995-96 showed aconsiderable decline in the utilization of public health serv-ices by the poor, especially the rural poor (Table 4). Besides,the study also showed that the rich consumed public serv-ices three times more often than the poor. The ratio ofaccess to admission between the lowest 10% quintile andthe richest 10% was reported to be 6.1 and 2.2 between thebelow poverty line (BPL) and the above poverty line (APL)populations.

The 52nd Round of the NSS provided insights into the quin-tile-wise health-seeking behaviour. As per this data, of thepoor who availed of services, 61% used public facilities com-pared to 33% among the rich. The poorest, however, benefitrelatively more from spending on primary care only (Mahal2001). This is primarily on account of the poor quality andirregular supply of these services which dissuade the rich fromaccessing them. Further, many of the services that benefit

the poor are, to some extent centrally funded vertical pro-grammes such as immunization, ANC, TB, Malaria, Leprosy,etc. The inequity in the access to and distribution of publichealth services has been a concern because of the extent ofimpoverishment households face on account of ill health, andcatastrophic illnesses in particular.

Health Expenditure by the Central Government

Major policy initiatives and reforms relating to health emanatefrom the Ministry of Health and Family Welfare (MOHFW),which plays a crucial role in financing this sector.

The Union Ministry of Health and Family Welfare consistsof three departments. The department-wise break-up of theHealth Ministry’s budget suggests that over one-third of thebudget is spent by the Department of Health, while roughlytwo-thirds goes to the Department of Family Welfare. TheIndian Systems of Medicine and Homeopathy (ISM&H) (AYUSH)Department receives a paltry 2%-3% of the total budget ofthe Ministry. There are 5 important aspects to the nature ofcentral spending in recent years: 1. The gradual reduction in the proportion of funds released

to States at a time when the States were themselves underfiscal stress;

2. The sharp reduction in capital investment in public hos-pitals at a time of technological innovation, shifts in theepidemiology and health needs and expectations of thepeople, besides the sheer increase in disease burden inabsolute terms;

3. Increased subsidy for own employees;4. Low priority to preventive and promotive health; and 5. Allocative inefficiencies under the National Health Pro-

grammes

Fractile 1986-87 (42nd Round) 1995-96 (52nd Round)

groups Rural Urban Rural Urban

0-10 12.94 11.59 3.13 12.87

10-20 10.59 11.42 6.30 7.40

20-40 22.94 25.66 16.70 20.90

40-60 18.69 23.91 17.20 18.17

60-80 19.73 17.28 24.30 19.77

80-90 8.82 3.63 14.07 10.23

90-100 6.30 6.52 18.30 10.67

All groups 100.00 100.00 100.00 100.00

All values are in percentagesNote: Government hospitals refer to public hospitals, PHCs and public dispensaries.Sources: 1. NSSO. Morbidity and Utilisation of Medical Services. Report No.364, Department of

Statistics, CSO, Government of India, September 1989, pp. A-8-13.2. NSSO. Morbidity and treatment of ailments. Report No.441, Department of Statistics, CSO, Government of India, November 1998, p. A-65 and p. A-170.

Table 4

Utilization of government hospital services for in-patient treatment

Per capita public

Health expenditure as % of the GDP expenditure

Year Revenue Capital Total on health (Rs)

1950-51 0.22 NA 0.22 0.61

1955-56 0.49 NA 0.49 1.36

1960-61 0.63 NA 0.63 2.48

1965-66 0.61 NA 0.61 3.47

1970-71 0.74 NA 0.74 6.22

1975-76 0.73 0.08 0.81 11.15

1980-81 0.83 0.09 0.91 19.37

1985-86 0.96 0.09 1.05 38.63

1990-91 0.89 0.06 0.96 64.83

1995-96 0.82 0.06 0.88 112.21

2000-01 0.86 0.04 0.90 184.56

2001-02 0.79 0.04 0.83 183.56

2002-03 0.82 0.04 0.86 202.22

2003-04 0.86 0.06 0.91 214.62

Sources: Report on Currency and Finance, RBI, various issues; Statistical Abstract of India, Governmentof India, various issues; Handbook of Statistics of India, RBI, various issues

Table 3

Trends in health expenditure in India (GDP is atmarket price, with base year 1993-94)



Centralization of funds and inadequate capitalexpenditures

The Ministry implements certain schemes such as the Cen-tral Government Health Scheme (CGHS), national disease con-trol programmes, etc. by itself, and other schemes throughthe State Governments. A large part of the Ministry’s budgetis passed on as grants-in-aid to States for implementing var-ious national health programmes. Such transfers accountedfor about 43% of the total budget of the Ministry in 2003-04. Even though the size of the Central health budget hasgrown considerably from Rs 1670 crore in 1991-92 to Rs 7851crore in 2003-04, transfers to States as a proportion of thetotal budget of the Ministry declined sharply from nearly 57%to 44%. This in effect reveals the increasing role that theCentral Government has been assuming in health service deliv-ery. As a result, roles such as stewardship and governancethat the Central Government is expected to play are under-mined.

The share of the Central Government expenditure on health,including grant-in-aid to States, constitutes over a third ofthe combined expenditure by the States’ and Centre. Figure 3 shows that during the period 1991-2003, the over-all increase in central allocations was 4%-6% annually. Despitethis, there was a sharp decline in capital expenditure, whichfell from about one-fourth of the Ministry’s expenditure toless than 6.7% of the net MoHFW expenditure (excludinggrant-in-aid to States and UTs but including capital expen-diture incurred by the Ministry of Urban Development on hos-pitals such as RML and LHMC). During the same time, allo-

cations for materials and supplies for central sector publichospitals also fell from 22% to 15% to accommodate theincrease in salaries from 56% to 63% on account of the FifthPay Commission. This has had an adverse impact on the declin-ing level of quality in these once premier hospitals which areexpected to act as a benchmark in the quality of care.

CGHS-a mandatory social health insurance schemefor the Central Government Employees

Six per cent of the combined budget of the department or18% of the budget of the Department of Health was spenton 44 lakh beneficiaries or 0.5% of the country’s populationunder the Central Government Health Scheme (CGHS). Sincethe introduction of contracting of private hospitals for pro-viding health services and permitting beneficiary membersto purchase drugs at pharmacy shops in 2000, there hasbeen an escalation in expenditure under this programme. Overand above the Rs 503 crore incurred on the CGHS by theDepartment of Health, an additional Rs 200 crore was spentby the various administrative departments on medical reim-bursements of their serving employees during 2001-02. Alltaken together, the outpatient expense under the CGHS percard is estimated to be about Rs 3478 per year and the inpa-tient expense per card issued to retired civil servants anddependents is Rs 6692 per year.

Low priority for preventive health care

An important public health function that governments areexpected to perform is expanding access to public goods byfocusing on preventive and promotive education. Preventiveand promotive education does not mean only disseminatingdisease-specific messages to raise awareness among peoplefor behaviour change but also includes a range of other aspectssuch as laws for the use of helmets for preventing road acci-dents, or providing nutritional information to consumersregarding food products, on risky behaviours and exhortingpeople to adopt healthy lifestyles such as non-consumptionof addictive substances such as tobacco, daily exercise, healthydiets, etc. In India, such an interventionist role of the State isnegligible with some information, education and communi-cation (IEC) activities undertaken under the National HealthProgrammes. This is a serious omission, given the huge treat-ment costs that will be required to cope with the emergingepidemic of non-communicable diseases.

Under the NHP, the amount spent on preventive care aimedat prevention and behaviour change during the financialyear is an estimated 21% as given in the Table 5; of this a largeamount was for vaccines under the universal immunizationprogramme (UIP). In terms of use of mass media and inter-personal communication, the expenditure under this head inthe National Programmes is a mere 2% of the overall budget.For TB, the amount spent during 2001-2002 on preventivecare is very low, as most of the expenditure was on drugs,equipment and staff. As people are unaware of the free serv-ices under the National Health Programmes, a large number

Fig 3

Trends in grant-in-aid allocations by MoHFW toStates and declining capital expenditures

Note: 1. Figures in parentheses denote percentage share of central

spending and grants-in-aid to states as a percentage of total

MoHFW (GOI) expenditure.

2. Grants-in-aid has been calculated as the sum of expenditure

under major heads 3601, 3602 and 3606.

Source: Demand for Grants, Ministry of Health and Family Welfare,

respective years



of them continue to go to the private sector for treatment.. Expenditures under the Reproductive and Child Health (RCH)

Programme pertain to the immunization programme whichhelps avoid vaccine-preventable diseases but is of limited valuein achieving the goal of bringing down IMR and under-5 childmortality rate for which commensurate investments have tobe made on propagating a range of behavioural practices.These include breastfeeding, use of oral rehydration solution(ORS), healthy practices such as consumption of boiled wateror washing the hands with soap, prevention of acute respi-ratory infections (ARI), etc. These interventions are as impor-tant for child health as the use of vaccines for vaccine-pre-ventable diseases. Since preventive and promotive expendi-tures are an investment on the demand side, it is necessaryto not only increase the level of expenditure under this com-ponent but also implement these activities more rigorouslyto reduce the disease load and public expenditures on cura-tive care.

Centrally sponsored schemes-National HealthProgrammes (1991-2003)

Of the total combined central budget 70% is spent on NationalHealth Programmes related to the disease control programmesand family welfare. The allocation of funds for the 5 NationalCommunicable disease control programmes (Leprosy, Malaria,TB, Blindness and HIV/AIDS) went up from 18.6% of the budgetduring 1991-92 to 26.8% of the budget in 2002-03, account-ing for Rs 704.3 crore. Due to limited expansion of the budget,malaria got gradually crowded out giving way to HIV/AIDS.In 1991-92, malaria accounted for over 66% of the total out-lay under disease control programmes of the Department ofHealth, shrinking to just 29.3% in 2002-03. During this periodthere was a corresponding increase in the HIV/AIDS programme:from 5% to 34.3%. In gross terms, the disease control pro-grammes got a higher allocation as they were all fundedunder World Bank projects. The quantum of external fundingreceived by the Department of Health on the communicabledisease control programmes went up from a negligible amount

in 1990-91 to Rs 513.26 crore in 2002-03, constituting almost20% of the Department’s expenditure during the year, as shownin Table 6.

Another major national programme that is centrally fundedin substantial measure is the Family Welfare Programme. Underthis programme, recurring expenditures of subcentres, theRCH Programme and free supply and social marketing of con-traceptives are the main activities receiving 40%, 20% and12%, respectively, of the budget allocations.

Health expenditure by State Governments

At the State level, public heath is also financed throughgeneral tax and non-tax revenue resources as the cost recov-ery from the services delivered has been negligible, at lessthan 2% (Selvaraju 2001). As a result, resource allocationto this sector is influenced by the general fiscal situationof the respective State Governments. For instance, the imple-mentation of the recommendations of the Fifth Pay Com-mission during the late 1990s resulted in an increase inthe fiscal deficit and a general resource crunch. Evidence

Name of the programme

Activity Malaria Leprosy TB FW* HIV /AIDS Blindness Total % TE†

Distribution of IEC materials 846.09 1089.92 205.35 8542 15000 958.26 26,641.62 6.0

Immunization 0 0 0 54,722 0 54,722.00 12.4

Supply of condoms 0 0 0 11,821 0 11,821.00 2.7

Supply of bednets 239.05 0 0 0 0 239.05 0.1

Supply of insecticides 4301.36 0 0 0 0 4301.36 1.0

Total 5386.5 1089.92 205.35 75,085 15,000 958.26 97,725.03 21.1

TE 21978 6105.07 10,058.06 391,663 22,500 11,802.23 464,106.36

% TE 24.5 17.9 2.0 19.2 66.7 8.1 21.1

* 2002- 03; † Total expenditureIEC: information, education and communication; TE: total expenditure; TB: tuberculosis; FW: Family Welfare;Source: Ministry of Health and Family Welfare, GOI

Table 5

Expenditure on preventive and promotive activities under NHPs during 2001-02 (Rs in Lakhs)

NHPs Total Share of Share of

allocation external funding external funding (%)

Malaria 206.6 (29.3) 97.96 47.4

TB 96.8 (13.7) 95.10 98.2

Leprosy 75.0 (10.6) 67.99 90.7

AIDS 241.4 (34.3) 239.96 99.4

Blindness 84.6 (12) 12.25 14.5

Total 704.3 (100) 513.26 72.9

Figures in parentheses are the proportion of the total allocated for these 5 programmesSource: Demand for Grants, Ministry of Health and Family Welfare, respective years

Table 6

External funding of National Health Programmes(2002-03) (Rs in crore)



from other countries also suggests that whenever there isa fiscal consolidation and stress, social sectors like healthand education are targeted for pruning expenditures andreducing budget allocations (Tanzi and Schuknecht 2000).The figures presented in Table 7 confirm the above find-ings. The budgetary allocations to the health sector dur-ing the year 1999-2000 declined to the extent of about 2percentage points as compared to 1985-96. Despite reduc-tion in the health budget from 7.02% in 1985-86 to 4.97%in 2003-04 the fiscal deficit as a percentage of the GSDPrecorded an increase, implying that allocation to healthdoes not necessarily accentuate fiscal deficits.

Public spending on the health sector in the States increasedto about 0.9% of the GDP as per the estimates for 2003-04,from 0.8% in 1975-76 as seen in Fig 4. During the decade1975-85, it registered a substantial increase and reached ahigh of 1.05%. Thereafter, it deteriorated steadily due to thegeneral fiscal stress during the late 1980s followed by thereform measures initiated in the 1990s. The severity of thefiscal strain during the late 1980s forced the State Govern-ments to introduce austerity measures and the ‘soft’ sectorssuch as health were targeted for expenditure compressions.Similarly, when reform measures were initiated at the Centreduring the early 1990s, fiscal transfers to States were com-pressed leading to reductions in health sector allocation atthe State level. The recommendations of the Fifth Pay Com-mission in 1997 forced the governments to increase the budgetto meet the increased salary cost of public sector personnel.However, these improved allocations could not be sustainedbeyond 1999-2000 when deceleration set in again. By theyear 2001-02, the relative allocation to the sector reached lev-els closer to those prevailing in 1975-76. (Figure 4)

Budgeting allocation and outcomes

The manner of resource allocation to and planning for thehealth sector shows a wide disparity in spending and out-comes across States, indicating the absence of appropriatenorms for allocation and monitoring of health programmes.Table 8 gives the budget allocation function-wise (SeeAppendix 1). Although the table does not attempt to estab-lish any correlations between such functional spendingand key outcomes such as IMR or safe deliveries, it may bea proxy for assessing the functioning of the health system.Yet, the data are juxtaposed only to highlight the pointthat it is the low-performing (high IMR and low safe deliv-ery) States which spend relatively higher amounts on pri-

States 1985-86 1991-92 1995-96 1999-2000 2003-04 (B.E.)

Andhra Pradesh 6.41 5.77 5.70 6.09 5.21

Assam 6.75 6.61 6.08 5.25 4.39

Bihar 5.68 5.65 7.80 6.30 4.84

Gujarat 7.45 5.42 5.34 5.21 3.68

Haryana 6.24 4.19 2.99 4.08 3.63

Karnataka 6.55 5.94 5.85 5.70 4.85

Kerala 7.69 6.92 6.81 5.95 5.42

Maharashtra 6.05 5.25 5.18 4.59 4.39

Madhya Pradesh 6.63 5.66 5.07 5.18 4.89

Orissa 7.38 5.94 5.42 5.03 4.47

Punjab 7.19 4.32 4.56 5.34 4.27

Rajasthan 8.10 6.85 6.18 6.39 5.75

Tamil Nadu 7.47 4.82 6.40 5.51 5.26

Uttar Pradesh 7.67 6.00 5.73 4.42 5.13

West Bengal 8.90 7.31 7.16 6.30 5.23

All States 7.02 5.72 5.70 5.48 4.97

Table 7

Share of health in revenue budget of major States (in %)

Fig 4

Trends in public health spendingSources: State demand for grants for various years



mary care as compared to other States and yet continue tohave such poor outcomes, raising the question as to whetherthere is any correlation of public spending to programmeoutcomes. However for such analysis longitudinal data areneeded.

Table 8,however, seems to suggest that an equitable spreadof resources among all the three sectors-primary, secondaryand tertiary-may be necessary. As can be seen in the case ofUP-the skewed spending on primary and negligible amounton tertiary, which deals with medical colleges and training-

can have long-term effects in two ways: on the quality of peo-ple trained or in creating a shortage of skilled personnel.Whether poorly trained or low in numbers, the impact onaccess to primary care services will be adversely affected asthe care provided will depend, in the ultimate analysis, onthe availability of human resources.

Structure of health sector spending

Analyses of the structure of spending on health by State

Primary Secondary Tertiary Social health Administrative Research and IMR/1000* Safe delivery 2002**

insurance training live-births 2002 (% Rounded off)


Andhra Pradesh 63,241 22,844 27,625 5419 11,592 2326 62 68

(47.53) (17.17) (20.76) (4.07) (8.71) (1.75)

Karnataka 51,334 23,883 23,626 4719 4164 844 55 62

(47.28) (22.00) (21.76) (4.35) (3.83) (0.78)

Kerala 19,389 26,460 21,198 3502 1979 2385 10 97

(25.88) (35.32) (28.30) (4.67) (2.64) (3.18)

Tamil Nadu 52,700 18,120 34,114 8011 5266 1772 44 80

(43.92) (15.10) (28.43) (6.68) (4.39) (1.48)

Medium performing States

Punjab 26,078 10,078 9419 3131 12140 995 51 61

(42.17) (16.30) (15.23) (5.06) (19.63) (1.61)

Gujarat 30,336 4986 20,430 6623 8968 1558 60 59

(41.61) (6.84) (28.02) (9.09) (12.30) (2.14)

Haryana 16,217 5060 5507 2436 2518 412 62 44

(50.38) (15.72) (17.11) (7.57) (7.82) (1.28)

West Bengal 46,184 35376 30,153 6737 12457 1839 49 43

(34.79) (26.65) (22.71) (5.07) (9.38) (1.39)

Maharashtra 102,106 27722 36,292 11120 4645 1380 45 61

(55.70) (15.12) (19.80) (6.07) (2.53) (0.75)

Poor Performing States

Assam 21,002 6003 6109 0 2182 314 70 20

(58.98) (16.86) (17.16) (0.00) (6.13) (0.88)

Bihar 46,349 6047 11,728 768 4765 1692 61 18

(64.96) (8.48) (16.44) (1.08) (6.68) (2.37)

Chhattisgarh 17,166 2348 1541 328 1157 394

(74.02) (10.12) (6.64) (1.41) (4.99) (1.70)

Madhya Pradesh 41,650 10,791 14,420 2049 4915 1771 85 32

(54.14) (14.03) (18.74) (2.66) (6.39) (2.30)

Orissa 20,370 11,837 6590 1054 4407 645 87 37

(45.33) (26.34) (14.66) (2.34) (9.81) (1.43)

Rajasthan 57,831 7556 24,598 2275 5159 1419 78 38

(58.50) (7.64) (24.88) (2.30) (5.22) (1.44)

Uttar Pradesh 142,193 50,257 18,138 6680 12034 621 80 26

(61.18) (21.62) (7.80) (2.87) (5.18) (0.27)

Total 754,143 269,369 291,486 64,850 98,346 20,366

(50.18) (17.92) (19.40) (4.32) (6.54) (1.36)

Figures in Paranthesis are percentages to total spendings by statesRE figures for 2001-02 have been used for Bihar, all others are actualsSource: Demand for grants for respective States, 2003-04 (2002-03 for Bihar)* SRS, 2004 ** Source: MICS 2000

Table 8

Sectoral allocation of health expenditure by States: 2001-02 (Rs in lakhs)



Governments shows that spending on salaries and wagesaccount for more than 70% of health budgets. The hugenetwork of services developed over time covering the lengthand breadth of the country is manned by doctors, nurses andparamedical staff and no doubt needs a large budgetaryallocation. Of the remaining budget, nearly 12% is allocatedfor drugs, medicines, supplies and consumables; purchaseof machinery and equipment account for 8%, and nearly5% is allocated for maintenance of equipment, buildings,electricity, rent, taxes, etc. The remaining 5% is spent onother routine expenditures.

The large proportion of the budget allocation for salariesis often criticized as unproductive. It is true that the risingshare of salaries has squeezed out other components caus-ing severe imbalances. With the less-than-proportionateincrease in the total budget to the sector and political com-pulsions to not cut the salary head, the non-salary com-ponent used for fuel, drugs and medicines, maintenanceand repair of equipment and buildings, etc. declined sharply.

Does fiscal deficit impact on per capita public healthspending?

To analyse the spending behaviour of States and its connec-tion if any with fiscal deficits, an analysis of five States wastaken up–two well–performing and thee poor-performingStates. The analysis shows that the burden of fiscal deficit ismuch higher in Orissa, Rajasthan and Uttar Pradesh comparedto Tamil Nadu during the past decade as seen in Fig 5 below.This might have seriously hampered resource allocations tothe health sector in these States affecting their ability to per-form. As can be seen, with the increase in the overall fiscaldeficit as a percentage of the GDP, there is a decline in percapita public health spending. The fall has been sharpest inUP.

Public spending on health plays an important role in theimperfect health market. It ensures minimum service deliv-ery under the difficult circumstances that prevail in back-ward States such as Orissa, UP, Bihar and, at the same time,acts as a corrective force for market failures where a numberof players deliver services. Studies on health financing empha-size that even though the aggregate spending level in Indiais comparable to a few developing countries, the levels of percapita public spending on health needs to be stepped up(Prabhu 1993). This gains further importance as a large shareof out-of-pocket expenditure by users of public hospitals goesto pay for drugs and diagnostic tests from private providers.This expenditure actually substitutes the government’s expen-diture. As seen in Table 8, States that allocate larger resourcesper capita are also the States with better health outcomes asalso seen in Fig. 5. Therefore, in States such as Orissa andUttar Pradesh, per capita public health spending needs to beincreased more than proportionately because of low levels ofout-of-pocket spending due to low incomes and poor pur-chasing power. In fact, out-of-pocket spending as a share ofthe household expenditure is among the highest in UP-theState where per capita public expenditure is also low, calling

for an increase in public spending. It is, however, true that nocorrelation can be established between per capita public spend-ing and household expenditure as the actual access to serv-ices depends on other factors such as the efficiency with whichthe system is functioning. In other words, if the health sys-tem is inefficient or poorly managed, mere increase of finan-cial resources may have little impact.

Suggestions to increase budgetary allocatios for health areoften questioned because of the widely prevalent opinion thatthe budget allocated is seldom utilized. An analysis of thebudget allocated and utilized at the end of the year for fiveStates showed a mixed trend (Fig. 6). For instance, Keralahas been underutilizing about 7% of its budget allocated tothe health sector whereas, in Tamil Nadu, expenditure exceededallocation by about 6%. The evidence does not seem to fit apattern. At periods of higher fiscal deficit, percentage uti-lization should be low, but in UP during the four-year period1990-1994 there was consistently excess spending. While rea-sons for this will need a closer analysis, intuitively, it could beinferred that at times of fiscal stress, budget allocations arereduced to the bare minimum such as for salaries, which get

Fig 5

Fig 5A

Fig. 5. Burden of fiscal deficitSource: RBI, prices are in real terms



utilized without effort quite automatically. Conversely, thelower utilization of funds at better times could perhaps havemore to do with the budgeting process than in the States’ability or capacity to absorb the funds, calling for a restruc-turing of the way in which health is financed.

Issues of Concern

Financing of National Programmes-not as per need

Financing of disease control programmes are effected throughsocieties created for the specific programmes at State anddistrict levels. The mechanism for allocating funds directly todistrict societies was found to be effective as it enabled quickerabsorption of funds. However, there has been a measure ofscepticism. For instance, it was envisaged that such decen-tralization of funds to district societies would enable need-based, bottom-up programme planning and budgeting. How-ever, this seldom happened. Most programmes are designedat the Centre and funds are released with strict guidelines andwell-defined budget line items, not very different from for reg-ular health programmes except that the unspent budget doesnot lapse at the end of the fiscal year. In addition, these pro-grammes have little flexibility in issues such as contractingselected services or procurement of critical supplies.

More importantly, analysis showed that in a number ofinstances budget allocations are not need-based and in con-sonance with the extent of the disease burden. For example,while the disease burden and caseload under leprosy in Biharwas 21.3% of total cases, the State received only 9.4% of thefunds, while West Bengal having a caseload of 7.5% got over10% of the allocation. Likewise, UP and MP together accountedfor 37% of the total caseload under child morbidity but receivedonly 24% of the total budget for RCH.

Figures 7a and b show such mismatch between funds andneed explicitly. For instance, out of 20 major States, the extentof funds allocated to States such as AP, Bihar, Madhya Pradeshand Maharashtra for the Malaria Programme was substantially

larger than the caseload in those States, while the position wasreversed in Karnataka, Orissa and West Bengal.

Another important case of misplaced emphasis is the PulsePolio Initiative, introduced in 1996. Implemented as a verti-cally driven scheme, an estimated total of Rs 3592 crores hasbeen spent so far. This amount does not include the extra-budgetary expenditures incurred by the WHO on the appoint-ment of over 1000 consultants in the country to monitor theprogramme and the amounts being incurred by the UNICEFon IEC. It is estimated that one drop of polio vaccine isalmost 30 times more than the drop given in routine UIP.Moreover, almost 13% of the department’s budget during2003-2004 was spent on this single activity, which has lim-ited impact on reducing the IMR, a principal national and Mil-lennium Development Goal.

Gross underfunding of National Health Programmes:A mismatch between policy and practice

Policy governing the National Health Programmes is that serv-ices being provided under them are free for all. Theoretically,therefore, regardless of income class, all citizens of the coun-try are eligible for availing of services free of cost under theNHP that cover vector-borne diseases, TB, leprosy, Family Wel-fare, cataract blindness and HIV/AIDS. Our calculations showthat such a policy would need a minimum of Rs 12,000 croreagainst which the total amount that is spent by the Centreand States on these programmes is about Rs 5000. The sub-optimal functioning of the delivery system due to gross under-funding explains the huge out-of-pocket expenditures beingincurred by individual households in seeking services ‘guar-anteed’ to them under the NHP.

A survey of households conducted by the IIHMR, Jaipur(IIHMR 2000) showed that a married woman in the age groupof 15-49 years of age spent an average of Rs 400 for RCH serv-

The State Malaria Officer (SMO) plans and places the demand for

funds. When the budget is approved, it is about 50% of the demand

placed by the SMO.

The SMO still carries on with the 50% budget by rationalizing the

funds. The SMO selects areas/blocks that have a high incidence and

goes on selecting the second highest, third-highest blocks until the

budget is exhausted.

When the next budget allocation is made, the SMO continues the

implementation process. By the time the SMO controls the incidence

in about 50% of the blocks by the third or fourth year, the blocks

where the programme was implemented in the first year again show

up on the high incidence list.

This cyclical process continues and eradication of the disease is

further complicated. Increase in the drug resistance for every reoc-

currence makes eradication a herculean task.

Typical case of the National MalariaProgramme

Box

Fig 6

Extent of underutilization of the Health budgetSource: Reserve Bank of India


ices, with urban households spending Rs 604 and rural house-holds about Rs 292. Of this, Rs 835 was spent for delivery, Rs440 for RTI treatment and Rs 160 for child care. Similarstudies show that the reluctance of women for institutionaldeliveries and the persistently high proportion of domiciliarydeliveries are driven by cost factors. A delivery in a publichospital is reported to cost an average of Rs 601 while in theprivate sector it costs about Rs 3593, while at home it costsonly Rs 93. The major item of expenditure was also found tobe drugs, which constitute 62%. Such findings are not sur-prising as government spending on RCH is very low. Of theCentre’s total FW budget during the period 1997-98 to 2003-04, the amount for activities directly impacting on maternalhealth was Rs 2531 crores accounting for 9.7% of the totalbudget and Rs 17 per capita per annum for women in theage group of 15-49 years of age. Thus, it is clear that if weare to achieve the National Goals of IMR and MMR, there isa need to step up public spending and also develop socialhealth insurance schemes to address the financial barriers thathinder women from seeking good quality care.

Weak absorption capacity in the Government

Even while there is mounting evidence to justify a quantumjump in public budgets for health, the Central Ministry rou-tinely surrenders budgets allocated to it. Under World Bankprojects also, there have been frequent expressions of con-cern at the slow pace of expenditure and poor drawals. Whatis the reason for this apparent disconnect between a short-age of funds and an inability to spend? Why does money notget translated into an outcome, particularly in the poor-per-forming States where the people are so desperate for subsi-dized health care? The reasons for the slow pace of expendi-ture are both systemic and institutional as well as poor design-ing and sequencing of expenditure items.

Lack of stability in budgetary processes

State Governments normally pass the budget between Apriland June every year. Once the budget is passed, treasurieslocated at various districts are intimated of the budgets allo-cated to various sectors, followed by a budget authorization.The amounts authorized vary widely depending on the finan-cial situation of the State, and the current priorities and rea-sons could range from political compulsions to debt repay-ment. Several times during such a bad fiscal situation, budgetauthorizations are released but instructions are issued infor-mally to treasury officers not to release money, disruptingongoing activities and processes, such as finalizing a contractfor procurement of drugs or equipment. The department doesnot only lose the ‘unutilized’ funds at the end of the fiscalyear but these are also shown as ‘surrender of funds’ and thenext year’s allocations accordingly pegged onto the funds‘actually spent’. Secondly, expenditure items are also fixed andno discretion is given at any level to reallocate availablefunds for meeting a need or an emergency. For any such ‘devi-ation’ the approval of the State Finance Department (and ifa centrally sponsored scheme then the Central Government)is required which normally takes a few months at the mini-mum. Thirdly, utilization of funds also does not take place asthe first instalment could be inadequate for any meaningfulactivity necessitating the release of subsequent instalments.Finally, in the month of December, the expenditure levels arereviewed and revised estimates for the department fixed. Attimes of acute fiscal stress, budget cuts are arbitrarily imposedacross the department.

All these factors are mainly responsible for the lumping ofreleases, non-timeliness of the availability of drugs or otherinputs for any meaningful utilization, the lack of synchro-nization of the mix of inputs, etc. There are another two wor-rying aspects. One, at times, to not let funds ‘lapse’ the amountsare spent on inessential items; and two, across the board budget

Fig 7a

National Malaria Programme: A case ofmismatch in funds and incidence-ISource: Government of India

Fig 7b

National Malaria Programme: A case ofmismatch in funds and incidence-IISource: Government of India




cuts could often also mean interruptions in the supply of essen-tial drugs carrying unintended consequences of drug resist-ance or burdening the patient to buy drugs.

Analysis of annual accounts of district societies for2002-03

As has been argued earlier, various societies have been cre-ated at the district level for the implementation of the NationalHealth Programmes, including the District RCH Society, Dis-trict Blindness Control Society, District Tuberculosis ControlSociety, District AIDS Control Society, District Leprosy Con-trol Society, etc. These societies are registered under theSocieties Act, and the governing body of these societies usu-ally include representatives of District administration, DistrictHealth officer (or his equivalent), and the respective programmeOfficers, often along with elected representatives from thedistrict and some representation from civil society.

The purpose of creating these societies is to provide auton-omy for programme implementation, decentralize the plan-ning, implementation and monitoring of the programme,and also as a funding mechanism wherein funds do not lapseat the end of the financial year and can be carried over to thenext year. Funds are provided by the Central, and/or the StateGovernment in the form of grant-in-aid to society, which isto be spent for the purpose of programme implementation.

However, funds often reach the societies late, and some-times the last instalment for the year is not even received atthe end of the financial year (and is accounted for as ‘Fundsin Transit’). The first instalment for a financial year can take

anywhere between 1 and 4 months or more to be released,and even more time to finally reach the District Society.

At the society level, often this fund is not adequately uti-lized during the financial year, resulting in a high closingbalance with the society at the end of the financial year. Tosome extent, this closing balance is also necessary, as itallows for a buffer to meet the expenditure for the newfinancial year before a new instalment of funds is received.However, in some cases, huge balances lie unutilized withthe district societies. In a study of 17 such societies from fivedistricts, for which the annual accounts and balances wereavailable at NCMH, one society had a reserve balance at theend of 2002-03 which was adequate for 5 years of its cur-rent annual expenditure, while 5 other societies had reservebalances at the end of 2002-03 which were adequate for morethan 1 year’s requirement. Table 9 Notably, 4 societies (outof 17) had negative balances, i.e. they had spent more thanwhat had been released from the Centre/State, and this exem-plifies delayed releases where funds did not reach even bythe end of the financial year.

A break-up of the items of expenditure showed that the pre-dominant item of expenditure for Blindness societies was grant-in-aid to NGOs, constituting between 41% and over 80% ofthe total expenditure incurred by these societies in 2002-03,but was insignificant for other societies. Similarly, barring onedistrict, the remaining 4 Tuberculosis societies had salaries ofthe contractual staff as the largest component, varying from55% to 83% of their expenditure during the year. If all theresource is spent on staff, what does the district society do toraise awareness? Further analysis showed no uniformity in focus.

District Society Closing balance on 31-3-03 Expenditure during Funds available at end of year

year 2002-03 (in months of requirement)

Vaishali AIDS 150,314 117,686 15.3

Nadia Leprosy 318,502 1,931,458 2.0

Kozhikode Leprosy 416,071 185,273 26.9

Vaishali Leprosy 916,235 1,003,017 11.0

Nadia Blindness -683,361 688,734 -11.9

Nadia Tuberculosis 1,873,881 3,211,496 7.0

Vaishali Tuberculosis 1,421,618 1,125,594 15.2

Vaishali Blindness 493,284 84726 69.9

Kozhikode Blindness -660,950 1,019,019 -7.8

Kozhikode Tuberculosis 2,762,057 851114 38.9

Jalna Tuberculosis 1,131,043 1,034,195 13.1

Nadia RCH 263,555 5,875,035 0.5

Pune Tuberculosis 0 1,445,881 0.0

Pune Blindness -1,298,941 1,814,016 -8.6

Pune Malaria 872,747 1,127,253 9.3

Pune Leprosy -137903 346,704 -4.8

Pune AIDS 1,266,104 1,309,104 11.6

Source: Accounts of the various district societies made available to NCMH

Table 9

Break-up of expenditure of district societies in different States for various programmes in 2002-2003 (Rs in lakhs)



Dysfunctional system of financing

Departmental budgets are made in a five-year cycle, catego-rized into various heads and subheads. The broader divisionsare revenue and capital, plan and non-plan. Revenue budg-ets finance current consumption such as salaries and wagesof staff, purchase of drugs and medicines, and repair andmaintenance of machinery, equipment and buildings includ-ing purchase of minor equipment, machinery, etc. Capitalbudgets are a one-time investment for purchase of land, build-ing construction, equipment, machinery, etc.

The budget of the health directorate is further categorizedinto rural, urban, allopathic, other systems of medicine,medical education and public health, and again into activi-ties such as training, urban and rural family welfare services,contractual services, transport, and so on. All these budgetheads are further allocated to numerous minute budget headsthereby making the allocations very specific.

The budget process so developed over decades has resultedin fragmentation of the health sector budget into more than4000 small heads. The funds allocated under those numer-ous budget heads are non-transferable and are surrenderedto the State’s general pool of funds if they remain unutilizedat the end of the fiscal year. This is strictly followed to ensurethat the funds budgeted for specific activities at the begin-ning of the year should be spent on those activities to fulfilthe intended objective.

Such systems of budgeting are extremely useful for auditand accounting purposes as the key objective is expenditurecontrol. Such procedures also help insulate the budgets fromarbitrary diversions, misuse of funds and deviation from statedobjectives. However, the system, from the perspective of achiev-ing health system goals, is archaic and needs to be changed.Firstly, fixing budgetary allocation on five-year and annualplan cycles is not based on any meaningful programme audit.There are neither baselines, nor endlines, evaluations norreviews taken into account or made available to serve as thebasis for resource allocation. The exercise is routine with incre-mental shifts and some programmatic targets that move fromyear to year. In fact, targets have little to do with the professedgoals that in turn have little to do with financial allocations.Therefore, since the physical targets have no bearing on thefinancial allocation, the focus shifts to budget utilization toprotect future allocations. And since financial expenditure isthe key indicator for achievement, the major proportion ofthe cumulative energy of the department go towards obtain-ing ‘utilizations certificates’ and releasing funds to States anddistrict societies, rather than focusing on the promotionalactivities that impact on health outcomes. Secondly, healthsector needs are different, requiring a measure of flexibilityas, barring some broad heads of expenditure where advanceplanning can be done, under operational costs, the level ofunpredictability could be high. The type, nature and inten-sity of diseases change with seasonal variations, demographicshifts and the macroeconomic environment. Health managerscannot therefore be tied down to a five-year plan of activi-ties nor can they foresee their needs five years in advance, as

a SARS epidemic can upset the whole budget allocation andpriorities. Similarly, at the local level, also, hospital managershave to be taking multiple decisions all the time requiringflexibility and some autonomy in financial decision-making.

Besides, for a policy-maker, the structure of budgeting makesit impossible to identify the cost centres, where expenditurecontrol needs to be exercised, the type of skills mix needed,which departments should be closed down and which expandedin keeping with the changing disease burden, etc. Such lackof flexibility is the reason for the low occupancy of beds inpublic facilities. Since hospital budgets are not global and arefactored based on bed strength, which determines the staffand drug support, etc. there could be situations where onedepartment has funds though few patients, while another mayhave restricted funding but have two patients on one bed.

Complex design

Funds also do not get spent if the design of the scheme orintervention is very complex and process-oriented. Participa-tory systems that involve all stakeholders do provide, in thelong run, greater sustainability to the programme. However,such approaches are time-intensive as different constituentsof stakeholders have different and varied ideas, expectationsand needs. Harmonizing them takes time, as communityresponses are not always uniform. Therefore, when any activ-ity has to be implemented within a strict time-frame, then suchprocesses get short-circuited and data are fudged or moneynot spent. Second, and more so in donor-funded projects,the emphasis is on spending. The release of funds is in equatedinstalments spread over all the project components. In such asystem, delay in the completion of one activity upsets theimplementation of others. For example, training may get heldup due to delays in the preparation of training modules ortraining of trainers or the procurement of equipment may getstalled due to delay in the construction activity.

Inadequate allocation of funds under externallyfunded projects

A frequently heard issue in relation to externally funded

In Ontario province of Canada, all hospitals are required to furnish

detailed financial returns to the department once a quarter based

on which budgets are released. The returns run into over 2000 budget

lines provided department-wise and indicating not only utilization

of the budget but also utilization of the services. Such concurrent

utilization, financial and physical line item-wise, is what gives the

hospital manager an understanding of the kind of services for which

the demand is growing, where there is an excess of drug budgets

or the workload of staff allocated can be calculated. This then helps

them to re-deploy staff to needy areas by training, wherever required;

reconfigure resources, shutting down departments where there is

inadequate demand; bring in control on prescription of drugs or tests

wherever they are found to have crossed reasonable limits, etc.

Box



projects is the slow pace of expenditure. This happens for threereasons: First, while the Government approves several stand-alone projects and agrees to a yearly funding plan, in prac-tice, funds made available under the ‘EAP’ (Externally AssistedProjects) component are normally short of the amounts agreedto. This is because of the system of capping the proportionof the EAP for each ministry based on the total resourceposition of the country calculated on the basis of total domes-tic and external revenues.

Second, the procedures for implementing activities are cum-bersome and require multiple clearances at several stages.Construction activities and procurement of equipment take,on an average, eighteen months to two years for starting theactivity, or obtaining the equipment. Third, complex proce-dures are involved in the recruitment of staff, and the processof selection is highly time-consuming, taking over a year.States are also often reluctant to create posts for which theywill have to pay after the cessation of the project in fiveyears, adding to their non-plan budget. Besides, due to lowsalaries, often posts do not even get filled up. To circumventthis problem, increasingly projects are recruiting persons oncontract. While this enables quicker placement of people, itaffects the human resource issue of the department in thelong term, since contractual appointees are neither providedtraining nor given any financial delegation of powers andresponsibilities as they are seen as temporary workhands.

A serious matter related to external funding is that suchfunding is not provided as an additionality. In such a system,instead of the health system being strengthened by externalfunding, priorities get skewed and distortions created, as non-funded programmes, which could be equally if not more impor-tant, get lower funding priority. Besides, since external fund-ing is not an additionality, there is little incentive for thedepartment to mobilize donor aid. At times of acute fiscalstress, again, two things happen: either the externally aidedcomponents of the budget are protected to the exclusion ofall else as seen in AP during the late 1990s, distorting depart-mental priorities once again, or the crises may end in cur-tailing the availability of funds to the externally aided proj-ects also, affecting the spending and credibility of the Statefor raising future funding.

Budgeting not functional

In other countries, budgets have two heads-capital andoperational. A budgeting system based on an artificial clas-sification of plan and non-plan makes it impossible to knowwhat money is going where. Since the annual planning processonly considers the plan or ‘new’ activities, the maintenanceof assets never gets the required attention under the non-plan budget. So while under the plan budget, buildings areconstructed, the cost of maintenance is not factored in fromyear to year. Second, the aggregation of budget heads keepschanging making any trend analysis difficult. Third, there isno uniformity in budget lines in the country. For example, inKarnataka and Maharashtra, the Director of Health Services

is aware of and responsible only for budgets released to hos-pitals having more than 100 beds, whereas budgets relatedto facilities having less than 100 beds are administered andmonitored by the respective Zila Parishads with funds releasedby the Department of Finance. Moreover, as already observed,the budget lines are useful only for accounting purposes andnot for policy planning. We tried, for example, to calculatehow much government departments spend on the health careof its serving employees. For the Government of India, thisinformation is spread over 8000 drawing officers, 700autonomous bodies, 38 departments and 220 PSUs. Each DDOagain has to scrutinize the salary bills to disaggregate theamount spent on medical care! In State Governments, obtain-ing this information was impossible.

Weak financial capability

At almost every level-central, State or district, administrativedirectorates or hospital units-the staff dedicated for finan-cial oversight functions are few and their capacity weak. Inmost cases, the staff consists of one or two officers and a fewclerks. None is trained on either financial management or onhealth needs. Several times their knowledge of financialrules is superficial. While the Central Government has an inter-nal audit system, at State and district level, such concurrentaudit systems do not exist. Computerization is poor and so isthe capacity for planning and budgeting. Weak systems giveroom for discretion and scope for fraud and, more impor-tantly, for delays due largely to raising meaningless and friv-olous queries. This therefore calls for greater professionalismof the finance set-up and sharing of responsibility, makingthem equally responsible for poor expenditure. Changing theirmindset from account-keeping to being facilitators for achiev-ing certain goals should be the key for the future.

Conclusion

Health sector in India suffers from gross inadequacy of pub-lic finance and therefore an immediate and significant scal-ing-up of resources is an imperative. The undue burden onhouseholds for spending on health cannot be wished away.Further, it is also clear that there is an urgent need to restruc-ture the budgeting system to make it more functional, amenableto review of resource use to take corrective measures in timeand be flexible enough to have the capacity to respond to anemergency or local need. Rules and procedures for actualrelease of funds, appointment of persons, labour laws, pro-curement systems all need a thorough review. Greater decen-tralization of funds, aligned with functional needs and respon-sibilities, is necessary. However, any decentralization and finan-cial delegation needs to be carefully calibrated and sequenced.In other words, decentralization can only be done after devel-oping the requisite financial capability and laying downrules and procedures for accounting systems. Unless suchrestructuring takes place, greater absorption of funds willcontinue be difficult.

Primary care: For the purpose of this paper, primary care hasbeen taken to include all facilities which provide outpatientcare, which may be preventive, promotive or curative, and alsothose facilities which provide outpatient as well as limitedinpatient care, wherein the admissions are primarily for sta-bilization or observation, etc. Thus, in this paper, primary careincludes subcentres, PHCs and CHCs, as also ISM dispensaries.Secondary care: This category includes institutions with inpa-tient facilities, above the level of CHCs, but not providingsuperspecialty care. Therefore, this category includes talukand district hospitals. While these institutions also provideprimary care, and for some of these, this could be a majoractivity, the entire expenditure of such institutions is classi-fied as secondary.Tertiary care: Teaching hospitals and medical colleges havebeen included in this category, which includes allopathic aswell as Indian systems of medicine. While these institutionsalso provide primary and secondary care, and for some, thesecould be major components of their activities, the entire expen-diture of such institutions is classified as tertiary.Research and training: Expenditure incurred on institutionsmainly engaged in health-related research or health-related train-ing activities have been classified in this category. Teachinghospitals and medical colleges have not been included here, forexample, as patient care is the major activity undertaken by them.Social health insurance: Expenditure incurred on subsidiz-ing the running of schemes such as CGHS, ESIS and othersuch funding mechanisms for the health care of specific groupsof people, have been included in this category.International cooperation: This includes expenditure incurredon contributions to UN agencies and other international agen-

cies such as Red Cross.Administrative: Although each of the above categories willhave administrative components therein, this category onlylists those expenditures that are exclusively administrative, forexample, the secretariat of the ministry, or a regulatory agency.

As will appear later in this chapter, a similar methodologyfor these categories has also been followed in the case of Statebudgets, except that small amounts of other expenditure thatcould not be allocated in the above categories are also groupedunder the category of Other Expenditure. Since there was noexpenditure by the status on International Cooperation, thecategory does not figure in the table on expenditures of theState governments.

The budgetary data were categorized according to sub-heads and detailed heads in rows, and object heads in columns,and were entered into spreadsheets. Each of these detailedrow items was then categorized as belonging to one of theabove categories, and then the sum totals of expenditure undereach category were obtained and tabulated. For the CentralGovernment, actual expenditures for 5 different financialyears, from 1991-92 till 2002-03, were similarly categorizedand analysed. As the heads of accounts used in the 1991-92budget were different from the ones in use now, these havebeen adapted to the ones in use at present.

For States, this analysis was similarly done for 16 majorStates, for the year 2001-02, based on the actual figurespublished in the Detailed Demand for Grants of the respec-tive health ministries. The only exception here was Bihar, wherethe 2003-04 demand did not contain all the actual expendi-tures, and the 2001-02 Revised Estimates (RE) figures for Biharhave been used throughout this study.



Appendix 1



Government of India. Statistical abstract of India. Variousyears.

Mahal A, Singh J, Afridi F, Lamba V, Gumber A. Whobenefits from public health spending in India. New Delhi:National Council of Applied Economic Research; 2001.

National Sample Survey Organisation (NSSO). Morbidityand treatment of ailments. Report No. 441. New Delhi:Department of Statistics, Central Statistics Organisation,Government of India; 1998:A-170.

National Sample Survey Organisation (NSSO). Morbidityand utilization of medical services. Report No. 336644.. NewDelhi: Department of Statistics, Central StatisticsOrganization, Government of India; 1989:A-13.

Prabhu KS. Social sector expenditures and human devel-opment: A study of Indian states. Bombay: DevelopmentResearch Group, Reserve Bank of India; 1993.

Reserve Bank of India (RBI). Handbook of statistics. Various years.

Reserve Bank of India (RBI). Report on currency andfinance. Various years.

Selvaraju V. Budgetary subsidies to health sector amongselected States in India. Journal of Health Management2001;3.

Selvaraju V. Health care expenditure in rural India.Working Paper No. 93. New Delhi: National Council ofApplied Economic Research; 2003.

Tanzi V, Schuknecht L. Public spending in the 20th cen-tury: Global perspective. Cambridge: Cambridge UniversityPress; 2000.

World Bank. World Development Report 2004: Makingservices work for poor people. World Bank; 2003:256-7.

References

G


UR ESTIMATES OF HEALTH SPENDING IN INDIA ARE BASED ON THE EXHAUSTIVEstudy commissioned by the National Commission on Macroeconomics and Health(NCMH). These estimates are constructed using a National Health Accounts (NHA)approach which is explained below.

The NHA methodology views financial flows as occurring across primarily threesets of agents and/or categories-ultimate sources of funds, financial intermediaries,and the uses to which funds can be put. These uses can be classified in a number ofways-by type of provider (e.g. government, private, non-profit); or by functionalclassification (e.g. inpatient care, outpatient care, collective goods, direction andadministration, training and research).

As our goal is to estimate aggregate spending and its major components, and theway such expenditures are financed, while avoiding any double counting, we limitourselves to describing financial flows of only three types: (i) from sources of fundsto financial intermediaries; (ii) from financial intermediaries to providers of care; and(iii) from financial intermediaries to a functional classification for the purpose ofcare. Given that there are several sources of funds, multiple financial intermediariesand different providers/functions in a country, these flows are best presented in theform of three matrices (here we provide only the first two matrices in Tables 1 and2), each corresponding to a different part of financial flows related to health. Thethree sets of matrices relate to the following financial flows: � From ultimate sources of funds to financial intermediaries� From financial intermediaries to functional categories � From financial intermediaries to care providers

The Meaning of Health Expenditure

A key step in trying to estimate financial flows linked to health is to specify themeaning of expenditure on health. For the purposes of this note, health expenditureis defined to include spending on care and treatment associated with illnesses, onadministrative expenses associated with such treatment, spending on public healthprogrammes (such as tuberculosis, malaria, blindness and HIV/AIDS), on medicalresearch and training, rehabilitation, immunization programmes and selected com-ponents of programmes associated with maternal and child health. Both recurrentand capital expenditures are included.

We have followed the convention of the literature on national health accounts andhave not included in our analysis expenditures for nutrition, education, clean waterand sanitation programmes, referred to as ‘health-related services’ in George andPattnaik (2004). It can be argued that the omitted categories of expenditure haveimplications for health, and some studies of health spending have, in fact, includedsuch expenditure flows. This note presents information on health expenditure for2001-02, the latest fiscal year for which data were available under many NHA cate-gories.

The entities that spend money on health in India

Given the above working definition of health expenditure, who are the players (oragents) that spend money on health? From the perspective of the ultimate sourcesof funds, this group includes primarily the government, households (their out-of-

Annexure 1National Health Accounts for India

O

S E C T I O N I V




[email protected]




SOMIL [email protected]


National Health Accounts for India SECTION IV

pocket spending and contributions to insurance premiums,whether in the public or private sectors), non-governmentalcum non-profit entities (NGOs), firms (whether in the publicor private sectors), and international institutions. This set ofultimate sources of funds may also include banks that financehealth sector investments, although the George and Pattanaik(2004) study does not consider this possibility. This study con-sidered the following categories as the ultimate sources offunds:� The Government (State, Central, local)� Households� Firms (public and private enterprises)� Quasi-government organizations other than public sector

enterprises� Non-governmental organizations� International agencies/rest of the world� Others (such as surpluses of certain organizations that fall

outside the above categories)Besides being ultimate sources of funds, many of the above

agencies also serve as ‘financial intermediaries’ as funds movefrom ultimate sources to ultimate uses. In particular, the fol-lowing are the major financial intermediaries in the Indiansetting:� Department of Health, Medical and Family Welfare

(DOHMFW)� Other State government departments that spend money

on health�Central government ministries that spend money at the State

level� Local governments � Societies/autonomous bodies�Public and private enterprises (especially in their role as pay-

ers of health services for their employees)� Social insurance [Employees’ State Insurance Scheme (ESIS),

Central Government Health Scheme (CGHS)] � Voluntary insurance (individual and group)� Households (when they directly pay for services received by

them)-sometimes they may be reimbursed for such expen-ditures.Financial intermediaries allocate funds to the ultimate

providers of health and health-related services. Of the severalcategories, two types of ‘ultimate uses’ were considered forthis report: provider-based classification and functionalclassification. These are discussed further below.

What are the uses and/or functions on which health expen-diture is incurred?

The two major classifications are provider-based and func-tion-based.

Provider-based classification

� Public providers � Non-profit providers� Private providers� Other providers � Rest of the world

Public providers of health services

Public providers include (i) hospitals of the State govern-ment (separately, if needed for Indian systems of medicineand non-Indian systems of medicine); (ii) dispensaries of theState government; (iii) sub-centres; (iv) rural and urban fam-ily welfare centres of the State government; (v) facilities ofvarious Central ministries (such as Defence, Railways and Postsand Telegraphs); (vi) facilities of public enterprises; (vii)facilities and services of local governments; (viii) facilities ofCGHS; (ix) facilities of ESIS; (x) facilities of autonomous insti-tutions and societies (xi) facilities of ‘other’ State governmentproviders not captured above; (xii) collective health services(of DOHMFW and other government entities); (xiii) adminis-trators (DOHMFW); (xiv) administrators (ESIS, CGHS and othersocial insurance); (xv) providers of training, education andresearch in the public sector, such as State Institute of Healthand Family Welfare (SIHFW), medical colleges, OSM col-leges, nursing colleges, auxiliary nurse midwife (ANM) train-ing colleges, etc.; (xvi) providers of training, education andresearch in the private sector.

It should be noted that ‘Collective health services’ includeexpenditures on prevention of disease; family welfare andprevention of food adulteration. The categories include col-lection of statistics and statistical analyses, information/advo-cacy efforts in health, testing of water and food quality,family planning, antenatal care, etc.

Private Providers of Health Services

These include (i) private hospitals; (ii) private doctors; (iii) facil-ities of private firms/enterprises (iv) traditional health providers;(v) traditional birth attendants; (vi) ancillary care providers;(vii) administrators for private insurance; and (viii) medicaleducation/research and training in the private sector.

It should be noted that ‘ancillary services’ include expen-diture on drug purchases, clinical laboratories, diagnosticimaging, and ambulance services. This classification is diffi-cult to undertake in the public or the private sector, althoughsome estimates can be made based on the NSS data.

Non-profit institutions

(i) NGOs (charitable hospitals and dispensaries) and othersthat provide clinical services; (ii) NGOs that provide dis-ease control and health promotion services; and (iii) med-ical education/training/research provided by non-profitinstitutions;

‘Other’ providers

(i) Rest of the world-this may include international NGOsand health services obtained abroad; (ii) self-care. Typ-ically, data on (i) is difficult to find.


SECTION IV National Health Accounts for India

Function based classification

� Personal health services � Collective health services � Direction and Administration � Health-related services

Personal health services

These include (i) outpatient care; (ii) inpatient care; (iii) self-care; and (iv) treatment by unqualified practitioners. One can,if needed and data were available, consider a further sub-clas-sification into public and private providers.

Collective health services

These consist of (i) disease prevention (expenditures on gov-ernment programmes for control of communicable diseasesand non-communicable diseases, surveillance of diseases, sur-veys and statistics, vaccinations other than primary vaccina-tions for children); (ii) health promotion-(a) family planningand welfare: expenditures on family welfare programmesundertaken by the government and all expenditure pertain-ing to childbirth, abortion (except spontaneous abortion, med-ical attention for which is considered a curative service), ante-natal care, postnatal care, family planning and primary immu-nization to children; (b) Control of food adulteration anddrugs-Includes expenditure on prevention of food adulter-ation and drug control administration

Direction and administration

In general, this information is not readily available for pri-vate providers. Thus, the standard approach has been to takeaccount of all Direction and Administration expenditures inDOHMFW, in CGHS and ESIS, in private insurance and, ifpossible, in other government health services expenditures.

Health-related services

Here again, we have medical education, training and researchand ICDS spending by public, private, or non-profit providers.

Methodology and Sources of Data for EstimatingHealth Expenditure in India

Matrix 1 summarizes information on the major ultimatesources of finances for health expenditure for which data werecollected for India, the major recipients of such funds andthe sources from which data were obtained on the magni-tude of the various financial flows.

Matrix 1 shows that the Central Government contributesto State health expenditure in several ways by supporting (i)State health departments, other State departments and soci-eties by means of ‘centrally sponsored’ schemes. Many (butby no means all) of the Centrally sponsored schemes in ques-tion are funded, at least partially, by international agencies;

(ii) health expenditure of its current and retired employees(and their dependants) based in different States: via theCentral Government Health Scheme (CGHS), dispensaries ofthe Department of Posts and Telegraphs and Department ofTelecommunications, and the Central Services (Medical Assis-tance) scheme; (iii) expenditure by Ministries such Railwaysand Defence on their current and retired employees (andtheir dependants); and (iv) grants to non-governmental organ-izations.

Similarly, State governments contribute to health spend-ing by supporting (i) the State department of health andfamily welfare, known as the Department of Health, Medicaland Family Welfare (DOHMFW) and the various directoratesthat come under its responsibility; (ii) contributions to thesocial insurance scheme known as the Employees’ State Insur-ance Scheme (ESIS) established for employees earning lessthan a pre-specified amount in firms, public, or private organ-ized sector. (iii) supporting health expenditures by their cur-rent and retired employees (and their dependents); (iv) sup-porting ‘hospital societies’ in the form of ‘stoppage’ charges;(v) contributions in the form of expenditures incurred by ‘other’State departments, such as Tribal Welfare, Governor and theCouncil of Ministers and the Department of Women and ChildWelfare and Disabled Welfare; and (g) grants given to localgovernments for specific purposes.

Matrix 1 also highlights the role of local governments infinancing health expenditures. Local governments belong totwo categories, depending on whether they relate to urbansettings (Municipal Council, or Corporation), or rural areas(Panchayati Raj institutions [PRIs]). In principle, both sets ofgovernments can raise funds on their own, in addition to ben-efiting from transfers from the State Government. Expendi-tures financed by own resources highlight the role of localgovernments as an ultimate source of funds. Most of thehealth-related activities of municipalities and municipalcorporations are confined to that of public health (registra-tion of births and deaths, antimalaria programmes, etc.), some-times in conjunction with the operation of a small set of pri-mary care centres. In this study, only urban municipalities/coun-cils were considered as resources flowing into PRIs on healthsector are insignificant.

Households are a major ultimate source of health spend-ing. These include contributions to insurance schemes (CGHS,ESIS, Armed Forces Group Insurance, Mediclaim) and user feespaid for health care at both public and private health carefacilities. As some health care expenses of households are reim-bursed by insurers, the government and private employers, thenet out-of-pocket expenses incurred by households are lessthan that suggested by household surveys. Our study tookthis problem into account and the health expenditure esti-mates reflect adjustments for reimbursements.

How did we arrive at households spending on health? Usingdata from the 52nd Round of NSS, we estimated the meanexpenditure for 1995-96, while the number of treated inpa-tient and outpatient cases were anchored to the 2001-02 pop-ulation. The mean expenditure obtained for 1995-96 wasthen projected forward to 2001-02 by adjusting it for both



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price changes and growth in real terms, based on informa-tion from the 50th (1993-94) and 55th (1999-2000) roundsof consumer expenditure surveys. Calculations were also under-taken separately for inpatient spending and outpatient spend-ing, for reproductive and child health, and expenditures incurredon self-care for the rural and urban populations in each stateand union territory of India. Finally, households estimatesfor the year 2001-02 was obtained for different categories:rural-urban, outpatient-inpatient, reproductive and childhealth, self-care and by all States and union territories.

A third set of major contributors for health expenses arefirms, in the public and private sectors who support their

current employees and their dependants and,in some cases, retired employees (and theirdependants). These contributions mainly takethe form of (i) direct provision of health serv-ices by some firms; (ii) contributions by firmsto insurance schemes such as ESIS and GroupMediclaim; (iii) Reimbursements of healthexpenditures; and (iv) lump sum allowancesas part of salary. Whether the last categoryought to be included in health expenditureestimates is debatable as, it need not corre-spond to any health spending.

International agencies also support State-level health spending in a number of ways:(i) By providing grants/loans to the Ministryof Health and Family Welfare and other Min-istries in the Government of India that, in turn,support ‘centrally sponsored’ schemes at theState level; (ii) support to State Governments(health and other departments), and fund-ing State-level societies; (iii) direct support toNGOs in the State for care, training andresearch. The funding agencies include bilat-eral and multilateral institutions, internationalNGOs, and individuals. Data on direct NGOsupport by individuals are particularly diffi-cult to obtain.

Findings

� What is the total spending on health andas a share of GDP in India?

India spent approximately Rs 108,732 croreon health and health-related expendituresduring the fiscal year 2001-02. This amountedto about 4.8 percent of the estimated GrossDomestic Product (GDP) at market prices in2001-02. National health expenditures, whentaken as a proportion of GDP at factor cost,were 5.2 percent.

As a proportion of GDP, our estimates ofnational health expenditures are on the lowerend of previous estimates for India. [5.2 per-cent (Peters et al. 2001), 6.0 percent (PeterBerman, as cited in World Bank 1995)].

� Who are the major financiers of health care spending inIndia?Table 1 shows that households ultimately financed about

69% of all health spending in India, with the different branchesof the government (Central, State and local) contributingabout 24%. If one were to add the contribution of publicsector enterprises and quasi-government institutions, the gov-ernment’s share increases to a little more than 26% of allhealth spending.

International funds support about 2 percent of nationalhealth spending, with private-for-profit enterprises con-tributing another 3%.” Although not large as a proportion

Table 1

Health care spending in India, by source of funds, 2001-02

Ultimate source Total resources Share in total As proportion to

(Rupees in crore) expenses (%) GDP (%)

Government 25850.5 23.8 1.14

Central 7859.6 7.2 0.35

State 15651.9 14.4 0.69

Local 2339.0 2.2 0.10

Households 74760 68.8 3.30

External Funding 2209.9 2.0 0.10

Firms 5301.0 5.1 0.23

Public enterprises 2043.2 1.9 0.09

Public sector banks 245.0 0.2 0.01

Privateenterprises 3257.8 3.0 0.14

Others/NGOs 366.0 0.3 0.02

Total 108732.5 100.00 4.79

Source: Based on Matrix 1: Financial sources to financial intermediaries

Table 2

Health care spending in India, by financial intermediary, 2001-02

Ultimate source Total expenditures Share in total

(Rupees in crore) expenses (%)

Government 26702.7 24.55

Central 3311.2 3.04

Other Central Ministries 2629.8 2.42

State: DOHMFW 18422.7 16.94

Local 2339.0 2.15

Firms 1963.2 1.80

Public enterprises 1155.8 1.06

Private enterprises 807.4 0.74

Social insurance 2564.6 2.36

Private insurance 756.9 0.70

NGOs 1768.0 1.63

Households 74977.0 68.96

Reimbursements 2218.3 2.04

Total 108732.5 100.00

Source: NHA Matrix 2, from financial source to financial intermediaries



of total health spending, international support could poten-tially be quite substantial for state governments' health spend-ing, amounting to roughly 10% of the latter. � How important is ‘Insurance’ as a source of financing?

Note first that insurance is a form of financial intermedia-tion, whose ultimate contributors could be households, thegovernment, firms, and other groups. Insurance could bothbe social (such as ESIS and CGHS) as well as voluntary (in theform of group and/or individual Mediclaim policies, AGIF andother packages offered by insurance companies in India).Viewed in this narrow sense, about 3.1% of health expendi-tures in India were insurance-supported spending (Table 2). Of course, government health facilities that offersubsidized services can also be considered a form of healthinsurance, albeit financed by the state.

Irrespective of the method used for arriving at health expen-ditures covered by insurance, it is clear that a substantial

amount of health expenditures (presumably curative care) inIndia is not covered by insurance schemes, and thus have thepotential of leaving people who incur such expenditures worseoff. Moreover, it may be the relatively economically worse-off households who bear the brunt of these expenditures forat least two reasons. First, most private and social insuranceschemes do not cover them. Second, they may not be as ableto access subsidized public health facilities as the better-offgroups corner them the most, as a study using NSS data sug-gests (Mahal et. al.). In addition to the financial risk borne bypeople on account of the relative lack of access to health insur-ance, excessive reliance on out-of-pocket spending is eco-nomically inefficient because individuals are much less effec-tive in bargaining for better prices and services than groups.Indeed, mechanisms such as reimbursement for health expensesincurred by individual households are also likely to be ineffi-cient for the same reason.



George C., Pattanaik G.Andhra Pradesh State Health Accounts2001-2. Hyderabad: Institute for Health Systems; 2004.

Mahal A et al. Who benefits from public health spending inIndia? New Delhi: HNP, The World Bank; 2001.

D. Peters, A. Yazbeck, G. Ramana, R. Sharma, L. Pritchett, A.Wagstaff. 2001. Raising the Sights: Better Health Systems forIndia's Poor. Washington, D.C.: The World Bank.

The World Bank. 1995. India: Policy and Finance Strategiesfor Strengthening Primary Health Care Services. Report #13042-IN. Washington, D.C.: Population and Human Resources Divi-sion, South Asia Country Department II.

References

Background

SER CHARGES CAN BE DEFINED AS 'CONTRIBUTIONS TO COSTS BY INDIVIDUALusers in the form of a charge per unit of service consumed, typically in the form ofcash' (Reddy and Vandermoortele 1996). Thus, user charges are explicitly distinguishedfrom insurance arrangements that require payment into a pool without reference toa specific service received. They are also to be distinguished from health care financedthrough general revenues supported by taxation. In the present context, user chargesare referred to as being for health services provided in the public sector.

The case for user charges in the health sector has typically been made on threegrounds all of which are central to India's health policy objectives: that they have thepotential for adding to scarce public resources (and presumably, therefore, qualityand coverage), enhancing efficiency and promoting equity.

User fees can raise resources for health by charging for services provided in gov-ernment-run facilities. The success of such a step will depend on (i) the magnitudeof user charges per unit of service provided; and (ii) the responsiveness of service uti-lization to user charges, often referred to in technical jargon as the price elasticity ofutilization.

If the utilization of services in public facilities falls sharply in response to the impo-sition of user charges (i.e. it has a high price elasticity of health service utilization),the move may not be very successful in raising revenues. Moreover, if the decline inutilization is somehow not made up by a rise in utilization of needed health careservices elsewhere, e.g. in the private sector, then the goal of raising resources mayhave the counterproductive impact of reducing health care consumption and poten-tially worsening health outcomes. To this one can add a third critical concern. Pub-licly provided subsidized health care, especially inpatient care in hospitals serves as adevice for insuring the population against the financial risk from catastrophic illnesses.Thus, raising finances by means of user charges, even if feasible, may end up sacri-ficing another key goal of health policy, i.e. protection against the financial risk fromillness.

In theory, user charges can contribute to improved efficiency in several ways. Forinstance, if health care services in the public sector are being overutilized because theyare free, then the imposition of user charges may help in curtailing some of thisexcess usage. In developing countries such as India, the most obvious example of suchexcess usage is the high use of outpatient departments in high-end secondary andtertiary hospitals, and the under use of primary health care centres (PHCs) for minorillnesses. By imposing user charges in public hospitals, especially for individuals whovisit without a referral from a lower-level facility such as a PHC, policy-makers maybe able to achieve more rational use of health facilities. This rationalization can bestrengthened if revenues from user charges can help enhance the quality of care atlower-level facilities.

Efficiency can also be promoted if user charges help to provide essential comple-mentary items (such as drugs and consumables) to health facilities. A health facilitywith personnel but no consumables is one example where additional resources to fundconsumables would also help improve the yield from the available medical person-nel. If user charges not set at too high a level, they might lead administrators to makeefforts to produce the associated service at a lower cost, which would enhance theefficiency of the health services.

User charges in India’s health sector:An assessment

U


S E C T I O N I V




[email protected]

N. VEERABHRAIAHASSISTANT COMMISSIONERANDHRA PRADESH VAIDYA

VIDHANA PARISHADHYDERABAD, ANDHRA PRADESH

Finally, user charges can also be used to divert govern-ments from subsidizing care that is less effective in achiev-ing health improvements towards public health interven-tions such as immunization, clean water, nutrition and san-itation, with substantially greater health benefits per rupeespent. In this connection, the objective of resource enhance-ment, which requires low price elasticity, ends up conflictingwith the objective of resource diversion towards public healthinterventions, which requires that people respond to usercharges by curtailing consumption (Gertler and Hammer 1997).

However, these efficiency gains are not guaranteed. Forinstance, if the funds from user charges get transferred tothe treasury with no guarantee of the health departmentgetting access to these additional resources, these efficiencygains will not occur. Also, user charges at hospitals seekingto divert individuals to lower-level units will not work in theabsence of quality improvements at lower-level facilities, whichled to excess hospital visits in the first place. All that mayhappen is a decline in overall utilization of care. To this onemay add another caveat-the goal of efficiency may some-times conflict with that of financial risk protection; for exam-ple, when user charges are imposed on hospital-based inpa-tient care to divert public subsidies to public health inter-ventions such as immunizations, nutrition, health promo-tion activities, etc.

User charges may also influence equity. If revenues fromuser charges are used to improve the quality of care at lower-level facilities, which typically are close to where the poorlive, utilization of services by the poor as well as their healthmight improve. Alternatively, if user charges somehow dis-suade richer sections from using public facilities, they mayhelp the poor to obtain better access to subsidized publicfacilities. If these steps can be combined with fee exemptionschemes for the poor, then there is a real potential for the poorto benefit from improved quality care facilitated by revenuesfrom user fees.

Equity gains will depend on the extent to which funds areretained at the facility and health department level, are usedfor improvement in quality, and on how effectively the poorcan be identified and exempted from user charges. If exemp-tion is difficult to administer or if quality improvements donot happen, how the health care utilization by the poor respondsto user charges becomes critical from the standpoint of apolicy focused on equity in access.

Supporters of user fees have also pointed out other poten-tial gains. Retention of user fees by facilities will help empowercommunity-level managements that oversee their expendi-tures, thereby lending support for efforts at decentraliza-tion. Finally, user charges may also lead to increasing politi-cal acceptance of insurance mechanisms that help protectindividuals against out-of-pocket expenses due to illness(Shaw 1996).

An empirical question

While considering the appropriateness or otherwise of userfees and their design, two sets of issues must be distinguished.

First, user fees, even if designed optimally, do not simulta-neously achieve all the goals that are of interest to policy-makers. Some goals such as efficiency and resource enhance-ment may conflict with others such as financial risk protec-tion (Gertler and Hammer 1997). Second, the impact of userfees in achieving health goals depends substantially on theway the fees are implemented and on the responsiveness ofhealth service utilization to user charges. Thus, both the appro-priateness of user charges and their optimal design are depend-ent on information that is best obtained by empirical analy-ses.

User Charges in Public Health Facilities: Theinternational literature

There is now an extensive literature on user charges in health,much of it focused on sub-Saharan Africa; but also from Asiancountries such as China, Indonesia and Viet Nam. This sec-tion summarizes the main findings of this literature and theresulting implications for the perceived benefits of user chargeswith regard to resource raising, efficiency and equity.

Resources from user fees

There is considerable debate about the effectiveness of usercharges in raising revenues. In sub-Saharan Africa, user feeshave tended not to exceed 5% of total government spend-ing on health (Creese 1997). At the micro level, there arelarge variations across countries and facilities, even withinsub-Saharan Africa. Some lower-level health facilities reporteda rise in their revenues by 40%-90% of their total expendi-ture. Hospitals were able to raise their revenues through usercharge by 15%-45% of their non-salary expenditure (Shaw1996). On the other hand, in China, revenues from user chargesaccounted for roughly 36% of all government spending, andthe number seems to be high for countries such as Viet Namas well. At the facility level, the share of revenues from usercharges in total expenditure is substantially higher (Creese1997; Gertler and Hammer 1997; Shaw 1996).

Have there been any negative effects of user fees on healthcare utilization? There is substantial evidence that utiliza-tion of public health services fell in response to user fees insub-Saharan Africa, Indonesia and China (Gertler and Ham-mer 1997; Shaw 1996, Hsiao and Liu 1996). Several early mul-tivariate analyses to measure the responsiveness of utilizationof services to their prices were plagued by a variety of method-ological problems and yielded estimates that varied widely-from -0.002 to -3.6 (Reddy and Vandermoortele 1996; Shaw1996). However, methodologically more careful analyses forIndonesia and elsewhere do suggest that health care utiliza-tion can be quite responsive to user charges; that the poorwere more responsive to price increases than the rich; thaturban residents were more price-responsive than rural; thatinpatient care was less price-responsive than outpatientcare; and that the care for children was more price-respon-sive than that for adults (Gertler and Hammer 1997).

The mere fact that utilization falls in response to user fees


SECTION IV User charges in India’s health sector: An assessment

need not necessarily be worrisome, if people also care aboutquality. Findings from a study in the Cameroon suggest thatutilization can improve when quality improvements accom-pany user charges (Gertler and Hammer 1997). This suggeststhat the problem may not be with user charges per se, butwith the way they are implemented. Moreover, if declininguse of public services were accompanied by simultaneousincrease in the use of private services, it may lessen the adversehealth impacts of user charges. This last argument will notapply to the poor who are unlikely to be able to afford rea-sonable quality private sector care. In China, the evidenceseems to suggest that utilization and health levels fell con-siderably on account of the increasing reliance on user chargesto fund services of public providers (Creese 1997; Hsiao andLiu 1996).

Efficiency and user fees

A second issue is whether the introduction of user chargesleads to an improvement in efficiency. While direct evidenceis not available, there are good empirical reasons to believethat these gains are unlikely to have been fully realized inmany cases.

In some countries, the necessary 'price signals' for efficientuse of different tiers of health care were undercut by exemp-tions at higher-end facilities for special groups-governmentemployees, doctors and their dependants, and others. This isan example where there might have been a trade-off betweenthe objective of risk protection and the objective of efficiency.Inefficiencies have not been eliminated in some countriesowing to a referral system that does not provide any specialbenefits to people being referred to a higher-level facility fromlower-level facilities as compared with those who directlyaccess the higher-level facility. In other countries, revenuesraised from user fees were not used to provide additionalsupplementary resources, or were not retained at the facilitylevel, but were directly transferred to the treasury. Thus, effi-ciency gains from complementarities between existing facil-ity resources and additional revenues could not be exploited.

However, the picture is not bleak everywhere. In Zaire (nowthe Democratic Republic of Congo), the implementation ofuser fees was found to have reduced the utilization of dis-trict hospitals as the place for a first visit, and increased uti-lization of PHCs. This may point to the efficiency gains referredto above.

However, it is important to keep in mind that if suitableexemptions are not in place, the objectives of efficiency mayconflict with those of equity. Moreover, child health may dis-proportionately be affected, because their utilization of healthcare facilities is more price-responsive as compared with thatof other age groups.

Equity and user fees

User charges are considered especially problematic from thestandpoint of equity. To the extent that most African coun-tries do not have exemption policies for the poor, user fees

may harm them. The higher the responsiveness of the poorto fees charged for services, the higher may be the potentialharm to their health; and increased inequity may result, ifthe poor respond by reducing utilization more than the richdo. The early literature on the subject did not provide a con-clusive answer to the question: Are the poor more responsiveto prices (user charges) for health services than the rich? Theseearly studies were plagued by a variety of methodologicalproblems. In some country studies, price elasticities of demandfor health care were found to be statistically indistinguish-able from zero (Shaw 1996). However, later studies havebeen able to empirically establish that the poor are indeedmore responsive to health service prices than the non-poor(Gertler and Hammer 1997). As shown by the Cameroon study,user charges may not negatively affect utilization by thepoor if the imposition of user charges was simultaneouslyaccompanied by quality improvements. Indeed, the poor werelikely to respond more strongly to quality improvementsthan the non-poor.

Equity may, however, be considered along other dimensions:child versus adult health care utilization; rural versus urbanpopulation; and across gender. As recent international stud-ies suggest, the price-responsiveness of health care utiliza-tion does vary across these different groups. Addressingthese inequities requires a somewhat more nuanced approachto the designing of user fees to take into account differentelasticities of health services utilization. For instance, one maypropose lower user fees for children. At the same time, onecannot immediately conclude that user fees for adults oughtto be higher, especially for inpatient care, which could bevery expensive. In this case, lower user fees serve the objec-tive of risk protection, especially for the poor.

User Charges: The Indian experience andpolicy implications

There are hardly any studies that provide insights into thepotential impact of user charges in an Indian setting. The onlypertinent study in India is a demand analysis undertaken byGupta and Dasgupta (2000) who used data from a nation-ally representative survey carried out by the National Coun-cil for Applied Economic Research (NCAER). The study foundthat, across the economic spectrum, the price elasticity ofdemand for outpatient health care was statistically indistin-guishable from zero. If so, one might expect user charges tobe not so harmful for the objective of raising revenue (sincedemand will not be affected much by price increases). Thelow price elasticity also suggests that price incentives for bring-ing about efficiency improvements are unlikely to work wellbecause people will not change their utilization much inresponse to price changes. Finally, to the extent that theprice elasticity of demand for outpatient care was close tozero at all income levels, the study's findings suggest that userfees may not have an adverse effect on equity of utilization.

The above study suffers a number of methodological prob-lems, perhaps the most significant being the absence of aquality indicator (Shaw 1996; Gupta and Dasgupta 2000).


User charges in India’s health sector: An assessment SECTION IV

Moreover, its use of the income variable as the indicator ofeconomic status may be problematic to the extent that itmay not properly reflect the household's earning potential(permanent income) and is likely to be under-reported, moreso at higher income levels.

One can learn about the impact of user fees on the variouspolicy objectives from the actual experience of public sectorhealth facilities that have imposed user fees in India. Thereare now a large number of facilities in India-mainly second-ary and tertiary hospitals in the public sector-that have imposeduser charges as part of the World Bank's health system devel-opment projects and other reforms instituted by states. Anotherfeature of these projects is the extensive record-keeping ofutilization of services at the various facilities where user chargeswere imposed. One can examine the utilization of services ata baseline date and compare it to a later date to assess theimpact of user fees in the interim period.

To address our questions about user charges, we now exam-ine some of the information made available to us from thestates of Andhra Pradesh and Maharashtra. It should nonethe-less be emphasized that the 'before-after' studies like the oneswe resort to now, which take little account of confoundingelements in the price-utilization relationship must, in the lan-guage of Gertler and Hammer (1997), be treated with 'extremecaution'. To take account of at least one confounding ele-ment, we supplement our findings on utilization of serviceswith supporting evidence on the impact of user fees on thequality of care.

User fees in Andhra Pradesh Vaidya VidhanaParishad (APVVP) hospitals

The Andhra Pradesh Vaidya Vidhana Parishad (APVVP) man-ages 228 public sector hospitals, categorized as district hos-pitals, area hospitals, community health centres, specialty hos-pitals and dispensaries. The APVVP regularly collects data onutilization of services from 159 hospitals supported by theWorld Bank, on inpatients and inpatient days, outpatientvisits, diagnostics, surgeries and deliveries. This informationis available separately for individuals living above or belowthe poverty line (BPL), based on their possession of cards iden-tifying them as such, and by gender. Facility-level informa-tion on total bed capacity in each department, the numberof doctors by specialty, nursing personnel and other para-

medical staff is also available. In addition, APVVP hospitalsalso collect information on revenues from user charges andvarious stoppage charges (charges for rent of parking spaces,shopping spaces and the like, not required for health serviceprovision), and the way these revenues were used by hospi-tal societies.

We used APVVP data to ask three questions:

� What is the magnitude of user charges in APVVP hospitals?� Is there any association between user charges and quality

of services provided? � Is there any association between user charges and health

care service utilization by the poor and the non-poor?

Sixty hospitals were purposively selected from the WorldBank-supported 159 hospitals in Andhra Pradesh, after strat-ifying by geographic region (23 from Andhra, 12 from Ray-alseema and 25 from Telengana) and were considered repre-sentative of rural and district-level hospitals (Table 1). Thedata on user charges and stoppages, the annual budget reg-isters and the departmental audited financial reports of theselected hospitals formed the basis for the financial dataused in the study. The data are for three consecutive finan-cial years from 2001-2002 to 2003-2004.

Table 2 gives region-wise data on the magnitude of usercharges, in absolute terms and as a proportion of total hos-pital expenditure for the sample of health studies. The evi-dence presented clearly points to the rising importance of usercharges that have grown considerably in importance in absoluteterms and as a percentage of total non-salary expenditureeven over the short time period for which we were able toobtain data.

Andhra Pradesh allows APVVP hospitals that levy user chargesto retain the revenues. This raises two questions: Did the greaterpotential for user charge revenues influence budgetary allo-cations from the government? And did this translate intoimprovements in the quality of care provided at APVVP hos-pitals?

The first question can be examined in two parts: The (over-all) amounts allocated by the State Government to the APVVPas a share of its health budget; and the amount allocated toindividual APVVP hospitals from the overall APVVP budget.Data for the latter were not readily accessible. As to the for-mer, it is quite apparent from the data that the share of the



Region District hospitals Area hospitals Community health centres Specialty hospitals Total

No. Sample No. Sample No. Sample No. Sample No. Sample

Andhra 8 3 19 6 33 12 4 2 64 23

Rayalseema 3 2 9 4 15 5 1 1 28 12

Telengana 9 3 27 10 29 11 2 1 67 25

Total 20 8 55 20 77 28 7 4 159 60

Table 1

Sample of hospitals selected from the various regions of Andhra Pradesh

APVVP in the total expenditure/budget of the State Govern-ment has declined in recent years-from 16.7% in 2001-02,to about 10% in 2003-4 (Mahal et al. 2003, authors' esti-mates using APVVP data]. Thus, user charges have becomeimportant for APVVP hospitals as a response to declining

revenue sources and not as an independent additional sourceof revenue.

Despite these findings, it might still be useful to inquirewhether the retention of revenues from user charges by thehospital societies in APVVP hospitals led to increased invest-ments in the quality of services provided, owing to the increasedflexibility with which such funds could be used. Table 3presents findings on the aggregate utilization of funds gen-erated from user charges and their trends over the years. It isimmediately clear from the data that the utilization of APVVPfunds has been extremely tardy, although it has been improv-ing over time - user fee utilization rates were barely 43% in

2001-2, rising to about 74% in 2003-4. Moreover, the ratesdiffer across regions - ranging from 53% in Telangana in2003-4 to more than 90% in Andhra. Taken together, thesedata suggest not only a potential inefficiency in resourceuse, but also a geographical inequity in the way revenues fromuser fees were utilized.

The precise reasons for these inter-regional and inter-tem-poral differences in utilization rates of revenues from user feesare unclear. Potential explanations could lie in indivisibilitiesin priority needs-equipment, large maintenance costs-or, theymay be the result of dysfunctional hospital committees, andthese are worthy of further investigation. The obvious expla-nation for the increase in utilization rates of revenues fromuser fees over time is the decline in government allocationsto APVVP, potentially necessitating the use of revenues fromuser fees to make up the deficit, and maintain quality. Infor-mation on the utilization patterns of revenues from user feesfor 2003-04 suggests that funds have mostly been used foractivities that potentially contribute to increased quality ofservices-payments for contracted personnel (11%), drugs andconsumables (14%), maintenance (13%) and electricity (21%).Whether these contributed to increased quality of services rel-ative to the situation before the introduction of user fees,however, appears somewhat questionable in light of the cor-responding declines in government allocations. Perhaps thebest that can be said is that revenues from user fees helpedmaintain APVVP service quality in the face of declining con-tributions from State Governments, at least in the most recentyears for which data are available.

If all that revenues from user charges did was to maintainquality through filling in for the declines in support from thegovernment, one might naturally expect utilization rates tofall in APVVP facilities on account of such charges. We donot have the actual number of poor in the 'catchment' areasof the sample hospitals in the three regions to calculate uti-lization rates. However, we do have information on the shareof the poor (as indicated by identification cards issued by thegovernment) in total utilization of the health services in APVVPfacilities during the period 2001-02 to 2003-04 (Table 4).The data clearly point to the declining share of the poor intotal utilization across a broad range of services provided atAPVVP hospitals, particularly inpatient care services. This ten-dency was somewhat less marked in diagnostic services andlaboratory tests.

Information from the APVVP suggests that overall utiliza-tion of inpatient and outpatient care has increased overtime. Between 2001-2 and 2003-4, for instance, total uti-lization at the APVVP facilities in our sample increased at anannual of 26 percent for inpatient stays, and by 19 percentfor outpatient visits. However, the declining share of thepoor during the same period (Table 4) meant that the uti-lization of these two types of services by the poor increasedmuch more slowly - by 14 percent and 7 percent, respectively- and in the Rayalseema region, utilization by the poor actu-ally declined over the same period.



Region and expenditure 2001-02 2002-03 2003-04

Andhra

User fee revenues (Rs in lakh) 36.52 62.00 82.13

User fees/total expenditure (%) 2.10 3.15 4.18

User fees/total non-salary expenditure (%) 15.50 21.56 35.36

Rayalseema



User fees/total non-salary Expenditure (%) 9.85 26.18 37.75

Telangana



User fees/total non-salary expenditure (%) 18.11 26.33 38.16

APVVP: Andhra Pradesh Vaidya Vidhana ParishadSource: Authors' estimates, using APVVP data.

Table 2

User fees in the samples of APVVP hospitals, byregion, 2001-04

State/region 2001-02 2002-03 2003-04

All Andhra Pradesh 42.5 53.3 72.7

Andhra 82.8 90.5 93.5

Rayalseema 27.9 52.9 80.1

Telengana 12.8 26.9 53.5

APVVP: Andhra Pradesh Vaidya Vidhana ParishadSource: Authors' calculations, using APVVP data. We have assumed that the utilization rate for user charges is the same as the utilization rate for the totalof user charges and stoppages since both are in the same bank account and under the control of thehospital committees attached to the hospitals.

Table 3

Proportion of user fee revenues utilized by theAPVVP (trends, 2001-04)

Implications of user fees in governmenthospitals in Maharashtra

In contrast to the APVVP, we were able to get much less detaileddata for Maharashtra, another state where user fees were intro-duced in secondary hospitals as part of the reform processsupported by the World Bank. User fees were sharply raisedin Maharashtra in 1999 and 2001 (personal communicationwith Ravi Duggal; Duggal 2003). In fact, the average feepaid per patient in the 136 health facilities covered underthe World Bank health systems project in Maharashtra morethan doubled between 2000 and 2001, with the increase beingparticularly marked at higher-level facilities such as districthospitals and sub-district hospitals with 100 beds (personalcommunication with Ravi Duggal). We used the data on healthfacility utilization from the Department of Health, Maha-

rashtra to assess the impact of this increase on utilization,especially by the poor. Given the sharp increases in user feesbetween 2000 and 2001, one would expect that utilizationby the poor would fall, or at any rate, increase more slowlythan richer groups so that their share in overall utilizationought to decline, or else be the same.

Table 5provides us with information on utilization (and theproportion of total utilization accounted for by 'free care') forinpatient stays and outpatient visits in a sample of 55 healthfacilities-9 community health centres, 35 sub-district hospi-tals and 11 district hospitals-for the years 1999, 2000 and2001. Only those facilities were included in the sample thathad complete utilization data for the three years. The datasuggest that, with one exception, overall utilization declinedbetween 2000 and 2001 for outpatient visits and inpatientcare in all four categories of facilities, and the share of thepoor in total utilization mostly fell as well. Unfortunately,the recorded data on utilization by families below the povertyline families were incomplete and did not appear reliable.Instead, we used information on the proportion of users ofcare who obtained the care for 'free' as per the hospital recordsas a proxy for utilization by the poor. In general, not all 'free'users of public health facilities are poor. An ongoing reviewof utilization of public facilities in Maharashtra suggeststhat only about 40% of the 'free' users can be termed poor,with the rest being beneficiaries of various exemptions-gov-ernment employees, freedom-fighters and the like (personalcommunication with Ravi Duggal). The use of data on the'free' users of care can potentially bias our conclusions: forinstance, if imposition of user charges is accompanied by bet-ter targeting of users in a way that improves health facilityaccess to the poor, then imposition of user charges can beconsistent with both improved utilization by the poor andwith a decrease in 'free' users of care. However, we do notbelieve that the bias is a serious one in the case at hand sincethe user fee regime in Maharashtra itself dates back to before2000, so any sorting on account of better identification ofthe poor is likely to have occurred before the hike in usercharges in 2000, i.e. we believe that the composition of thepoor among 'free users of care' is unlikely to have changedmuch in the period immediately before and after 2000.

Why did utilization by the poor decline? Clearly, the rapideconomic growth currently being experienced by Maharash-tra and the consequently declining numbers of the poor areconfounding elements. However, the anecdotal literature fromMaharashtra and elsewhere offers an alternative, perhaps morecompelling explanation. First, revenues from user fees in Maha-rashtra have remained largely unutilized and, therefore, notcontributed to quality improvements even when retained byhospital committees at the facility level (Duggal 2003). Theunderutilization has partly been the result of governmentorders that have frozen these funds owing to fears of misap-propriation. Interestingly, this freeze on fund use has left thecollection of user fees unaffected, so that whereas the deter-rent effect on utilization of user charges would have remained,it is unlikely that quality of care improved.

Second, the exemption scheme for the poor may not have



State/region Services 2001-02 2002-03 2003-04

% % %

All Andhra Pradesh

Inpatients 92 79 65

Outpatients 83 75 68

Surgeries 82 79 74

Deliveries 74 62 53

Laboratory tests 85 79 78

Diagnostic tests 64 62 63

Andhra

Inpatients 90 81 71


Surgeries 72 75 67

Deliveries 65 66 56



Rayalseema

Inpatients 97 82 58


Surgeries 84 63 56

Deliveries 72 48 44



Telangana

Inpatients 89 75 67


Surgeries 95 95 92

Deliveries 85 67 56



Source: Authors' estimates using data from the Andhra Pradesh Vaidya Vidhana Parishad.

Table 4

Proportion of total utilization accounted for bythe poor in Andhra Pradesh, by region and type ofservice, 2001-04

worked as well as envisaged. There is, for instance, evidencefrom Punjab (another wealthy state with health reforms ini-tiated with World Bank support) that the process for obtain-ing exemption cards was time-consuming and bureaucratic,making it virtually impossible for a poor person to obtain thebenefits associated with such cards (Gupta 2002). Withoutquality improvements and exemptions, it seems reasonableto support the claim that utilization by the poor must havedeclined.

Declining utilization of services in public health facilitiesneed not be worrying from the standpoint of access to health,if the individuals shift to private sector facilities for healthcare of comparable quality. However, this argument is unlikelyto hold for the poor, who may not be able to afford suchcare. The more likely outcome is either a shift to self-care orto lower quality providers.

Conclusion

Clearly, neither theory nor empirical analysis offers an open-and-shut case on user charges. Provided quality improvementsaccompany user charges and there are exemptions for thepoor or for groups such as children whose health care use isprice-elastic, user fees can contribute to improvements inequity. When user fees can contribute to revenues that enablebetter usage of previously underutilized resources, or whenthey can be used to guide referrals to higher-end facilities,they can contribute to increased efficiency and quality as well.

The optimal strategy on user fees, however, must considerthree areas where user fees are especially problematic. Thefirst is in the identification of beneficiaries. The second is theirpotential impact on the protection offered by public servicesagainst the financial risk associated with illness, mostly with

the need for inpatient care. The third is the utilization of fundscollected from such fees.

As for the identification of beneficiaries, there is someconcern that existing methods for this purpose, which havefocused on means testing, have not done well in India. Otherapproaches have also been tried or considered in differentcountries-by type of service used and by geographical region.All suffer from leakages in some form or the other, and tendto put a large administrative burden on health facility per-sonnel (Gertler and Hammer 1997). For these reasons, a regimebased purely on user fees is unlikely to work well.

The above discussion also suggests a method of identifica-tion and exemption, which may be administratively less bur-densome, and simultaneously addresses the second problemof 'insurance against catastrophic health risk'. In particular,some form of community or social insurance, whereby con-tributions of the poor are undertaken by the government/com-munity may be the way to go. This removes the burden of iden-tifying the poor from health facility personnel, and transfersit to a professional insuring group or communities, who maybe able to do it better. An example is the use of village-levelmanagement committees (composed of village elders) in com-munity-financing experiments in China who serve to bothenroll people into schemes as well as help identify the poor(personal communication with William Hsiao, Harvard Uni-versity). Of course, for this alternative scheme to work well,insurance must ideally be compulsory-voluntary participa-tion in insurance can potentially lead to adverse selection andrisk selection as a response-the original reason for the failureof the free market to provide insurance. On the other hand,some voluntary community-financing schemes have managedto do reasonably well in countries such as China (personal com-munication with William Hsiao, Harvard University).



Facility 1999 2000 2001

Total Free % Total Free % Total Free %

Community health centres (CHC)

Outpatient visits (000s) 303.0 26.4 8.7 326.6 28.6 8.8 321.7 26.6 8.3

Inpatient stays(000s) 28.2 14.3 50.8 26.7 14.7 55.2 27.7 13.8 49.9

Sub-district hospitals (50 beds)



Sub-district hospitals (100 beds)



District hospitals



Note: Data provided by Maharashtra State Department of Health. 'Free' refers to stays or visits provided at no official charge. Data cover 11 district hospitals, 16 sub-district hospitals with 100 beds, 19 sub-district hospitalswith 50 beds, and 9 community health centres. Only those hospitals that had a complete set of statistics for the years 1999-2001 were included.

Table 5

Inpatient and outpatient care utilization in public health facilities in Maharashtra according to facility typeand selected years



An insurance regime that pays health facilities for servicesprovided the precise payment mechanism (capitation basisor other) can be readily combined with a user fee regime thatoffers many of the benefits discussed above. For instance,insurance may not reimburse expenses when the user visits ahigh-level facility prior to obtaining referral from a lower-level facility, lower co-payments for childhood conditions,and the like.

Acknowledgements

We are grateful to Mr Ravi Duggal of CEHAT for his thought-ful comments that helped improve our analysis, and to MsSujatha Rao, Member Secretary of the National Commissionon Macroeconomics and Health for encouraging us to workon the study.

Arhin-Tenkorang D. Mobilizing resources for health: Thecase for user fees revisited. Working paper no. #WG3:6.Geneva: World Health Organization, Commission onMacroeconomics and Health; 2000.

Andrew C. User fees: They don't reduce costs and theyincrease inequity [editorial]. British Medical Journal1997;315:202-3.

Duggal R. Whither user charges. Express HealthcareManagement 31 August 2003.

Gertler P, Hammer J. Strategies for pricing publicly pro-vided health services. Discussion paper. Washington, DC:The World Bank. Available from URL: http://www.world-bank.org/html/dec /Publications/Workpapers/WPS1700series/wps1762/wps1762.pdf 1997. [Accessedon November 25, 2004]

Gupta V. World Bank funded health care: Reality ordeception. Available from URL: http://www.sikhspec-trum.com/062002/world_bank.htm; 2002. [Accessed onNovember 25, 2004]

Gupta I, Dasgupta P. Demand for curative health care inrural India: Choosing between private, public and no

care. Discussion paper #14/2000. New Delhi: Institute forEconomic Growth; 2000.

Hsiao W, Liu Y. Economic reforms and health: Lessonsfrom China. New England Journal of Medicine1996;335:430-2.

Mahal A, Narayana K, Rao S. Expenditures and financingof the department of health, medical and family welfarein Andhra Pradesh: Towards a resource envelope for theperiod 2003-7. New Delhi: Department for InternationalDevelopment.

Reddy S, Vandermoortele J. User financing of basic socialservices: A review of theoretical arguments and empiricalevidence. UNICEF Staff Working Papers. New York:United Nations Children's Fund, Evaluation, Policy andPlanning Series; 1996

Paul SR. User fees in sub-Saharan Africa: Aims, findings,policy implications. In: Paul SR, Ainsworth M (eds).Financing health services through user fees and insur-ance: Case studies from sub-Saharan Africa. Discussionpaper number 294. Washington, DC: The World Bank,Africa Technical Department; 1996.



References

OCIAL SECURITY FOR MEDICAL EMERGENCIES IS NOT NEW TO THE INDIAN ETHOS.It is a common practice for villagers to take a ‘piruvu’ (a collection) to support a house-hold with a sick patient. However, health insurance, as we know it today, was intro-duced only in 1912 when the first Insurance Act was passed (Devadasan 2004). Thecurrent version of the Insurance Act was introduced in 1938. Since then there waslittle change till 1972 when the insurance industry was nationalized and 107 privateinsurance companies were brought under the umbrella of the General Insurance Cor-poration (GIC). Private and foreign entrepreneurs were allowed to enter the marketwith the enactment of the Insurance Regulatory and Development Act (IRDA) in 1999.

The penetration of health insurance in India has been low. It is estimated that onlyabout 3% to 5% of Indians are covered under any form of health insurance. In termsof the market share, the size of the commercial insurance is barely 1% of the totalhealth spending in the country. The Indian health insurance scenario is a mix of manda-tory social health insurance (SHI), voluntary private health insurance and commu-nity-based health insurance (CBHI). Health insurance is thus really a minor player inthe health ecosystem.

Social Health Insurance

Universal coverage has two dimensions: health care coverage (adequate health care)and population coverage (health care for all) and, coupled with the societal values thatunderpin it, leaves essentially two financing options—general taxation and SHI. The for-mer implies financing care entirely from general revenue; its viability as the singlemechanism to finance universal health coverage is necessarily limited in an environ-ment of competing demands on a severely limited tax base. The SHI is based onincome-determined contributions from mandatory membership of, in principal, theentire population with the government subsidizing the financially vulnerable sections.While the SHI is an effective risk-pooling mechanism that allocates services accordingto need and distributes the financial burden according to the ability to pay (therebyensuring equity in access), such schemes are difficult and expensive to implementwhere a majority of the workforce is unemployed or employed in the informal sector.

International experience in SHI: Factors that affect the speed of transition

Achieving universal coverage through SHI is not easy. Evidence from 8 countries withSHI schemes for which sufficient information is readily available—Austria, Belgium,Costa Rica, Germany, Israel, Japan, Republic of Korea (ROK) and Luxembourg—shows that the transition period (defined as the number of years between the firstlaw related to health insurance and the latest law enacted to implement universalcoverage) is 79 years (Austria), 118 years (Belgium), 20 years (Costa Rica), 127 years(Germany), 84 years (Israel), 36 years (Japan), 26 years (ROK) and 72 years (Luxem-bourg). These countries embarked on SHI when their economies were still underde-veloped; moreover, coverage is not necessarily a simple linear increase, as some groupsare harder to reach than others. For example, moving from 25% to 50% coveragemight take less time than moving from 50% to 75% (Carrin and James 2004).

International experience suggests the following factors impacting the speed of tran-sition to universal coverage using the SHI financing option: 1. The level of income and structure of the economy (specifically, the relative size of

Health insurance in India

S


S E C T I O N I V

K. SUJATHA RAOSECRETARY, NATIONAL

COMMISSION ONMACROECONOMICS AND

HEALTH, GOVERNMENT OFINDIA, NEW DELHI


the formal and informal sector) determine the feasibilityof collecting contributions as well as the amounts thatmay be raised through SHI schemes.

2. Distribution of the population and infrastructure deter-

mine the capacity of SHI schemes to deliver the benefitpackage.

3. The administrative structure and solidarity in a countrydetermine its ability to actually implement SHI and withlegitimacy.

In India, its large rural and informal sector accounting for90% of the population, lack of cohesion and solidarity, andpoor institutional capacity to organize them etc. will be con-stricting factors for the upscaling of the SHI in the near ormedium term. The experience with collecting income tax pre-dicts problems in assessing incomes and collecting premiumsfrom small, unregistered firms, unorganized industries and therural sector. The consumer redressal mechanism may also notfunction effectively because of the large illiterate population.The SHI is therefore likely to be restricted to the employedpopulation and largely in urban areas, where collection of pre-mium is easier and administrative costs minimal (Annexure).

The existing mandatory health insurance schemes in India—the Employees’ State Insurance Scheme (ESIS) and the Cen-tral Government Health Scheme (CGHS)—were first startedas pilot projects in 1948 and 1954, respectively in the con-text of achieving universal coverage via the SHI. Table 1summarizes the provisions under these schemes.

Employees’ State Insurance Scheme (ESIS)

Enacted in 1948, the Employees’ State Insurance (ESI) Act wasthe first major legislation on social security in India. The schemeapplies to power-using factories employing 10 persons or more,and non-power and other specified establishments employing20 persons or more, with employees earnings up to Rs 7500per month being covered, along with their dependants. Thecurrent coverage stands at 84 lakh employees and 353 lakhbeneficiaries across 22 States and Union Territories (expect-edly, the membership is higher for more industrialized States).

The benefit package is quite comprehensive in its coverageof health-related expenses, going beyond the cost of medicalcare to include cash benefits (sickness, maternity, permanentdisablement of self and dependant) as well as other benefitssuch as funeral expenses and rehabilitation allowance. How-ever, the actual package of benefits available is determined moreby the type of facility accessed rather than the type of cover.Medical care comprises outpatient care, hospitalization orspecialist treatment as well as services of the Indian systems ofmedicines. These services are provided through a network ofESIS facilities, public care centres, non-governmental organi-zations (NGOs) and empanelled private practitioners.

Corresponding to these arrangements, a variety of pay-ment mechanisms are employed from salaries for ESIS staffto capitation fees for private doctors. The ESIS is financed bya three-way contribution from employers, employees andthe State Government. Between 1993–94 and 1997–98, theincome of the scheme grew substantially (largely due toincreases in contributions which now account for 80% ofthe ESIS income) while medical benefits have actually fallen(from about 50% to less than 30% of the expenditures) and,as a result, the net excess transferred to the ESI fund went up


SECTION IV Health insurance in India

The IRDA was passed in December 1999 by Parliament. The Act allows

for the entry of private sector entities in the Indian insurance sector,

including health insurance, and envisages the creation of a regulatory

authority. The IRDA is supposed to protect the interests of the policy-

holders, promote efficiency in the conduct of insurance, regulate the

rates and terms and conditions of the policies offered by insurers and

direct the maintenance of solvency margins.

The IRDA provides sufficient protection for capital and solvency margins.

There is an entry requirement of a minimum capital of Rs 100 crore. Then

there is a minimum lower bound of Rs 50 crore for the solvency margin

along with a requirement of 20% of net premiums or 30% of the average

of net incurred claims in the 3 preceding years. The IRDA has wide powers

for accounting and auditing insurers. The Insurance Act does not allow

the insurers to undertake additional business that is not directly linked

to insurance. It discusses the liquidation of a company but does not talk

of a Guarantee fund.

The IRDA specifies a code of conduct for the insurance agents and also

allows for a Tariff Advisory Committee to oversee premium rates,

insurance plans and to prevent discrimination. However, there is no

specific clause for the consumer, who has to use the CPA of 1986 to

redress any complaints. The IRDA does not have much to say about the

relationship between the insurer and the provider.

Though the Tariff Advisory Committee can make recommendations the

IRDA also does not have much to say about rating the premium. The

IRDA does not also specify the benefit packages. It however allows for

the entry of re-insurers in the market. Its main two functions are

maintaining market standards, and overseeing solvency and financial

regulations.

Conclusion: The legislation concerning health insurance in India is fairly

comprehensive even in comparison to a model set of regulations when

focusing on auditing, financial controls, investment guidelines and

licensing regulations. There is much less regulatory focus on the

consumer of insurance products and the overall goals of health policy

in the form of regulation that curbs risk selection, protects consumers,

promotes HMOs, etc. It also cannot involve in the relationship between

insurers and providers (which comes under the MRTP Act) or the

expansion of ESIS (which is the ESIS Act).

In India health insurance is not given much importance. The IRDA itself

contains no reference whatsoever to the health sector or to health

insurance. Nor is health mentioned in the nearly 175 pages of the

Insurance Act of 1938. This broadly reflects the policy environment in

India, where health insurance continues to be neglected. Even in GOI’s

report on Insurance reforms (1994), there was precisely one reference

to health insurance.

Source: Mahal A. Assessing private health insurance in India: Potential impacts and regulatoryissues. Economic and Political Weekly 2002:559–71.

The Insurance Regulatory and DevelopmentAct (IRDA) 1999

Box 1

from 14% to 30%. Significantly, the cost of administering thescheme has been steadily increasing as a proportion of expen-diture on the revenue account.

Central Government Health Scheme (CGHS)

Established in 1954, the CGHS covers employees and retireesof the Central Government, and certain autonomous, semi-autonomous and semi-government organizations. It also cov-ers Members of Parliament, governors, accredited journalistsand members of the general public in some specified areas.The families of the employees are also covered under thescheme. Total beneficiaries stand at 43 lakh (10.4 lakh cardholders, 2003) across 24 cities with membership in Delhi beingthe highest. Benefits under the scheme include medical careat all levels and home visits/care as well as free medicinesand diagnostic services. These services are provided throughpublic facilities (including CGHS-exclusive allopathic, ayurvedic,homeopathic and unani dispensaries) with some specializedtreatment (with reimbursement ceilings) being permissibleat private facilities. Of the total expenditure, about a third isspent on wages and salaries of the CGHS staff (Table 2) andFigure 1.

Table 2 highlights three important points: (i) that 18% ofthe health department’s budget is spent on less than 0.5% ofthe population; (ii) that most of the expenditure is met by theCentral Government as only 12% is the share of contributions.

If the scheme continues in its present form, and contributionsstagnate at Rs 50 crore, the proportion of contribution will fallfurther to 5% of the total over the next five years, given the ris-ing expenditures This calls for steps to ensure that contribu-tions keep pace with expenditure, and perhaps even reducethe subsidy element; and (iii) The period 2001–04 also wit-nessed a sharp increase in inpatient expenditures. Coinciding


Health insurance in India SECTION IV

Table 1

Key features of the Employees' State Insurance Scheme (ESIS) and Central Government Health Scheme (CGHS)

Mandatory social insurance schemes

Indicators ESIS CGHS

Types of beneficiaries Factory sector employees (and dependants) with income Employees (and dependants) of Central Government-current

less than Rs 7500 per month and retired, some autonomous and semi-government

organizations, Members of Parliament judges, freedom

fighters, journalists

Coverage About 353 lakh beneficiaries in 1998 About lakh beneficiaries in 1996

Types of benefits Medical and other health-related provided through Medical care through public facilities and restricted

ESIS facilities and partnerships private care

Premiums (financing of scheme) 4.75% of employees' wages by employers; 1.75% of Varies from Rs 15 to Rs 150 per month based on salaries

their wages by employees; 12.5% of the total expenses of the employeesMainly financed by the Central

by the State Governments Government funds

Provider payments Mainly salaries for physicians in dispensaries and referral Salaries for doctors. Treatment in private hospitals is

hospitals. Hospitals have global budget financed by reimbursed on case basis, subject to actual expenditure

ESIC through State Governments. and prescribed ceilings

Administrative costs About 21% of the revenue expenditure. For paying Direct administrative costs including travel expenditure,

wages for corporation employees, and administering office expenses, RRT 5% of the total expenditure. Part of

cash benefits, revenue recovery and implementation salaries can also be charged to administrative costs.

in new area.

Status of finances Contributions: more than 80% of the ESIS income- Contributions about 15% of the CGHS income-half of the

double the expenditure on benefits. salary expenditures.

Employees' State Insurance Scheme (ESIS)

Fig 1

CGHS expenditure 1999-2004

Source: Ministry of Health and Family Welfare, GOI

with the sharp increase in the membership among retired per-sons, this indicates the trend towards adverse selection (Fig.2).

Expenditures that cover outpatient treatment, includingmedicines for all serving and retired CGHS beneficiaries andinpatient/diagnostic services availed by retired beneficiaries,has thus grown between 12% and 25% per year over the pastfour years. A gross estimate suggests that another Rs 200 crorewould have been incurred on inpatient treatment by servingemployees. The maximum increase is seen to have occurredon professional services, i.e. reimbursement to pensioners anddirect payments to hospitals and diagnostic centres.

The CGHS is a high-cost enterprise with an inequitable spreadof service delivery and no control systems for checking mar-ket failures such as moral hazard. As can be seen from Table3, while each dispensary currently caters to an average of 3610cardholders, varying between a low of 1073 cards per dis-pensary in Bhubaneshwar to a high of 6662 cards in Pune,the average OPD attendance during 2003–04 was 14.3 OPD

visits per card per year, varying between 5.6visits in Bhopal to 28.4 visits in Bhubanesh-war. The approximate unit cost per visit comesto a high of Rs 222 in 2002–03. Similarlyinequitous is the payment structure for inpa-tient care too.

To assess the health-seeking behaviourand the trends towards utilization of healthfacilities after the CGHS opened up to over200 private hospitals for providing care atpre-negotiated rates to their members, theNCMH took up a study of the CGHS pay-ments pertaining to the reimbursements topensioners, hospitals and diagnostic centres.A sample of 1000 claims were examined fromthe total bills paid by the Pay and AccountsOffice of CGHS, Delhi, during 1999, 2003

and 2004. For 2003 and 2004, all the payments made topensioners in the randomly chosen successive months of Juneand July were taken up for the study. Results of the claimsshowed an increasing number of cases using private sectorfacilities, which has budgetary implications for the Govern-ment, particularly in view of the absence of any regulationsregarding prices and the large number of pensioners joiningthe scheme (Table 4).

The 1999 sample (July to December) comprising of 104 reim-bursement bills showed treatment being taken in governmentinstitutions in 58 of the cases. The ratio of the amount spenton government and private hospitals in 1999 was 1:1.25, or4:5. These ratios changed in 2003–04 more adversely to gov-ernment hospitals—1:12 in the 2003 sample and 1:8.5 in2004. Thus, over the 5-year period from 1999 to 2004, therewas a sharp rise in the total number of bills, the total expendi-ture on professional services and payments made to privateproviders as a proportion of all payments, with governmentproviders claiming just one-tenth of the total payment forprovision of professional services in the 2004 sample.

Private Health Insurance

Since the liberalization of the insurance industry in 2000India has been promoting private players to enter the healthinsurance sector. With the enactment of the IRDA, the indus-try now has a regulatory framework to protect the interests ofpolicy holders. This was followed by another landmark deci-sion in 2001 establishing Third Party Administrators (TPAs) tofacilitate speedier expansion by providing an administra-tive–intermediary structure to the insurance industry. Thereare, at present, 12 general insurance companies and 25 TPAs.The total number of insurance holders is reported to be 112lakh with almost 90% enrolled with the four public sectorinsurance companies. These four companies collected a pre-mium of Rs 1128.64 crore under Mediclaim. Of the 102 lakhenrolled by these four companies (excluding GIC, EmploymentGuarantee Corporation, AICL), which are permitted to markethealth insurance products, Mediclaim alone accounts for 97lakh persons, the rest being enrolled under other insurance



Fig 2

The increasing per person expenditure onoutpatient and inpatient (2001-04)

Source: Ministry of Health and Family Welfare, GOI

Table 2

Total expenditure on CGHS (Rs in crore)

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004

Establishment 117.1125 123.8712 125.3384 133.1083 139.4496

Supplies and materials 106.176 131.2345 165.3858 185.1242 222.9404

Professional services 47.8071 51.2002 65.7699 81.9203 140.7256

TOTAL CGHS 271.0956 306.3059 356.4941 400.1528 503.1156

TOTAL Department of Health 2132.46 2291.84 2577.04 2625.37 2800.64

% Share of CGHS 12.7 13.4 13.8 15.2 18.0

Total contributions 54.27 52.54 50.65 70.9 60.58

% of expenditure 20.2 17.15 14.21 17.71 12.04

Source: Demand for Grants, MOHFW

schemes such as Jan Arogya, etc. During 2003–2004, the claimratio was about 96.34%. The industry, however, believes thatthe overall claim ratio is expected to go up from around 130%to 300%–350% in the next three years (Table 5).

The question that arises is whether pro-moting the private commercial insurance sec-tor will help India achieve its health objec-tives of equity, efficiency and quality? Whatare its implications? Should India considerother options, or is this a case of one sizefitting all? International experience and eco-nomic theory on private insurance marketshowever show evidence of widening inequity,excessive utilization, adverse selection,increase in inappropriate care, risk selectionincreasing overall cost of care and in a highlycompetitive, voluntary market, high admin-istrative costs, unviable risk pools, under-cutting and unrealistic pricing leading tomarket instability and bankruptcies. Privatecommercial-led health insurance systemsresulting in, etc.—factors that contribute toinflation in costs. Yet of the 39(2001) coun-tries having private insurance contributing

to 5% of the total health expenditure, 46% were low- and mid-dle-income countries where private insurance is perceived asan important source of health financing (Sikhri 2005), con-tributing to about 5%–20% of the country’s total health spend-



No. of cards OPD attendance No. per dispensary Cards per dispensary OPD per dispensary

Ahmedabad 6672 118764 5 1334 23752

Allahabad 17794 279625 7 2542 39946

Bangalore 61409 592042 10 6140 59204

Bhopal 2627 14656 1 2627 14656

Bhubaneshwar 2147 60927 2 1073 30463

Chandigarh 7762 103346 1 7762 103346

Chennai 48156 486342 14 3439 34738

Dehradun 1

Delhi 456468 87 5246

Guwahati 9243 106484 3 3081 35494

Hyderabad 90262 949448 14 6447 67817

Jabalpur 19534 227542 3 6511 75847

Jaipur 24504 380177 5 4900 76035

Kanpur 27439 529268 9 3048 58807

Kolkata 56426 17 3319

Lucknow 20068 6 3344

Meerut 13626 6 2271

Mumbai 91379 724995 28 3263 25892

Nagpur 21274 508847 10 2127 50884

Patna 13407 5 2681

Pune 46631 390151 7 6661 55735

Ranchi 2789 70999 2 1394 35499

Shillong 1771 12004 1 1771 12004

Thiruvananathapuram 6155 98160 3 2051 32720

Total 1047543 5653777 247 83041 832847

Average 3610 46269

OPD: outpatient department Note: Blank cells indicate data not available and have been excluded in the calculations Source: MOHFW, GOI

Table 3

City-wise utilization (of allopathy) during 2003-04

Table 4

Health-seeking behaviour and trends towards utilization of health facilities

Government Private Private/ Private as

institutions institutions Government a % of the

(in Rs) (in Rs) ratio total

1999- Individual claims 733236 (58) 914897 (46) 1.25 55.5%

2003- Individual claims 658083 (79) 2018361 (114)

2003- Hospital claims 1156281 (33) 16427031 (1425)

2003-Diagnostic provider claims 0 2900829 (1287)

2003 Total Paid 1814364 21346221 11.77 92.2%

2004- Individual claims 3281255 (305) 7277243 (332)

2004- Hospital claims 1299264 (39) 29227474 (2072)

2004-Diagnostic provider claims 0 2579414

2004 Total Paid 4580519 39084131 8.53 89.5%

Period selected for the study was June-July for 2003 and 2004, and July-December for 1999; Figures in parenthesis are number of casesSource: NCMH analysis, 2004

ing. Private insurance in these countries arosein response to increased expectations of afflu-ent classes, covering the healthiest and thewealthiest resulting in limited social gain.Therefore, no country relies on private insur-ance to resolve the problems of financialrisk protection for the poor and the ill. Andregulation is required to minimize some ofthe adverse impacts.

The case of Chile

The USA and Chile are the two best exam-ples of private health insurance. Chile, a mid-dle-income country, consisting of 1.58 crorepeople, spends US$ 697 per capita (7.2%of the GDP) but has health outcomes thatalmost equal those of the USA. Table 6givesa comparative statement of key indicatorsof India, Chile, China and the USA

Chile developed its health system in threephases: the first till the 1980s was focusedon reducing the burden of infectious andcommunicable diseases; the second duringthe 1980s when the National Health Fundwas established to administer the SHI scheme(Fonasa) through a network of 194 hospi-tals run by the National Health Services Sys-tem; and the third during the 1990s whenhealth insurance was opened up to the pri-vate sector (Isapres). As of date, 67% of thepopulation is enrolled with Fonasa, while20% are covered under 40,000 private planswith 18 licensed, private Isapres. Insuranceis mandatory and all have to pay 7% of theirwages for health insurance. Both schemesare regulated by the Superintendence ofIsapres, under the Ministry of Health (Gov-ernment of Chile).

Under the Fonasa, care is provided throughits own public hospital network and forenhanced contributions, accredited networkof private hospitals based on a fixed pricereimbursement for specific ambulatory andinpatient medical services. Seventy-five percent of the Fonasa budget is released toprimary health centres that are obliged toprovide a predefined package of health serv-ices. Isapres, on the other hand, offers a myr-iad and individually customized, risk-ratedpremium plans based on the age, health andeconomic status. They function on a fee-for-service basis. The Isapres have the free-dom to fix the premium, indicate the con-tent and coverage levels, degree of co-pay-ment and set the limits for reimbursements.Regulation is only on contractual compli-



Table 5

Premium and claim figures-Mediclaim (1999 to 2003-04)1) National Insurance Co. Ltd

(Rs in lakh)

2) New India Assurance Co. Ltd(Rs in lakh)

3) Oriental Insurance Co. Ltd(Rs in lakh)

4) United India Insurance Co. Ltd(Rs in lakh)

GIPSA Companies (Rs in lakh)

Year No. of Number Premium No. of No. of Incurred Incurred

policies covered received claims claims claim claim ratio

issued reported settled amount (%)

1999-2000 572308 748508 5210 48653 44760 3630 69.672000--01 610571 803742 5668 84392 77643 6045 117.132001-02 897480 2497801 17614 213313 189595 14572 82.702002-03 436273 2025610 22533 148963 140274 22037 104.172003--04 505260 3122536 29802 198573 186110 30471 102.24



issued (Rs) reported settled amount (%)

1999-2000 489150 2163876 16165 108247 90573 15629.37 96.682000-01 609255 2951010 23915 275774 305406 20349.96 85.092001-02 822534 2794510 26996 165368 116819 18853.00 69.84`2002-03 937012 3086763 35443 201108 196300 31053.00 87.612003-04 949648 2856675 36641 167898 161959 30068.12 82.06




1999-00 269288 1077151 7450 12220 11556 6570 87.13

2000-01 376878 1507512 10553 16386 15420 8870 84.062001-02 502512 2010047 15075 63166 53617 14188 94.11

2002-03 537061 2148247 20408 74620 64251 15754 77.192003-04 555858 2223436 22953 83050 71907 22407 97.62




1999-2000 322845 904594 9124 60120 54077 7620 83.522000-01 105331 361600 11761 32452 27759 8850 75.252001-02 140441 482133 14518 30130 25626 15819 108.962002-03 245000 772000 21569 40000 37889 22317 103.462003-04 305000 845000 23528 50500 42585 25018 101.92



issued reported settled amount (%)

1999-2000 1653600 3924693 38040 229240 200968 33448 882000-01 1702035 5623864 51897 409004 426228 44114 852001-02 2362967 7575427 94400 471977 385657 64800 692002-03 2155348 7885465 102600 464691 438714 91160 902003-04 2315768 9047647 112900 500021 462561 106400 94Source: Department of Insurance, Ministry of Finance, GOI

ance but not on the content of the policies. To safeguard thestability of the insurance pool, Isapres are known to followrigorous procedures of screening out high risks, provide lowcoverage for high-cost illnesses and expensive procedures,discriminate against or even terminate subscribers with high-cost chronic diseases by increasing the premium or contractconditions, forcing the subscriber to opt out. Typically, there-fore, the Isapres enrollees have a mean income that is fourtimes more than those enrolled in Fonasa; 70% of the ben-eficiaries are in the age group of 15–64 years with 2.5% above65 years compared to 62% and 10%, respectively in Fonasa.Such tiered rating is inevitable so as to keep the premiumlow enough to retain the young healthy subscribers.

As in India, Chile has the problem of inappropriate skill mixin public hospitals, not in keeping with the changed epi-demiology; the centralized budgeting system giving little dis-cretion, salaried system of provider payments with no incen-tives to improve efficiencies, resulting in 50% bed occu-pancy in peripheral hospitals and overcrowded city hospitals.

Second, with private sector allowed to provide the same setof services, there is duplication of infrastructure and result-ant wastage in the system as a whole. However, since the qual-ity of care is similar in public hospitals, despite a law, 12% ofIsapres beneficiaries were found to have availed free care inpublic hospitals. In other words, the system induces the sub-scriber to avail ambulatory care in Isapres and move to Fonasawhen sick. Besides, due to the short-term character of thecontracts and ability to offload patients when ill, the Isapreshave no incentive of providing preventive care. This dual sys-tem has thus resulted in segmenting the population on thebasis of income and risk. With the freedom to fix premiums,the risk-rating system has resulted in a systematic discrimi-nation against fertile women, chronically ill and the elderlythrough the three stratagems of higher premiums, reducedbenefits and refusal to enrol or renew contracts. The lack ofuniformity or transparency of insurance plans makes it eas-ier to resort to such tactics. The effect of such a system isseen in the disproportionate share of high-risk persons beingdischarged onto the public hospitals: HIV/AIDS (82%), cervixcancer (90%), kidney failure (83%) and leukaemia (80%).The system encompasses all the incentives for increased costof care: fee for service as a basis of provider payment. Withmandatory insurance, the competition is on quality, based

on sophisticated technology, which may notalways be cost-effective and also puts pres-sure on the public system to keep pace. Thus,competition is on offering high-technologyclinical procedures to low-risk individuals.

Third, the need for spending substantialamounts on screening out high-risk patients.Such risk-rated premiums also affect the oldor those who fall sick as their option to changethe insurers is only Fonasa, as no other Isapreswill accept a high-risk enrollee. The admin-istrative costs of Isapres are 14% and esca-lation of average fee per visit is 80%, higherthan that of Fonasa, which are 1.2% and

50%, respectively. The cost of the whole system is high asdespite mandatory payment of 7% of the wage, the out-of-pocket expenditures account for another 35% of the totalhealth spending. Finally, in the event of insolvency or merg-ers between one Isapres and another, the interests of theenrollee are not protected.

In 2002, Chile launched a major health reform process. Thekey features consist of mobilizing additional resources byearmarking 1% of the value-added tax (VAT) for health; accred-itation of facilities and providers in the public and privatesector; standardized benefit packages for delivery by Fonasaand Isapres guaranteeing access, opportunity, quality andfinancial protection; ensuring stability of enrollee interests incase of insolvency of a private insurer; and regulations forpreventing risk discrimination and dumping of high-riskenrollees. Of importance is the Standard Benefit Package: accessis guaranteed by entitling enrollees to receive care listed inthe package at the appropriate level and within reasonable dis-tance; opportunity implies defining a maximum wait periodfor each service, with the option to get the service from anyplace of choice to be reimbursed by the plan; quality is ensuredby service provisioning by accredited members; and financialprotection ensures that none are denied care for want of abil-ity to pay and a ceiling of co-payment to be 20% or not exceed-ing a patient’s 2 months’ wage. For implementing these reforms,organizational and financial restructuring have also beendesigned with laws protecting enrollee interests and provid-ing for a solidarity compensation fund to compensate privateinsurers for the enrolment of high-risk persons.

Current status of private health insurance in India

India has lessons to learn from the experience of Chile. Indiatoo has a dual system of care—a private fee-for-service basedsector where the money is paid out-of-pocket by individualhouseholds and a tax-based public sector where the providersare salaried. Utilization of insurance under both these systemsis partly restricted and rationed by the affordability of theindividual household and availability of the budget.

On the other hand, insurance as a means of financing is afar more sophisticated mechanism, requiring a comprehen-sive understanding of the failures that characterize health insur-ance markets. For example, a problem such as asymmetry in



Table 6

Key indicators of India, Chile, China and the USA

Indicator India Chile USA China

Population in crore 103.34 1.54 28.8 128.52

Health expenditure per capita (in US$ 96 642 5274 261

Public expenditure. on health* as % of GDP/2000 0.9 3.1 5.8 1.9

IMR per 1000 live-births 2001 68 10 2 31

Life expectancy at birth 62 77 77 71

Maternal mortality ratio per 100,000 lakh births* 540 23 8 55

Source: World Health Report, 2005, WHO, * MDG-UNDP, 2002

information puts the patient and the insurer at a disadvan-tage due to their inability to resist or challenge medical opin-ion regarding an existing condition or future treatment. Besides,in the absence of knowledge of prices, the provider can short-change the two by overcharging. Second, cashless insurancecreates disincentives to control costs as it appears to be a‘free’ good for the patient and the provider, often resulting inexcessive treatment by the provider (induced demand) and friv-olous use by the patient taking treatment even for a condi-tion which he would normally have ignored or cured with ahome remedy (moral hazard). Third, it is only the patientswho know their health status. Since it is normally those in needof health care who tend to subscribe to health insurance, thisputs the risk on insurance agencies to resort to extensiveprocesses of risk selection, such as medical examination, beforebeing given admittance as an enrollee and focusing on low-risk groups, such as the young or healthy. Risk selection in indi-vidual-based policies however results in increasing the load-ing fee and consequently the cost of premium. This is onereason for the attractive group discounts being as high as 67%.For these reasons, private commercial health insurance is knownto select its customers—the young, healthy, rich, males—leav-ing the bad risks to the government—old, poor, young womenin the reproductive age group, and the ill.

Health insurance in India is usually associated with the‘Mediclaim’ policy of the GIC, which was introduced in 1986as a voluntary health insurance scheme offered by the pub-lic sector. The premium based on the age, risk and the bene-fit package opted for, ranged from a minimum premium ofRs 201 for those <25 years of age, to a maximum benefit ofRs 15,000 with discounts for group memberships. In 2001,there were 78 lakh persons covered under Mediclaim (Gupta2003). The subscribers are usually from the middle and upperclass, especially since there is a tax benefit in subscribing toMediclaim. The standard Mediclaim policy covers only hos-pital care and domiciliary hospitalization benefits. Most med-ical conditions are reimbursed though there are importantexclusions, such as pre-existing diseases, pregnancy and childbirth, HIV/AIDS, etc. Hospitals with more than 15 beds andregistered with a local authority can be identified as providers.

The insurance company (or the TPA, where applicable) admin-isters the scheme. Being an indemnity scheme, the patient paysthe hospital bills and submits the necessary documents to thecompany. The company in turn reimburses the patient. A studyof 621 GIC claims for the year 1998–99 by Bhat and Reuben(2001) showed that the average time between submission ofdocuments and reimbursement is 121 days. This study alsoshowed that one-third of the claims were due to adverseselection; 38% pertained to doctor’s fees and 25% chargesfor diagnostic services. The provider-induced claims thusaccounted for 63%. Yet another interesting insight was that22% of the total claims were for the treatment of communi-cable diseases, while 64% were for non-communicable dis-eases. There is also uncertainty about the amount reimbursed,there are times when the patient is reimbursed only partially,the usual reason being the insufficiency of documentation.The policy is not renewed automatically and is dependent on

the timely payment of premium. Ellis et al. observed that theGIC was more interested in whether the claim pertained to anexisting disease or whether the facility was qualified or not,but spent little time on detecting fraud. With claims exceed-ing 30% a year, more than the household spending, it reflectsthe problem of moral hazard which requires close monitor-ing. Second, it was also observed that the GIC sets premiumon the filing of claims and not actual amounts settled, givingit a cushion year on year as settled claims amounts are alwayslower than those filed, an amount that remains unadjusted.

During 1994, 4.4% of the insured persons made a claim, ofwhich only 75% of claims were settled. The claims ratio was45%. However, of late, the claims ratio is growing at a fastrate, allegedly because of collusion between the patients,insurance agents and hospitals.

From the above discussion, five features that characterizethe health insurance system in India emerge:1. By and large, the system offers traditional indemnity,

under which the insured first pay the amount and thenseek reimbursement. Under indemnity, all known dis-eases or health conditions are excluded and thereforesuch policies typically have a large number of exclusions.This also means that those most in need of insurance,i.e. the sick, get excluded for any financial risk protec-tion against the diseases they are suffering from.

2. It is a fee-for-service-based payment system. Such asystem of payment is advantageous for the provider sincehe bears no risk for the prices he can charge for servicesrendered by him. Combined with the asymmetry in infor-mation, such a system usually entails increased costs.

3. Policies provide a ceiling of the assured sum. Such a sys-tem, and that too within a fee-for-service payment sys-tem, results in shortchanging the insured as he gets lessvalue for money, as the provider and the insurer have noobligations to provide quality care and/or over provide/overcharge services so long as the amounts are within theassured amount of the insurance policy.

4. The system is based on risk-rated premiums. This againputs the risk on the insured as the premium is fixed inaccordance with the health status and age. Under sucha system, women in the reproductive age group, the old,the poor and the ill get to pay higher amounts and arediscriminated against.

5. The system is voluntary, making it difficult to form viablerisk pools for keeping premiums low.

Reasons for poor penetration of health insurance

Penetration of health insurance has been slow and halting,despite the ‘huge market’ estimated to range between Rs7.5–20 crores. Some reasons that explain for the slow expan-sion of health insurance in the country are as follows:

1. Lack of regulations and control on provider behaviour

The unregulated environment and a near total absence of anyform of control over providers regarding quality, cost or



data-sharing, makes it difficult for proper underwriting andactuarial premium setting. This puts the entire risk on theinsurer as there could be the problems of moral hazard andinduced demand. Most insurance companies are thereforewary about selling health insurance as they do not have thedata, the expertise and the power to regulate the providers.Weak monitoring systems for checking fraud or manipula-tion by clients and providers, add to the problem.

2. Unaffordable premiums and high claim ratios

Increased use of services and high claim ratios only result inhigher premiums. The insurance agencies in the face of poorinformation also tend to overestimate the risk and fix highpremiums. Besides, the administrative costs are also high—over 30%, i.e. 15% commission to agent; 5.5% administra-tive fee to TPA; own administrative cost 20%, etc. Patientsalso experience problems in getting their reimbursementsincluding long delays to partial reimbursements.

3. Reluctance of the health insurance companies topromote their products and lack of innovation

Apart from high claim ratios, the non-exclusivity of healthinsurance as a product is another reason. In India, an insur-ance company cannot sell non-life as well as life insuranceproducts. Since insurance against fire or natural disaster ortheft is far more profitable, insurance companies tend to com-pete by adding low incentive such as premium health insur-ance products to important clients, cross-subsidizing theresultant losses. With a view to get the non-life accounts,insurance companies tend to provide health insurance coverat unviable premiums. Thus, there is total lack of any effortto promote health insurance through campaigns regardingthe benefits of health insurance and lack of innovation tomake the policies suitable to the needs of the people.

4. Too many exclusions and administrative procedures

Apart from delays in settlement of claims, non-transparentprocedures make it difficult for the insured to know about theirentitlements, because of which the insurer is able to, on onestratagem or the other, reduce the claim amount, thus demo-tivating the insured and deepening mistrust. The benefit pack-age also needs to be modified to suit the needs of the insured.Exclusions go against the logic of covering health risks, though,there can be a system where the existing conditions can beexcluded for a time period—one or two years but not forever.Besides, the system entail equity implications.

5. Inadequate supply of services

There is an acute shortage of supply of services in rural areas.Not only is there non-availability of hospitals for simple sur-geries, but several parts of the country have barely one or twohospitals with specialist services. Many centres have no cardi-ologists or orthopaedicians for several non-communicable dis-

eases that are expensive to treat and can be catastrophic. If wetake the number of beds as a proxy for availability of institu-tional care, the variance is high with Kerala having 26 beds per1000 population compared with 2.5 in Madhya Pradesh.

6. Co-variate risks

High prevalence levels of risks that could affect a majority ofthe people at the same time could make the enterprise unvi-able as there would be no gains in forming large pools. Theresult could be higher premiums. In India this is an importantfactor due to the large load of communicable diseases. A studyof claims (Bhat 2002) found that 22% of total claims werefor communicable diseases.

Third party administrators

With the entry of TPAs under the IRDA Regulations Act, 2001,the insurance industry is taking a new turn towards ‘Man-aged Care’. The TPAs are required to be registered under theCompanies Act, 1956, and licensed by the IRDA, and be con-tracted by one or several insurance companies ‘for the provi-sion of health services’. The original role of a TPA was to pro-vide the back-office administrative set-up to insurance com-panies—issuing ID cards to subscribers, processing claims, mak-ing payments, etc. Taking advantage of the lack of clarity onthe specific role and responsibilities of TPAs, some among themare rapidly developing capacity to establish provider networksto service the needs of the insured, collecting and analysingdata, fixing and negotiating rates for procedures with providers,contracting providers, processing claims and making directpayment to them and arbitrating any dispute between the sub-scriber and the provider. This system, often referred to as ‘cash-less payment’, has resulted in relieving the patients of thepsychological stress of having to mobilize resources at shortnotice. By scrutinizing provider claims, TPAs also help insafeguarding the interests of the insuring company of anyfraudulent claims by the providers. For all these services, theinsurance companies pay 5.5% of the total amount of pre-mium collected under the policy. In addition, TPAs were alsoto be given a bonus from insurance companies for reducedclaim ratios or for promoting the companies with the insur-ers. This then would have given them the financial incentivesto develop systems for provider control: contracting throughpredetermined rates for procedures and treatment, utilizationsreviews, prior authorization for expensive surgeries, etc. andalso ensuring that the patients do not resort to frivolous useof the services. However, with the administrative fee beinglow and the idea of bonus not operationalized, there is reallyno incentive for the TPAs to reduce the claim ratios. Secondly,barring a few, for most TPAs health insurance itself is a sec-ondary concern to their main activity of brokerage.

The system of TPAs has facilitated cashless payments andexpanded access to providers but is yet to show evidence ofhaving been able to control cost or provide appropriate care.As the system of TPAs unfolds there are apprehensions: (i)whether patients will get adequate treatment and appropri-



ate care; (ii) whether quality of treatment will be compro-mised with the gradual loss of control and autonomy of thephysician on the kind of treatment to be given to his/her patient;(iii) whether costs will go up due to the substantial adminis-trative responsibilities placed on the providers for record main-tenance, filling claim and billing forms—in USA, where healthinsurance is organized on a TPA system, doctors spend almost30% of their time on processing their claims and the admin-istrative costs of the system are 25%–30% as compared to3% in Canada.; (iv) will there be possibilities of collusion betweenthe TPA and some providers in the network, resulting in pro-cessing their higher claims even if not justified, affecting theinterests of the insurance agency; (v) with TPAs getting organ-ized over time, whether they may acquire monopoly controlover the processes and dictate higher administrative fees, sincein the current system the TPA bears no risk; and finally (vi) thelegal uncertainty of the future in view of the framework regard-ing the functioning of TPAs being ambiguous and unclear. Forexample, the IRDA does not supervise or regulate the finan-cial activities of TPAs, the contractual relationships with providersor relationships with the corporate or union health plans. Inthe light of such limited regulatory oversight, some alreadycombine subscription plans being serviced by a provider net-work without involving any insurance company such as forexample, the Karnataka Police insurance with Apollo-spon-sored TPA which provides hospital services in a network ofsome 35 hospitals. In the absence of any statutory control orobligations imposed by the IRDA, such as networking onlyaccredited providers, or those adhering to certain quality bench-marks, or submitting reports on the qualifications of the providerand performance reports, etc., there is a major lacuna, mak-ing it difficult to ensure appropriate accountability in the sys-tem. Overall international literature1 does show that the TPAsystem is expensive (personal communication with Professorao, Harvard School of Public Health); even when their role isconfined to payment of benefits and management of claims,the administrative costs run up to 20%–30%. If they are assignedthe role of identifying providers then the amount can go evenhigher to 45%, making insurance products very unafford-able. Besides, such literature also seems to suggest that theTPAs neither have any motivation to undertake the steward-ship function to protect consumer interest nor enroll newpersons. In this context NGOs could be better agents.

Given the complexities of these markets, the key lesson forIndia is to closely study behavioural responses that such financ-ing systems generate among all the major players and instituteappropriate regulatory systems to minimize likely distortions.

Universal Health Insurance Scheme (UHIS)

For providing financial risk protection to the poor, the Gov-ernment announced a UHIS in 2003. Under this scheme, fora premium of Rs 365 per year per person, Rs 548 for a fam-ily of five and Rs 730 for a family of seven, health care for anassured sum of Rs 30,000 was provided. BPL families weregiven a premium subsidy of Rs 200 per annum. The schemewas redesigned in May 2004 with higher subsidy and restrict-

ing eligibility to BPL families only. The subsidy was increasedto Rs 200, Rs 300 and Rs 400 to individuals, families of fiveand seven, respectively. To make the scheme more saleable,the insurance companies provided for a floater clause thatmade any member of the family eligible as against the MediclaimPolicy which is for an individual member. Yet in the last twoyears of its implementation the coverage has been around10,000 BPL families in the first year and 34,000 in the sec-ond year till 31 January 2005.

The reasons for failing to attract the rural poor are many. First,the public sector companies who were required to implementthis scheme find it to be potentially loss-making and do notinvest in propagating it, resulting in very low levels of aware-ness, reflected in the low enrollment and very poor claimratios. To meet the targets, it is learnt that several field officerspay up the premium under fictitious names. Second, a majorproblem has been the identification of the eligible families.Identification became cumbersome as the family needed tohave some form of certification, which is difficult to obtainfrom revenue authorities. Besides, the poor also find it difficultto pay the entire premium money at one time for a future ben-efit, foregoing current consumption needs. Third, the proce-dures are cumbersome and difficult for the poor—the pre-mium has to be paid in a lump sum; the paperwork requiredfor enrolment as well as getting claim amounts is very time-consuming. Fourth, in most places there is a deficit in the sup-ply or availability of service providers, particularly becausegovernment hospitals are not eligible. For example, in Uttaran-chal, only 17 hospitals could be accredited under this scheme,which could have gone up to 37 if government hospitals wereallowed to be included and also expanded access and choiceto the enrollees. Besides, in several areas there are just no doc-tors available. Fifth, there was a set-back due to health insur-ance companies refusing to renew the previous year’s policies.Finally, the TPAs are also not willing to implement this schemeat 5.5% of premium amount as their administrative costs ofcovering rural populations in dispersed villages makes it unvi-able.

During 2004, the Government also provided an insuranceproduct under which for a premium of Rs 120 the sum assuredwas Rs 10,000. This was, to be available only for self-helpgroups (SHG). However, the intake is reportedly negligible. Thereasons for this poor intake are similar to those cited above.

With the Common Minimum Programme (CMP) commit-ted to having a UHIS, there has been much effort and debateto evolve a suitable and sustainable design. To expand thehealth insurance business, recommendations are also beingmade to reduce the minimum pre-qualification of Rs 100 croreequity as it will require 15 years to break even. Another set ofrecommendations is for permitting TPAs and hospitals tointroduce health insurance products. There are, however,doubts regarding this model as it may promote conflict ofinterest. In combining various aspects of provisioning andinsuring there could be perverse interests to provide low qual-ity of care over-diagnose or under-treat—for making profits.



Community-Based Health Insurance

Community financing (CF) as a method of raising finance atthe community level was initiated by UNICEF under its BamakoInitiative for Africa in 1987. The initiative had the followingobjectives: (i) to revitalize public health systems; (ii) to decen-tralize decision-making; (iii) to mobilize resources to coverlocal operating costs; (iv) to encourage community partici-pation through management of services and locally gener-ated funds; and (v) to define the minimum package of essen-tial health services. (UNICEF 1987). Though the experimentfailed in Africa, its concepts are once again gaining recogni-tion as an appropriate strategy for low-income countries whichhave a weak resource base, poorly developed markets and avast population having very low threshold of payment capac-ity (WHO 2002).

In community financing, the community is in control ofthe principal functions of collection and utilization, the mem-bership of the scheme is voluntary and there is willingness toprepay the contributions (Hsiao 2001). The scheme is basedon the hypothesis that with greater social capital there willbe more willingness to pay and participate. The communityhas been defined as a group of households living in close prox-imity or belonging to social, religious or economic organiza-tion. The efficacy of the scheme is based on two implicitprinciples: one, that the community has adequate homo-geneity or social coherence that gets easily translated into acapacity to mobilize resources; and two, that the willingnessto prepay will be influenced by self-interest when each indi-vidual perceives his marginal benefit exceeding his costs, i.e.accessing something of value which can be obtained easilyand more in quality through prepayment. Literature reviewsof such community-based schemes tend to suggest thatthey have enabled an increase in the availability of resources;inclusion of the poorest groups on account of governmentsubsidy; enhanced access to health services; and reducedimpoverishment on grounds of illness (Jakab 2001).

While the CBHI movement is vibrant in Africa, it is slowlypicking up momentum in India. Currently, there are about22 voluntary CBHI programmes in India, initiated and admin-istered by NGOs. Of these about 10 are active (Table 7). Inmany schemes, the community is also involved in various activ-ities such as creating awareness, collecting premiums, pro-cessing claims and reimbursements, and the management ofthe scheme (deciding the benefit package, the premiums, etc).

Devadasan, in his paper identified broadly three types ofcommunity health insurance (CHI) schemes and also analyzedtheir structure and basic features as discussed below: (Devadasanet al. 2004; Fig. 3): � Type I—The provider of health care plays the dual role of

providing care and running the insurance programme (e.gACCORD, VHS)

� Type II—where a voluntary organization/NGO is the insurer,while purchasing care from independent providers (e.g. Trib-huvandas Foundation, DHAN Foundation)

� Type III—(intermediary design)—The NGO plays the role ofthe agent purchasing care from providers and insurance

companies (TPA, e.g. SEWA, Karuna Trust, BAIF).The membership of these CHIs scheme varies from 1000 to

more than 20 lakh. Most of the schemes operate in ruralareas and cover people from the informal sector. Enrolmentis usually facilitated by membership of the organizations,e.g. micro finance groups, cooperatives, trade unions, etc. Theannual premium ranges from Rs 20 to Rs 120 per individual.The unit of enrolment is an individual and the membershipis voluntary in most of the schemes.

All the schemes offer hospitalization; this ranges from theclassical Mediclaim product to a very comprehensive coverincluding all conditions and no exclusions. Many NGOs havebeen successful in negotiating an appropriate insurance pack-age for their members. Most providers are either NGOs or pri-vate for-profit organization. The utilization rates range from6 to more than 240 per 1000 persons insured. The latterobviously indicates extreme adverse selection.

The main strengths of the CBHIs schemes are that theyhave been able to reach out to the weaker sections and pro-vide some form of health security; increase access to healthcare; protect the households from catastrophic health expen-ditures and consequent impoverishment or indebtedness.However, sustainability is an issue as these initiatives aredependent on government subsidy or donor assistance. Theyprovide limited protection in view of the very little cross-subsidy between the rich and the poor, resulting in the smallsize of the revenue pool which also constricts getting a bet-ter bargain from the providers. A disturbing factor in theseprogrammes, (barring one or two) is the very low claim ratio,ranging from 0.25 to 0.66, which indicates that the schemeis not able to overcome the barriers that are hindering accessor the cover provided is too inadequate or the members tooignorant about their entitlements. It is also seen that the poor-est of the poor get excluded on account of their inability topay their share within the specified time limit. Some NGOsmanage the scheme by themselves, which may be ‘illegal’within the current IRDA regulations. Also, some of the schemescover very small numbers and so the potential for scaling-upis restricted. Moreover, many of the schemes see health insur-ance as an end in itself and do not seek to either promotepreventive and promotive health care or extend adequateprovider linkages.

There is no exhaustive evaluation of the CBHI schemes inIndia due to the lack of uniformity in MIS. Many questionsremain unanswered and need to be researched to see if thesemodels can be implemented and replicated in India. For exam-ple, it is not clear how much it costs to administer such schemes,or its impact on strategic purchasing of services, developingprovider networks or on the local quack, or the problems forupscaling and finally if the scheme has helped protect thepoor from penury and if so, how it can be sustained if NGOswithdraw their support, etc.

Of all the schemes in operation, the one that has drawnwidespread attention in India is the Yeshaswani, an insur-ance scheme for farmers, designed and implemented by theGovernment of Karnataka since 2002. Under this scheme,the Cooperative Department enrolled, through a govern-



ment fiat, over 17 lakh farmers within one year and createda corpus of over Rs 15 crore. In the second year, an additional5 lakh members have been enrolled against the target of 1crore. The scheme provides financial risk protection against1600 surgeries offered in 90 accredited hospitals at prefixedrates. Outpatient treatment is free and any diagnostic serv-ice resulting in surgery carries a discount of 50%. To keepthe premium low at Rs 90, now revised to Rs 120, a Trustchaired by Secretary of the Department of Cooperatives, hasbeen constituted with the premium forming the corpus fundfrom which the claims are settled. A commercial TPA has beencontracted by the Trust at 5.5% of premium collected to

provide ID cards to the members, process the claims andmake payments to the service providers. A doctor appointedby the TPA gives prior authorization for expensive surgeriesand also scrutinizes correctness of the claims. Within one yearof establishment of this scheme, over 27,000 persons wereprovided outpatient treatment and 4000 surgeries performed.However, sustainability is an issue. The scheme is now facingmonetary problems and has a long wait list for surgeries andclaims to be paid despite the reimbursement being guaran-teed by the Government of Karnataka. Focusing solely on sur-gical aspects of health can have only a limited appeal and ablind replication of this scheme can give wrong incentives



Name and location Population covered Premium collected Benefit package

of the scheme (target population in 2003) (per cent target

population covered in 2003)

ACCORDGudalur, Tribals living in Gudalur taluk and who are Rs 25 per person Hospitalization cover up to Rs 1500 per person

Nilgiris, Tamil Nadu members of the AMS union (n =13,000) per year (36%) per year

BAIFUrali Kanchan, Women members (between 18 and 58 Rs 105 per person Hospitalization cover up to Rs 5000 per person

Pune, Maharashtra years) of the micro savings scheme in per year (58%) per year

22 villages (n =1500).

BUCCSBuldhana, Members of the Buldhana Urban NA Hospitalization cover up to Rs 5000 per person

Maharashtra Cooperative and Credit society per year

(n = 175,000).

DHAN Foundation Women members of the micro finance Rs 100 per person Hospitalization cover up to Rs 10,000

Kadamalai taluk, Theni scheme and living in Mayiladumparai per year (40%) per person per year

District, Tamil Nadu block (n =19049)

Karuna TrustT Narsipur BPL families in T Narsipur Block (n = Rs 30 per person per year. Hospitalization cover up to Rs 2500 per person

Block, Mysore District, 278,156) Fully subsidized for the per year. Includes ambulance services and

Karnataka SC/ST population (31%) loss of wages

MGIMS HospitalWardha, The small farmers and landless labourers Rs 48 per family of four Hospitalization cover up to Rs 1,500 per

Maharashtra living in the 40 villages around Kasturba (in cash or kind) (90%) person per year

Hospital (n= 30,000)

Raigarh Ambikapur Poor people living in the catchment area Rs 20 per person (58%) Primary and secondary health care

Health Association (RAHA) of the 92 rural health centres and hostel

Raigarh, Chhattisgarh students. (n = 92,000 individuals).

SEWAAhmedabad, SEWA Union women members (urban and Rs 22.50 per person or Hospitalization cover up to Rs 2000 per person

Gujarat rural), and their husbands living in 11 Rs 45 for a couple (10%)

Districts of Gujarat (n = 1,067,348)

SHADEKolencherry, Members of the SHGs operating in The Universal Health Hospitalization cover for family up to a maximum

Kerala Ernakulam district (n = 9000) Insurance Scheme (Rs 548 limit of Rs 30,000 per family per year

for a family of 5) (20%)

Student's Health Full-time student in West Bengal State, Rs 4 per student per Primary and secondary health care

HomeKolkata, from Class 5 to University level. year (23%)

West Bengal (n =56 lakh students)

Voluntary Health Services Total population of the catchment area Rs 250 per family Hospital cover

Chennai, Tamil Nadu of 14 mini-health centres (n= 104,247) of five (12%)

YeshasviniBangalore, Members of the District Farmer's Rs 120 per person (25%) Cover for all surgeries up to Rs 100,000

Karnataka cooperative societies and their

families (n = 80 lakh)

Source: Devadasan et al. 2004

Table 7

Some community health insurance schemes in India

for investing in surgery and neglecting other medical needs.However, the scheme has been innovative in demonstratingthe benefits of utilizing government resources for the admin-istration of insurance schemes, in bringing down the admin-istrative overheads and facilitating lower premiums.

The Yeshaswani model as well as experimentation abroad,seem to clearly point towards the fact that while CBHI is anaffordable model of financial risk protection in low-risk set-tings, it needs institutional support and formal mechanismsfor carrying out the critical functions of health insurance—collection of premium, settlement of claims, laying downclear rules of entitlements and oversight. Only when suchsystems are designed and put in place can the CBHI modelsbe upscaled to reach risk pools that are financially viableand provide sustainability.

China’s model of Community-Based HealthInsurance

In China, a model is under implementation on a pilot basistheir combins certain design features to address the rottenhealth system in the rural areas. The model, based on a part-nership between the government and the community, usesthe village-based barefoot doctor as the key provider and

gatekeeper for referrals. (This portion on China is fromProfessor Hsaio of Harvard School of Public Health, USA ina personal communication with the author). The schemedetails are as under:

Three underpinning concepts

(a) People by themselves, especially those living in rural areasand the poor, are unlikely to be able to raise enoughmoney for such schemes to be fully self-financing, neces-sitating public subsidy;

(b) Even if financing could somehow be organized, there isthe issue of how services are to be delivered, since exist-ing services are neither efficient nor effective in termsof quality;

(c) Issues related to governance and management: how isone to organize and manage such schemes and whowill perform the stewardship (or oversight) functions?These include overseeing the financial functioning andhealth of such schemes, the functioning of medical careproviders, contracting (if any) with providers.



Fig 3

Types of community health insurance schemes in India

NGO(ACCORD, JRHIS, SHH, VHS)

NGO(SEWA, BAIF, Navsarjan and

Karuna)

Insurance Company

Premium

Premium PremiumReimbursement

(KKVS)

Reimbursement(SEWA, BAIF)

Reimbursement(RAHA)

Health careHealth care

Reimbursement (Karuna Trust,

Navsarjan Trust)

Healthcare Group

PremiumReimbursement

Community

NGO(KKVS, RAHA)

Community Community

ProvidersProviders

Source: Devadasan. 2004

Outline of the scheme

Premium

The premium is Rs 100 per person plus the government sub-sidy (Fig. 4). The contributions of each enrolled member areroughly equal, except for the very poor, from whom no pre-mium is charged. There is an upper limit of benefits. Enrol-ment is on an annual basis—the first month of each year forrenewals or new enrolments—and after that no enrolmentsare allowed to prevent adverse selection.

Jurisdiction of the scheme

Typically, each scheme covers several villages. The experiencehas been that 93% of the people covered under the schemesupport it, but only 60% actually join it. Even this is sufficientto ensure a deep enough pool of members—6000 and above.

Benefit package

Free consultation visits to the village doctor as he is salariedunder the scheme, but there is payment for the drugs prescribed.Fifty per cent of the amount of payment is reimbursed by the

scheme upon examination of the prescription. Roughly 230drugs can be prescribed—including both modern and tradi-tional medicines—based on some type of essential drugs list.In addition, in case of referral to the subdistrict facility (Tehsillevel), the patient is reimbursed 50% of the expenditures incurred;20%–30% of all expenses for hospitalization at higher levels.

Referral

The patient can go to a higher order facility only if he gets areferral from the village doctor, who in turn has to take notesand justify why he is referring (Fig 5).

Government subsidy

A sum of Rs 110 per person is provided to those communitieswilling to set-up community financing organizations with aminimum number of members (about 70%). This acts as anincentive as well as subsidy.

Provisioning

Typically in China, every village has one or a maximum oftwo village doctors. The villagers decide which doctor is to



Fig 4

China’s health insurance system

Regular budget

Public health and prevention

Reimbursement

for services and

for village

doctors' salaries

and bonus after

THC find their

work meet

quality standards

Government subsidy

Premium

Co-insurance

Co-insurance

Salary andbonus

payments to village doctors

County and Town Government

Fund Management Office

Enrollees

County hospital

Township healthcenter

Village Health Post

Source: Hsiao, HSPH, USA

be involved with the scheme. This village doctor is employedon a salaried contract that lasts for only one year at a time.The village doctor gets paid in two parts: (i) a salary as per con-tract, and (ii) a performance-linked bonus. The salary is justenough to cover subsistence to ensure that he is interestedin the bonus. The bonus depends on three factors: (i) thedemand for the service of the doctor as reflected in the num-ber of visits by the villagers; (ii) careful keeping of medicalrecords (patient details, age, sex, number of visits, diagnosis,prescription); and (ii) regularity in attending continuing med-ical education and passing medical exams.

Training

The ‘barefoot village doctor’ (who is like the RMP/quack inIndia) is provided training. Those practising for over 5 yearsare exempted from training in the first year of the scheme,but in subsequent years they have to take continuing edu-cation courses or pass exams to remain a part of the scheme.For all others, a three-year course is necessary for qualifica-tion to work in the scheme, followed by annual examinations,and short continuing education courses on an annual basis.The training (and continuing education) of village-based doc-tors is focused on promoting the ability to treat the eight most

common health conditions, and on recognizing when to referpatients to higher-level facilities.

Medicines

The village doctor purchases the medicines from subdistrictlevel storage facilities operated by some agency, which he isallowed to sell at no more than 20% mark-up of the cost price.The price lists are prominently announced and displayed onnotice boards.

Administration

A manager and a clerk handle the day-to-day operation ofeach scheme. The manager reports on the functioning of thescheme to a management committee; the clerk keeps pre-mium receipts and payment records.

The ‘Management committee’ is organized at several lev-els. First, each village under the scheme has a managementcommittee of 5—typically composed of retired teachers, retiredlocal officials, etc. Their functions are: (i) overseeing the func-tioning of the local doctor’s clinic—making sure there are nocomplaints, no price gouging, etc.; (ii) maintaining a sug-gestion box where complaints can be placed; and (iii) organ-



Fig 5

Model for provision of health care services in China

Village Health PostPatients

Patients whodecided to

bypass referral(they get less

reimbursement)

Emergency service

Referral

Referral

Normal

County Hospital

Township Healthcenter


izing enrolment under the scheme.From each village-level ‘management committee’ one per-

son is nominated to represent them at the ‘Board of Direc-tors’ at the subdistrict level (the level at which the scheme isorganized). Because of the large number of likely membersof the Board, it meets only four times a year. However, a ‘stand-ing committee’ of 7 that works on behalf of this Board,meets more frequently and oversees the manager and the clerkalong with other functions. The standing committee maychange from year to year. No payments are made to the stand-ing committee and management committee members. Thestanding committee, based on simple contracts, employs thevillage doctors, etc. (Fig 6).

Oversight and stewardship by government

In technical matters for which the committees at the villageand subdistrict levels are not equipped, the government pro-vides the support:

(a) Auditing of accounts;(b) Checking drug quality through laboratory testing and

random checks.A broader approach to analyse/assess CBHI schemes is needed

through examination of two policy issues: (i) coordination ofCBHI and government risk pools, and (ii) equity implicationsof CBHI schemes and the role of government subsidies in suchschemes. There is a strong need for empirical work to explorehow CBHI schemes and the broader health care financing sys-tem interact. Even if individual schemes achieve their objec-tives (in terms of equity, efficiency, etc.), it does not neces-sarily imply that such objectives will be achieved at the sys-tem level.

What are the lessons for India?

The lessons that emerge from the China Model and discus-sions in the earlier paragraphs are that given the huge size,diversity and levels of development in India, it is important



Fig 6

Regulation, monitoring and supervision of community-based health care system in China

Elect 5 members

Elect 1members

Report

Report

Supervise

Financialreport

Fileclaim

records

Pay,superviseand train Monitor clinicalwork

Supervise and train

Regulateand

monitor

Monitor

Audit andSubsidize

Regulate and

Monitor

Supervise and

County hospital

Village Health Post

Enrolled peasants Board of Directors

Town People'sCongress

Board of Directors

ExecutiveCommittee

Fund Management Office

County People'sCongress

Party Secretary

Township Health Centre

County and Town Government


to adopt a four legged strategy for affording real risk pro-tection to the poor: (i) Bring down covariate risk in the com-munity and address the containment of infectious and child-hood diseases by intensifying public health programmes; (ii)strengthen government facilities to enable them to provideequally good quality care to the poor – this is the cheapestand most affordable option for government in the short runas a well functioning public health system has great poten-tial to protect the poor from risk; (iii) experiment with dif-ferent models of financing to spread risk and reduce theburden on the government. Such models will imply design-ing the features and implementing them on a pilot basisbefore coming up with a final policy framework; and (iv) inplaces/states where there are networks of self help groupsand evidence of solidarity experiment the China Model as itwould: (a) strengthen participation and that of local bodiesand Panchayat Raj institutions; (b) incorporate the RMPinto the system; (c) drastically reduce costs; (d) enable pro-viding healthcare within the village itself.

Such designing needs to be based on, first, being clear asto what the objectives of public policy are—is it deepeninginsurance markets, or extending financial risk protectionagainst illness, or increasing FDI to India? Second, the sizeof the risk pool and lowered risk factors are critical for lowpremiums that could be affordable for the majority of peo-ple. Thirdly if the system is to be based largely on a fee forservice system of payment, with zero cost at the point ofservice, then it will entail putting in place a set of prerequi-sites, such as standardized treatment protocols and unit costs;regulations to control the provider, disease classification usingICD-10 and/or grouping of diseases under Diagnostic RelatedGroup for payment system, pricing controls, putting sub-lim-its to expenses rather than having a cap of assured sum tocontain charges, making it mandatory for data returns, stan-dardization of claim forms etc. Besides, in any insurance sys-tem it is equally necessary to have regulations for quality andcost; mechanisms for accreditation and certification, issueof unique ID cards for members, different premium structures,controlling prices etc.

Implementation of the Package - RestructuringInstitutional Mechanisms and ReorganizingRelationships

Most importantly, for the actual implementation of UHIS, acritical institutional player needs to be inducted on the demandside commanding considerable market power to negotiatethe best possible care at the most affordable prices for thepatients. The concept is based on the assumption that orga-nizational structures are normally shaped to suit the objec-tives of financing systems. If expenditure control is theoverriding objective then there is usually a tendency towardscentralization of all spending decisions—costing, sanction-ing, releasing, accounting, mandating referrals through gate-keepers, etc. But in a prepaid insurance system the key actoris the consumer on whose willingness to contribute reststhe whole system. Since individual patients cannot be expected

to bargain prices on account of their vulnerability and thesuperior strength of the provider who has more informationon their needs, Enthoven’s idea of a sponsor, as an instru-ment to strengthen demand side to tilt the market to theadvantage of the consumer has force (Enthoven 1983, 1993).It implies that the purchasing function needs to be central-ized into one entity large enough to make a difference tothe practice and earnings of the providers. The concept alsodraws from the power of a single payer being able to nego-tiate better terms as in Canada than in a multipayer envi-ronment as in US. This concept is then the theoretical basisfor proposing a Social Health Insurance Corporation as thesponsor and reinsurer for independent health insurance com-panies. One option for the establishment of such a SHIC inIndian conditions is a) by the merger of the ESIS (medicalside) with the CGHS; and b) by steadily moving towards amandatory health insurance paradigm. For this the startingpoint could be mandating all public servants working in thegovernment or government owned entities to compulsorilypool their contributions to the SHIC. Combined with a broad-ened ESIS membership, this alone will increase the corpusamount over four to five times to the existing Rs. 1100 croreof premium collected for Health Insurance. This corpus canfurther be widened when the premium subsidy for the pooris also pooled in here. Such a mechanism will provide therequired volume and velocity required to trigger establish-ment of health insurance companies, professional providernetworks, mutual fund cooperatives like weavers and fish-ermen cooperative societies, a federation of CBHI schemes,HMO’s by hospitals having more than 500 beds and abilityto establishment own provider network etc. All these enti-ties subject to meeting solvency rules etc could be the vehi-cles to access the poor in the rural hinterland—like the com-mercial banks reach out through the grameen bank networks.For their operations the SHIC can act as the reinsurer. Sec-ondly, in the future years, as this system settles down, theSHIC can also establish an equalization fund as in Chile. InChile the equalization fund is made up of a proportion ofthe premiums collected by all the insurance companies beingpooled into the fund. Subsequently, this fund reimburses thecompanies in accordance with the risk profile of the insured.This then acts as a positive incentive to adhere to the guide-lines of not denying insurance to any one on grounds of riskand having exclusions of any kind. The success of this modelwill however depend upon our ability to bring in a high cal-iber of professional management to the SHIC and other financ-ing entities – having capacity to collect premiums, issueID’s, process claims, reimburse in a timely fashion, accreditand develop provider networks, negotiate rates etc.

Secondly, the SHIC will have to be a financing instrumentand not a provider. This then means that own hospitals anddispensaries by the ESIS, CGHS and PSUs will need to beconverted into Trust hospitals available for their members atdedicated times and for general public at other times. Theadvantage of this measure will be two: a) that the SHIC willbe able to accrue more for the corpus as the administrativecosts now pass onto the hospitals units which become self



financing, mobilizing its money from insurance policies/user fees; and b) the general public as well as the employeesand members of ESIS, CGHS and PSUs all get a wider accessand choice of hospitals. At present the CGHS dispensaries havean average of 14 OP patients per day and the ESIS hospitalshave an average occupancy rate of 50%, with some havingeven as low as 10%. Likewise, in several remote areas wherepublic infrastructure is weak the PSUs have excellent medicalfacilities with capacity to serve the local populations. Thusover 2000 facilities under ESIS, CGHS and PSUs can be openedup to the general public with an incremental amount ofadditional budget. This would also increase access and fea-sibility of insurance reaching the poor.

Economy of scale that comes from a large risk pool is animportant consideration for covering hospitalization. By lay-ing down a minimum level of say 75-80% population cov-erage at the village panchayat level, or a risk pool of 10-15,000 members as the eligibility criteria for receiving gov-ernment subsidies, it could be ensured to have a more rep-resentative membership – the healthy and the better pay-ing sections along with sick and poor. And in order to achievethe willingness to pay and optimal participation, substan-tial subsidies targeted to the poor, a need based standard-ized benefit package and linkage to provider networksneed to be incorporated as the three core elements of thedesign.

The flip side of the SHIC model is that it may entail highadministrative costs due to the several layers of intermedia-tion. The SHIC will also need to be run on professional lineswith highly skilled and trained persons, which will again increasecosts. The issue then is whether such a structure will be suit-able and affordable and other alternatives to reduce admin-istrative costs need to be examined. In the absence of anyexperience it is incumbent to try out on pilot basis some ofthe financing systems.

To monitor and regulate this huge initiative, there will alsobe an urgent need to have an independent health regulatorand a body of laws that address various issues related to healthinsurance markets and the serious distortions that the cur-rent trends are creating and will be difficult to remove later.In the absence of such a roadmap for reform and clarity ofvision, the goal of having a Universal Health Insurance willnot be realized. This goal was first articulated in 1954 by thethen Prime Minister Jawaharlal Nehru. It is indeed a tragedythat even after five decades such an important goal contin-ues to be an aspiration.

Conclusion

The present system of financing and payment systems raiseseveral important concerns on the suitability of the structureto meet current day problems and future challenges. The

large size of out of pocket expenditures provides an opportu-nity to pool these resources and facilitate spreading risk fromhouseholds to government and employers on a shared basiswhich will be a more equitable financial arrangement. Thedimension of equity is of particular concern as the inelastici-ties of demand for acute care, are resulting in over 33 lakhpersons being pushed below poverty line, every year. In shortthe social benefits of instituting social insurance as a finan-cial instrument to replace user fees, outweighs the possiblerisks of moral hazard and increased costs, typical outcomes ofprepaid insurance. How to minimize these two market fail-ures are of concern and need to be addressed by developinga well thought out strategy taking international evidenceinto account so we build on existing knowledge and learn fromothers’ experiences. It is argued that it is not advisable forgovernments to intervene in health insurance markets in apiecemeal manner—insurance for pensioners by the Depart-ment of Personnel; for weavers by the Department of Tex-tiles, for fishermen by the Department of Agriculture, for farm-ers by the Department of Cooperatives, poor women by theDepartment of Rural Development etc., as such attempts frag-ment risk pools. In other words, resorting to insurance as afinancing instrument must be an act of a deliberate strategythat addresses the market failures in order to ensure thatinequities do not widen and the poor are not marginalized—two typical outcomes of private, fragmented insurance sys-tems.

In conclusion it is reiterated that given the fiscal con-straints for government to provide universal access to freehealth care, insurance can be an important means of mobi-lizing resources, providing risk protection and achievingimproved health outcomes. The critical need is to experi-ment with the wide range of financing instruments availablein different scenarios and have adequate flexibility in thedesign features, the structures and processes, institutionalmechanisms and regulatory frameworks, so that a viable bal-ance can be achieved for minimizing market distortions sothat the outcomes do not make the cure worse than the dis-ease (Enthoven 1983, 1993). Unregulated markets are inef-ficient and inequitable, requiring governments to interveneto ensure no segmentation in the system (Bloom, 2001). Forthis, the burden of building partnerships and managing changeis on the government, which in turn needs to base its strat-egy on sound research.

Acknowledgements

I gratefully acknowledge the assistance of Dr Somil Nagpalfor the analysis of the CGHS and Dr Alaka Singha, WHO, Geneva.I am most indebted to Dr. William Hsiao, Harvard School ofPublic Health, USA for so generously sharing his experiencesof China.





Industry Rural Urban All areas

High Middle Low High Middle Low High Middle Low Total

1. Organized Sector 0.14 1.80 0.87 2.81

1.a. Government 0.14 1.09 0.72 1.94

1.b.1 Agriculture 0.00 0.03 0.05 0.09

1.b.2 Manufacturing, etc. 0.03 0.34 0.17 0.54

1.b.3. Services, etc. 0.04 0.18 0.07 0.25

2. Unorganized Sector 2.23 10.15 12.68 0.90 3.06 4.62 3.12 13.21 17.30 33.62

2.1. Regular salaried 0.40 0.87 0.43 0.40 1.68 1.35 0.80 2.55 1.78 5.13

2.1.a. Agriculture 0.04 0.11 0.19 0.01 0.01 0.01 0.05 0.12 0.20 0.37

2.1.b. Manufacturing, etc. 0.11 0.18 0.11 0.15 0.51 0.40 0.26 0.69 0.51 1.46

2.1.c. Services, etc. 0.28 0.47 0.21 0.37 1.14 0.82 0.65 1.61 1.03 3.30

2.2. Self-employed 1.19 6.56 6.23 0.19 1.31 2.12 1.38 7.87 8.35 17.60

2.2.a. Agriculture 0.96 5.18 4.85 0.03 0.08 0.29 0.99 5.26 5.14 11.39


2.2.c. Services, etc. 0.22 0.80 0.67 0.16 0.94 1.14 0.39 1.74 1.81 3.94

2.3. Casual employed 0.38 3.05 5.95 0.06 0.31 1.16 0.44 3.35 7.10 10.90

2.3.a. Agriculture 0.34 2.11 4.94 0.00 0.06 0.21 0.34 2.17 5.15 7.66


2.3.c. Services, etc. 0.01 0.20 0.30 0.00 0.12 0.35 0.01 0.32 0.65 0.98

(1+2) Total Workforce 2.23 10.15 12.68 0.90 3.06 4.62 3.27 15.01 18.16 36.44

Note: The number of workforce has been measured by the current daily status (CDS). Figures are reconciled using Table 51 of the NSS Report No. 458 and tables extracted from unit-level record data of the 55th Round alongwith a table from Economic Survey (2003-04). Data on break-up of urban-rural organized employment are not available. High, middle and low denote the household monthly per capita expenditure class. Source: Unit Level Records of Employment and Unemployment Survey, 55th Round, National Sample Survey (NSS), 1999-2000

Annexure 1

Number of workforce by employment category, income status and industry classification (1999-2000)


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ROVIDING ACCESS TO ADEQUATE HEALTH CARE SERVICES IS AN IMPORTANT component of empowering people with human capital. This, however, can be achievedonly when the spending on health care is adequate and delivery systems efficient.Ensuring adequate outlay on health services and efficient use of allotted expendi-ture are important not only to improve the productivity and earning capacity of thepopulation, particularly the poor, but also their health status. Not surprisingly, improv-ing health indicators is an important component of the Millennium DevelopmentGoals (MDGs) set by the United Nations. There are also important targets on healthstatus achievements set for the Tenth Plan. The Common Minimum Programme ofthe ruling UPA government also seeks to increase the public expenditure by the Cen-tre and States on health from the present level of less than 1% to 2%-3% of the grossdomestic product (GDP).

The provision of health and family welfare services falls in the realm of concurrentresponsibility of the Centre and the States, but the latter have a predominant role inthe delivery of these services. However, fiscal pressures at the State level led to com-pression of expenditures by the State Governments partly compensated by an increasein Central financing of these services, particularly for some prioritized programmesimplemented through Central sector and Centrally sponsored schemes. In general,over 85% of the public expenditure on medical and public health is incurred by theState Governments.

This paper identifies the resource gap between the desired and the actual healthexpenditure in 15 major States in India (14 large, non-special category States andAssam), and highlights the extent to which the gap can be reduced by augmentingresources at the State level. Further, it estimates the resource gap that cannot be metthrough States’ own resources and therefore requires Central transfers. The design ofCentral transfers needed for meeting the required health expenditure of various Statesis also discussed.

The principal motivation for this paper is the concern for achieving the targets set forimproving the health status of India’s population, particularly the poor and the vul-nerable. While fulfilling the targets for improving the health status set by both nationaland international agencies (Tenth Plan goals and MDGs) requires considerable aug-mentation in expenditures, the deteriorating fiscal situation at the State level has imposedsevere constraints in financing them. In particular, there has been a decline in socialsector expenditure as a percentage of both gross state domestic product (GSDP) andtotal expenditure in a majority of States in the 1990s (Dev and Mooij 2005). The com-bined expenditure of States on medical and public health, sanitation, water supply andfamily welfare declined from 8.4% of the total expenditure in 1990-91 to 7.2% in2001-02. As a proportion of GSDP, the decline was from 1.5% to 1.3% during the period.

In the context of deteriorating finances of the States, the decline in health expendi-ture is a matter of concern. This is more so because the share of public expenditure inGDP in the case of health expenditure is much lower in India for the level of per capitaincome. In 2000, the total expenditure by the Centre and the State Governments in Indiawas about 0.9% of GDP. In comparison, Bangladesh and Bhutan, with lower per capitaGDP, spent 1.4% and 3.7% of GDP, respectively on health. Advanced countries such asthe US and UK spent substantially higher amounts-5.8% and 5.9% of the GDP, respec-tively.

With the prevailing level of public expenditure on health and its declining trend inthe 1990s, it appears difficult for India to achieve the health targets of MDGs and the

Resource Devolution from the Centreto States: Enhancing the RevenueCapacity of States for Implementationof Essential Health Interventions

P


S E C T I O N I V

M. GOVINDA RAODIRECTOR

NATIONAL INSTITUTE OF PUBLICFINANCE AND POLICY

18/2 SATSANG VIHAR MARG,NEW DELHI 110067

INDIA

EMAIL: [email protected]

MITA CHOUDHURYECONOMIST



INDIAEMAIL: [email protected]

MUKESH ANANDSENIOR ECONOMIST



INDIAEMAIL: [email protected]

Tenth Plan objectives. As per the provisional estimates, theinfant mortality rate (IMR) in India stood at 66 in 2001 (Sam-ple Registration System Bulletin 2002), which was much higherthan the Tenth Plan target of 45 by 2007. Similarly, the mater-nal mortality ratio (MMR) was much higher than the target. Theproblem is exacerbated by the fact that there are significantvariations in the IMR, MMR and life expectancy at birth (LEB)between different States. In fact, health sector outcomes inthe poorer States are extremely low. Similarly, there is consid-erable catching up to do in the health status of women, sched-uled castes and tribes. This calls for substantial increases in theresources allocated to the public provision of health, targetingof health expenditure to areas and groups of population withlow health indicators and focusing on the delivery of healthservices to transform public expenditure into improved outputsand outcomes.

This study attempts to estimate the expenditure requiredbetween 2005-06 and 2009-10 for meeting specific health goalsand explores the possible means of meeting the expenditurerequirement in 15 selected States.1 The choice of the terminalyear 2009-10 for estimating expenditure requirement is drivenby the fact that the MDGs have to be met by 2015. To arrive atthe desired outcomes by 2015, incurring appropriate expendi-ture during the period 2005-06 to 2009-10 is crucial.

Expenditure Requirement for Health andRelated Sectors

Health outcomes are determined not only by direct expendi-ture on the health sector but also by expenditure on relatedsectors such as safe drinking water, sanitation, nutrition, pri-mary education and roads (Shiva Kumar 2005, Deolalikar 2004).Expenditure requirement in this analysis is, therefore, viewed asa package of expenditures required in each of these sectors ratherthan the health sector alone.2 Such expenditures in differentsectors mutually reinforce each other and have been argued tobe important in the context of assessing budgetary allocationsfor achieving health goals (Shiva Kumar 2005). This study esti-mates the input deficiencies in each of these sectors from thespecified national norms/targets in the States and transformsthese into the expenditure needs for the respective States.

Health Sector (Medical, Public Health and FamilyWelfare)

In this paper, expenditure requirement in the health sector isestimated such that it is adequte to provide a minimum levelof access to health care facilities, both in terms of physicalfacilities and manpower. In particular, the study focuses on

the national norms related to rural primary health care insti-tutions such as subcentres (SCs), primary health centres (PHCs)and community health centres (CHCs) and estimates theresource requirements for meeting the national norms relatedto these institutions. As per the national norms, there shouldbe one SC for every 5000 population, 1 PHC for every 30,000population and 1 CHC for every 120,000 population in theplains. The corresponding figures for tribal/difficult terrainsare 3000, 20,000 and 80,000, respectively. While the normsmay be inadequate to achieve the desired outcomes in manyStates, they aim to ensure the provision of the minimumlevel of health infrastructure in each State. The expenditurerequirement for the health sector during 2005-06 to 2009-10 is given in Table 1.

The need for increased expenditures in the health sectorarises from the fact that the existing infrastructure of SCs,PHCs and CHCs is grossly inadequate in many States. As perthe Bulletin on Rural Health Statistics (2002), none of the 15major States under study have achieved the required level ofprovision in all the three categories of SCs, PHCs and CHCs.While some States have achieved the norms in terms of SCsand PHCs, none of the States have achieved the targets withrespect to CHCs. The number of States meeting the norms inindividual categories reduces as one moves from SCs to PHCsand CHCs. Even where the norms are met in terms of the num-ber of facilities required, many of them are non-functionaldue to lack of equipment and need for civil works. The meremeeting of norms in terms of the number of facilities istherefore not enough. Many of these facilities also suffer fromshortage of manpower. The estimates therefore include thecost of upgrading the equipment facilities, civil works andmanpower in the existing facilities, apart from setting up newfacilities, to fulfil the national norms.

The total requirement of expenditure in the health sectorcomprises the capital and the revenue components. The cap-ital component of expenditure requirement further consistsof two parts. The first is the cost of building new facilities forfulfilling the national norms for SCs, PHCs and CHCs, andthe second is the cost of upgrading the civil works and equip-ment in the existing SCs, PHCs and CHCs. It is assumed thatthis capital expenditure will be carried out in a phased man-ner over a period of five years between 2005-06 and 2009-10 to eliminate all gaps in the physical infrastructure by2010. In addition to the cost of covering up the existing gap,the estimate of requirements also includes the cost of pro-viding health care services for the additional population ineach year between 2005-06 and 2009-10.3, 4

The revenue expenditure requirement in the health sectoralso comprises two parts. First, in addition to the expendi-


SECTION IV Resource Devolution from the Centre to States

1 The 15 States are Andhra Pradesh, Assam, Bihar (including Jharkhand), Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh (including Chhattisgarh), Maharashtra, Orissa, Punjab,Rajasthan, Tamil Nadu, Uttar Pradesh (including Uttaranchal) and West Bengal.

2 The National Commission on Macroeconomics and Health (NCMH) has identified expenditure on these sectors as important for achieving health goals.3 Information on the existing SCs, PHCs and CHCs has been taken from the Bulletin on Rural Health Statistics, which provides the figures updated till 2001-02. Unfortunately, the information on

the addition to infrastructure in the States between 2001-02 and 2005-06 is not easily available. To account for some likely increase in infrastructure between 2001-02 and 2004-05, capitalexpenditure on SCs, PHCs and CHCs in individual States, provided in the States' Finance Accounts, along with the unit cost of building these facilities were used. For water supply andsanitation, a 10% increase in access between 2001-02 and 2004-05 has been assumed.

4 The National Commission on Macroeconomics and Health (NCMH) estimates the unit cost used for building SCs, PHCs and CHCs to be Rs 24.5 lakh for a PHC, Rs 80.5 lakh for a CHC and Rs 2lakh for an SC. The cost of upgrading the civil works and equipment in the existing facilities has also been provided by NCMH based on a facility survey carried out in 1999.

ture being currently incurred to run the existing SCs, PHCsand CHCs, it includes the salary expenditure required to pro-vide these existing facilities with manpower as per the norms.Second, it includes the expenditure that would be requiredto run the new SCs, PHCs and CHCs to be built between 2005-06 and 2009-10 with adequate number of health workers.5The additional requirement of resources is estimated as theextent of resources required over and above the actual expen-diture as a percentage of GSDP incurred in 2001-02.6

The estimate indicates that an additional amount of aboutRs 26,439 crore (at 2005-06 prices) is required to provide aminimum level of access to health care facilities in the States(Table 2).7 Nearly 60% of this amount is needed in UttarPradesh (UP) and Bihar alone. On average, Madhya Pradesh,West Bengal and Orissa account for about 20% of additionalexpenditure. The States of Maharashtra and Karnataka requireless than 1% of this amount, while Kerala requires no addi-tional expenditure.

As a percentage of GSDP and in per capita terms, Bihar, UttarPradesh, Assam, Madhya Pradesh and Orissa require the high-est increase in expenditure in the health sector. It may be notedthat the existing levels of per capita expenditures in thesestates are among the lowest in the country (Table 2). Table 2 also shows that the ratio of health sector expendi-ture to GSDP is very high in these States. This, however, ismerely a reflection of low GSDP in these States.

If one examines the States that lie above the average levelof per capita additional requirement of resources during 2009-10, the five low-income States of Bihar, UP, Assam, MP andOrissa are included (Fig. 1). The requirements for Haryanaand West Bengal are also relatively high. It must be noted thatamong the selected States, the amount of GSDP devoted byHaryana towards the health sector is the lowest. As the incomesof West Bengal and Haryana are higher than average, as a per-centage of GSDP, their additional requirements are relativelylow. In general, additional requirements both in terms of percapita as well as GSDP, indicate that Bihar, UP, Assam and

Resource Devolution from the Centre to States SECTION IV


5 For calculating the salary requirements in each year, the Central Government pay scales for different levels of medical personnel at SCs, PHCs and CHCs were used. The population projections for the years 2005-06 to 2009-2010 provided by the Registrar General of India were used for the estimations.

6 Data on State Finances of India published by the Reserve Bank of India were used for the actual expenditures.7 An average inflation rate of 7% was assumed throughout the study.

Fig 1

Per capita additional requirement of resourcesfor the health sector, 2009-10

State As percentage of GSDP Real per capita (in Rs) (2005-06 prices)

2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 0.92 0.93 0.93 0.94 0.94 251 253 255 257 258

Assam 1.35 1.37 1.38 1.39 1.40 234 239 243 246 249

Bihar (including Jharkhand) 2.04 2.18 2.31 2.43 2.54 229 247 265 282 298

Gujarat 0.70 0.67 0.65 0.62 0.59 234 225 217 208 199

Haryana 0.64 0.65 0.65 0.66 0.66 248 253 257 260 263

Karnataka 0.95 0.91 0.87 0.83 0.80 269 267 267 267 267

Kerala 0.98 0.95 0.92 0.90 0.87 303 303 303 303 303

MP (including Chhattisgarh) 1.17 1.16 1.16 1.15 1.13 213 213 213 213 213

Maharashtra 0.71 0.69 0.67 0.65 0.63 275 267 260 260 260

Orissa 1.47 1.43 1.39 1.36 1.32 233 229 224 220 214

Punjab 0.94 0.93 0.92 0.92 0.91 373 372 370 368 365

Rajasthan 1.34 1.29 1.25 1.20 1.16 286 278 269 259 250

Tamil Nadu 0.93 0.92 0.90 0.88 0.86 285 281 275 269 261

UP (including Uttaranchal) 1.18 1.22 1.26 1.30 1.33 178 187 195 203 210

West Bengal 0.95 0.99 1.02 1.04 1.06 238 250 260 269 276

Note: Projections of GSDP were made using the prescriptive growth rates suggested by the Twelfth Finance Commission

Table 1

Expenditure requirement for the health sector between 2005-06 to 2009-10

MP occupy the top four positions. The health sector in theseStates therefore needs a special focus.

Safe Drinking Water and Sanitation

According to the 2001 Census, only about 67% of householdsin the selected States have access to safe drinking water andin States such as Assam and Orissa, it is less than 50%. Sim-ilarly, less than 30% households have access to toilet facili-ties in Bihar, UP, Orissa, MP and Rajasthan. The percentageis as low as 15 in Orissa. We now highlight the resource require-ments for providing all households in the States with accessto safe drinking water and toilet facilities by 2010.8 Table 3provides the expenditure requirement for water supply andsanitation in the period 2005-06 to 2009-10.

The resource requirements for water and sanitation alsohave a capital and revenue component. The capital compo-nent includes the cost of providing all households not hav-ing access to safe drinking water and toilet facilities with thesefacilities. This requirement of expenditure is spread over a five-year period between 2005-06 and 2009-10. It also includesthe cost of providing the additional population in each year

between 2005-06 and 2009-10 with these facilities. Therevenue component includes the expenditure associated withthe increased coverage. In the case of safe drinking water, anadditional 10% of the capital cost is also included for main-tenance of the water supply systems.

Estimates indicate that an additional amount of Rs 17,593crore will be required for providing safe drinking water andtoilet facilities to all households (Table 4). Of these, four StatesKerala, Maharashtra, West Bengal and Orissa account for morethan 60% of the requirement. The high requirement of Ker-ala may be attributed to the low access to safe drinking water.9Only 20% of households in the State have access to safe drink-ing water. In contrast, Tamil Nadu, Gujarat, Haryana andAndhra Pradesh do not require any additional expenditure.

As a percentage of GSDP, excluding Kerala, Assam and Orissarequire the highest increase. Interestingly, Kerala and Kar-nataka spent the lowest amount of their GSDP on water sup-ply and sanitation in 2001-02 among the selected States.Given the low level of spending in Kerala and the low accessto safe drinking water, marked increases in expenditure,both as a percentage of GSDP and per capita are required inthe State. While Karnataka also requires a substantial increase



Additional

As percentage of GSDP Real per capita (in Rs) (2005-06 prices) resources required

Current Current (2005-10)

level level (Rs in crore

State (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06) prices

Andhra Pradesh 0.86 0.06 0.07 0.07 0.08 0.08 232 19 21 23 25 26 944

Assam 1.04 0.31 0.33 0.34 0.35 0.36 176 59 63 67 70 73 976

Bihar (including 1.27 0.77 0.91 1.04 1.16 1.27 140 88 107 124 141 157 7,150

Jharkhand)

Gujarat 0.58 0.12 0.09 0.07 0.04 0.01 193 41 33 24 15 6 634

Haryana 0.54 0.10 0.11 0.11 0.12 0.12 207 41 46 50 53 56 554

Karnataka 0.94 0.01 0.00 0.00 0.00 0.00 267 2 0 0 0 0 10

Kerala 1.01 0.00 0.00 0.00 0.00 0.00 303 0 0 0 0 0 0MP (including 0.80 0.37 0.36 0.36 0.35 0.33 148 65 65 65 65 65 2,983Chhattisgarh)

Maharashtra 0.67 0.04 0.02 0.00 0.00 0.00 260 15 8 0 0 0 223

Orissa 1.02 0.45 0.41 0.37 0.34 0.30 161 72 68 63 58 53 1,210

Punjab 0.85 0.09 0.08 0.07 0.07 0.06 338 35 33 32 30 27 405

Rajasthan 1.10 0.24 0.19 0.15 0.10 0.06 236 50 42 33 23 14 990

Tamil Nadu 0.84 0.09 0.08 0.06 0.04 0.02 256 30 25 19 13 6 612

UP (including 0.74 0.44 0.48 0.52 0.56 0.59 111 66 75 84 91 99 8,463Uttaranchal)

West Bengal 0.92 0.03 0.07 0.10 0.12 0.14 229 9 20 30 39 47 1,286

Total 26,439

Table 2

Additional requirement of resources for the health sector between 2005-06 to 2009-10

8 It is assumed that 30% of the uncovered population will have access to piped water and the remaining 70% will have access to handpumps. The unit cost of providing piped water was taken to be approximately Rs 1200 per capita and that of handpumps Rs 140 per capita. A unit cost of Rs 1000 was taken for building a toilet per household.

9 Partly, the high requirement in Kerala despite it being a high rainfall State is due to the definition of safe drinking water. A large proportion of the population in the State uses the well water,which is considered unsafe. Requirement of the State is an overestimate as the unit cost of providing safe water in Kerala would be lower due to high density of population.




2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 0.29 0.30 0.30 0.30 0.30 81 81 81 81 81

Assam 0.82 0.88 0.93 0.98 1.03 146 159 170 182 195


Gujarat 0.21 0.21 0.21 0.20 0.20 88 88 88 88 88

Haryana 0.56 0.58 0.59 0.61 0.62 278 278 278 278 278

Karnataka 0.43 0.44 0.44 0.44 0.44 126 131 92 92 92

Kerala 0.54 0.65 0.74 0.83 0.91 176 218 255 294 332


Maharashtra 0.30 0.30 0.30 0.30 0.31 118 120 122 123 130

Orissa 1.13 1.22 1.29 1.36 1.41 180 197 212 228 241

Punjab 0.29 0.29 0.28 0.28 0.27 117 118 114 114 110

Rajasthan 1.18 1.25 1.30 1.35 1.39 275 275 280 291 302

Tamil Nadu 0.26 0.26 0.25 0.25 0.24 143 143 143 143 143


West Bengal 0.43 0.44 0.45 0.45 0.46 112 117 123 125 131


Table 3

Expenditure requirement for water supply and sanitation between 2005-06 to 2009-10

Additional




State (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06) prices

Andhra Pradesh 0.30 0 0 0 0 0 81 0 0 0 0 0 0

Assam 0.46 0.36 0.42 0.47 0.52 0.57 79 67 80 92 104 116 1,349

Bihar (including 0.57 0.11 0.12 0.13 0.14 0.15 63 13 14 15 17 19 897

Jharkhand)

Gujarat 0.26 0 0 0 0 0 88 0 0 0 0 0 0

Haryana 0.73 0 0 0 0 0 278 0 0 0 0 0 0

Karnataka 0.32 0.11 0.12 0.12 0.12 0.12 92 34 39 0 0 0 415

Kerala 0.18 0.36 0.47 0.56 0.65 0.73 52 123 165 202 242 279 3,532

MP (including 0.51 0.21 0.22 0.22 0.22 0.22 94 37 39 40 41 43 1,842Chhattisgarh)

Maharashtra 0.19 0.11 0.11 0.11 0.11 0.12 73 45 47 48 50 57 2,455

Orissa 0.57 0.56 0.65 0.72 0.79 0.84 90 89 107 122 137 150 2,336

Punjab 0.25 0.04 0.04 0.03 0.03 0.02 101 16 17 13 13 9 175

Rajasthan 1.28 0 0 0.02 0.07 0.11 275 0 0 4 16 26 300

Tamil Nadu 0.47 0 0 0 0 0 143 0 0 0 0 0 0


West Bengal 0.27 0.16 0.17 0.18 0.18 0.19 66 47 52 57 59 65 2,459

Total 17,593

Table 4

Additional requirement of resources for water supply and sanitation between 2005-06 to 2009-10

in per capita terms, given its income level, the required increaseas a percentage of GSDP is relatively moderate. Apart fromthese States, West Bengal requires a marked increase both inper capita terms as well as a percentage of GSDP (Table 4).The two low-income States of Assam and Orissa require spe-cial policy focus.

Nutrition

One of the primary causes of infant and child mortality inIndia is maternal and child malnutrition. Keeping this inview, policy stance in recent times has focused on providingnutritional supplements to pregnant and lactating mothersand undernourished children. However, the coverage of theprovision of nutritional supplements has not yet been uni-versal. We estimate the resource requirements for makingthis universal. Specifically, we estimate the requirement ofresources for providing nutritional supplements to all mal-nourished children in the age group of 6-71 months, and allpregnant and lactating mothers below the poverty line. Theunit cost of providing nutritional supplements to children inthe age group of 6-71 months under the ICDS scheme is Rs3.10 per child per day. Similarly, the unit cost of providingnutritional supplements to severely malnourished children isRs 3.81 per child per day and to pregnant and lactating moth-ers Rs 3.41 per beneficiary per day. These unit costs are usedto estimate the expenditure requirements. It may be notedthat the above-mentioned unit cost for providing nutri-tional supplements is abysmally low. However, as these normshave been specified by the Government of India, they havebeen used to estimate the expenditure requirements. Table 5gives the expenditure requirements for providing nutritionalsupplements in the period 2005-06 to 2009-10.

A total of Rs 56,383 crore is additionally required for pro-viding nutritional supplements to all malnourished childrenbetween the age of 6 and 71 months, and pregnant and lac-tating mothers below the poverty line (Table 6). Of this,more than 50% is required in Bihar and UP alone. Uttar Pradesh

alone calls for more than 30% of this required expenditure.Madhya Pradesh, West Bengal and Rajasthan along with UPand Bihar account for almost 80% of the requirement. In con-trast, Tamil Nadu and Andhra Pradesh spend a substantialamount of their GSDP on nutrition and therefore do notneed any additional expenditure.

As a percentage of GSDP, Bihar, UP, MP, Orissa and Rajasthanoccupy the top five positions in terms of requirement. AndhraPradesh and Tamil Nadu have the highest expenditure bothas a percentage of GSDP and in per capita terms, and there-fore do not require any increase in expenditure. Kerala, Maha-rashtra, Punjab and Haryana require an increase of less than0.2% of their GSDP. In terms of per capita, Bihar, UP, Orissa,MP and Rajasthan require substantial increase (Table 6). Thus,Bihar, UP, Orissa, MP and Rajasthan call for a special policyfocus.

Primary Schooling

We now estimate the expenditure requirement for providingprimary schooling to all children in the age group of 5-14years in selected States. It is important to note that univer-salizing primary education is not only important for achiev-ing health outcomes, but also has various other positive exter-nalities. In fact, bringing all children to school is an MDG aswell as a Tenth Plan goal by itself. The expenditure requiredfor universalizing primary education therefore should not beseen as a requirement for achieving health outcomes alone.

The capital cost for universalizing elementary educationwas estimated based on the report of the Expert Group onFinancial Requirements for Making Elementary Education aFundamental Right (GOI 1999). The estimates provided in theabove study were modified for the number of schools builtbetween 1993 and 2002 (based on the Sixth and SeventhSchool Education Survey). The revenue expenditure require-ment was calculated based on an estimate of an average expen-diture per child in primary school provided by the NationalCommission on Macroeconomics and Health (NCMH). As ear-


Fig 2

Per capita additional requirement of resourcesfor water supply and sanitation, 2009-10

Fig 3

Per capita additional requirement of resourcesfor providing nutritional supplements, 2009-10


lier, requirement of capital expenditure is distributed over afive-year period between 2005-06 and 2009-10 (Table 7).

An additional amount of Rs 106,008 crore is required to pro-vide all children with primary schooling (Table 8). Of these,the States of Bihar, UP and Gujarat account for the largestshare. The high requirement of Gujarat is on account of a sub-stantial decline in the number of primary schools in the Statereported by the Sixth and the Seventh All India School Edu-cation Surveys.10 Apart from these States, MP and West Ben-

gal call for a substantial increase in expenditure. The five Statesof Bihar, UP, Gujarat, MP and West Bengal account for morethan 90% of the requirement. On the other hand, Tamil Nadu,Karnataka, Kerala and Maharashtra do not require any addi-tional expenditure (Fig. 4). However, even in these States, allchildren are not in school and therefore one might need toidentify the possible reasons for why these children haveremained out of school and spend on appropriate headsrequired to bring these children to school.




2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 0.23 0.24 0.25 0.29 0.27 94 94 94 94 94

Assam 0.53 0.55 0.58 0.66 0.63 96 102 110 128 124


Gujarat 0.28 0.28 0.29 0.33 0.31 95 98 104 122 118

Haryana 0.18 0.19 0.19 0.22 0.21 74 80 82 97 95

Karnataka 0.28 0.29 0.30 0.33 0.31 85 91 26 26 26

Kerala 0.13 0.14 0.14 0.16 0.15 45 50 52 60 58


Maharashtra 0.25 0.26 0.27 0.30 0.28 100 105 111 127 120

Orissa 0.79 0.82 0.85 0.96 0.92 126 134 142 165 162

Punjab 0.13 0.13 0.14 0.15 0.15 53 54 60 66 67

Rajasthan 0.64 0.67 0.69 0.78 0.74 134 144 152 177 173

Tamil Nadu 0.20 0.20 0.21 0.23 0.22 97 97 97 97 97


West Bengal 0.35 0.36 0.37 0.41 0.39 101 107 114 132 130


Table 5

Expenditure requirement for providing nutritional supplements between 2005-06 to 2009-10

Fig 4

Per capita additional requirement of resourcesfor primary schooling, 2009-10Note: Resource requirements for Gujarat are high due to data

problems

Fig 5

Per capita additional requirement of resourcesfor construction of roads, 2009-10

10 This is likely to be due to data problems.




2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 1.49 1.45 1.41 1.37 1.34 416 406 397 386 379

Assam 3.14 3.07 3.00 2.92 2.85 531 527 527 527 527


Gujarat 4.12 3.93 3.74 3.56 3.39 1386 1356 1322 1288 1254

Haryana 1.17 1.13 1.10 1.07 1.03 450 433 429 429 429

Karnataka 1.51 1.45 1.39 1.33 1.28 439 439 439 439 439

Kerala 1.06 1.03 1.00 0.97 0.94 419 419 419 419 419


Maharashtra 1.26 1.21 1.17 1.13 1.08 707 707 707 707 707

Orissa 3.37 3.27 3.18 3.09 2.99 537 526 515 504 491

Punjab 1.23 1.20 1.17 1.14 1.10 494 488 481 474 462

Rajasthan 2.94 2.83 2.73 2.63 2.53 628 610 593 575 555

Tamil Nadu 1.14 1.09 1.04 0.99 0.95 392 392 392 392 392


West Bengal 2.19 2.10 2.01 1.92 1.84 595 581 566 550 535


Table 7

Expenditure requirements for providing primary schooling to all children between 2005-06 to 2009-10

Additional




State (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06) prices

Andhra Pradesh 0.35 0 0 0 0 0 94 0 0 0 0 0 0

Assam 0.11 0.42 0.44 0.47 0.55 0.52 18 78 84 92 110 106 1,379

Bihar (including 0.05 1.44 1.51 1.59 1.83 1.76 7 165 176 189 222 218 11,204

Jharkhand)

Gujarat 0.10 0.18 0.18 0.19 0.23 0.21 34 61 64 70 88 84 1,979

Haryana 0.05 0.13 0.14 0.14 0.17 0.16 20 54 60 62 77 75 736

Karnataka 0.09 0.19 0.2 0.21 0.24 0.22 26 59 65 0 0 0 703

Kerala 0.00 0.13 0.14 0.14 0.16 0.15 1 44 49 51 59 57 910


Maharashtra 0.16 0.09 0.1 0.11 0.14 0.12 63 37 42 48 64 57 2,471

Orissa 0.11 0.68 0.71 0.74 0.85 0.81 17 109 117 125 148 145 2,478

Punjab 0.00 0.13 0.13 0.14 0.15 0.15 0 53 54 60 66 67 775

Rajasthan 0.15 0.49 0.52 0.54 0.63 0.59 31 103 113 121 146 142 3,876

Tamil Nadu 0.32 0 0 0 0 0 97 0 0 0 0 0 0


West Bengal 0.04 0.31 0.32 0.33 0.37 0.35 10 91 97 104 122 120 4,693

Total 56,383

Table 6

Additional requirement of resources for providing nutritional supplements between 2005-06 to 2009-10



Additional

As percentage of GSDP Per capita (in Rs) (2005-06 prices) resources required



State (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 (2001-02) 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06) prices

Andhra Pradesh 1.08 0.41 0.37 0.33 0.29 0.26 291 124 115 105 95 88 4,338

Assam 3.12 0.02 0 0 0 0 527 4 0 0 0 0 11

Bihar (including 2.62 2.98 2.86 2.74 2.63 2.52 290 342 334 326 319 312 18,782

Jharkhand)

Gujarat 1.41 2.71 2.52 2.33 2.15 1.98 466 920 890 856 822 788 23,037

Haryana 1.12 0.05 0.01 0 0 0 429 21 4 0 0 0 54

Karnataka 1.54 0 0 0 0 0 439 0 0 0 0 0 0

Kerala 1.40 0 0 0 0 0 419 0 0 0 0 0 0


Maharashtra 1.82 0 0 0 0 0 707 0 0 0 0 0 0

Orissa 2.25 1.12 1.02 0.93 0.84 0.74 358 179 167 157 146 132 3,006

Punjab 0.63 0.6 0.57 0.54 0.51 0.47 251 243 237 230 223 211 2,956

Rajasthan 2.10 0.84 0.73 0.63 0.53 0.43 452 176 158 141 123 103 4,321

Tamil Nadu 1.29 0 0 0 0 0 392 0 0 0 0 0 0


West Bengal 1.01 1.18 1.09 1 0.91 0.83 250 345 332 316 300 285 13,811

Total 106,008

Table 8

Additional requirement of resources for providing primary schooling between 2005-06 to 2009-10

State As a percentage of GSDP Real per capita (in Rs) (2005-06 prices Additional

2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10 resources required

(2005-10)(Rs in

crore 2005-06) prices

Andhra Pradesh 0.06 0.06 0.07 0.07 0.07 18 19 22 23 24 873

Assam 1.90 2.02 2.12 2.22 2.30 355 385 413 442 469 6,061

Bihar (including Jharkhand) 1.69 1.79 1.88 1.97 2.04 194 209 224 239 252 12,902

Gujarat 0.16 0.17 0.17 0.18 0.18 54 60 62 69 72 1,714

Haryana 0.00 0.00 0.00 0.00 0.00 0 0 0 0 0 0

Karnataka 0.05 0.05 0.05 0.05 0.05 16 16 17 18 18 489

Kerala 0.01 0.01 0.01 0.01 0.02 3 4 4 4 8 77

MP (including Chhattisgarh) 2.96 3.11 3.25 3.38 3.48 517 557 597 637 674 27,419

Maharashtra 0.09 0.09 0.09 0.10 0.10 37 38 39 45 47 2,063

Orissa 3.33 3.53 3.71 3.87 4.02 532 579 626 672 718 12,065

Punjab 0.03 0.03 0.03 0.03 0.03 12 12 13 13 13 166

Rajasthan 0.81 0.85 0.88 0.90 0.92 170 184 197 209 221 6,085

Tamil Nadu 0.07 0.07 0.07 0.08 0.08 22 23 24 29 30 855

UP (including Uttaranchal) 0.82 0.86 0.90 0.93 0.96 125 134 143 152 160 14,513

West Bengal 0.57 0.59 0.61 0.63 0.64 167 179 193 208 220 8,485

Total 93,765

Table 9

Additional requirement of resources for connecting all habitations by road between 2005-06 to 2009-10

Roads

Recognizing the importance of roads, the Prime Minister’sGram Sadak Yojana (PMGSY) was introduced in December2000. This scheme aims to connect all rural habitations byroads. The cost is based on information provided by PMGSY.As in the case of primary schooling, apart from the positiveimpact on health outcomes, expenditure on roads has otherpositive externalities too. This expenditure therefore shouldnot be treated as an expenditure that is exclusively directedtowards health outcomes.

As of March 2004, Bihar, UP, MP and West Bengal had thehighest number of unconnected habitations among the 15States. Table 9 shows that these four States account for approx-imately two-thirds of the total requirement of resources. Ifone includes the requirement for Orissa, the total share ofresources required in these States increases to more than 80%.

For all selected States taken together, a sum of about Rs93,765 crore is required for connecting all habitations by roads.While in absolute terms, the five States of Bihar, UP, MP,West Bengal and Orissa account for the largest share, as a per-centage of GSDP, the States of Orissa, Assam, Bihar and MPrequire significant increases.

Table 10 shows the total additional requirement of resourcesin different sectors from 2005-06 to 2009-10. For health,water, sanitation and nutrition alone, a total of Rs 100,415crore is required over the next five years. If one adds up theexpenditure for primary schooling and roads, the require-ments almost triple. The total combined requirement of allsectors is of the order of Rs 300,188 crore. The requirementfor primary schooling alone is more than the combined require-ment of health, water, sanitation and nutrition. If one focuseson the low-income States of Assam, Bihar, Orissa, MP andUP, which is just around the average of the selected States,the requirements are of the order of Rs 199,730 crore (Table10). Even if one focuses only on health, water, sanitation

and nutrition, the requirements are about Rs 70,000 crore.Figure 6 shows that excluding Gujarat, whose require-

ments are primarily determined by high requirements for pri-mary schooling (mainly due to data problems), MP, Orissa,Bihar, Assam, West Bengal and UP occupy the top positionsin terms of additional per capita requirements in the terminalyear 2009-10. In fact, UP, MP and Bihar account for more than50% of the additional requirement of resources (Table 10).Even if one focuses only on health, water, sanitation and nutri-tion, Bihar, UP and MP occupy the top positions. These Statestherefore require a special policy attention. The requirementof Kerala is primarily determined by its high requirement forsafe drinking water. In contrast, Karnataka, Tamil Nadu, Haryana,Andhra Pradesh and Maharashtra occupy the lowest posi-tions in terms of additional requirements.

It is interesting to note that the additional expenditurerequirements are particularly high in States with low per capitaGSDP. Figure 7 indicates the association of the additional percapita expenditure requirements in the year 2009-10 withcurrent (2002-03) per capita income of States. Low-incomeStates are also the ones with high poverty (the correlation ofper capita income with poverty in States is more than 0.8).Thus, in general, lower the income level of a State, higher isits expenditure requirement for health outcomes. This pointunderlines the importance of expenditures on anti-povertyprogrammes including employment creation and income-generation activities, particularly in States with higher con-centration of poverty.

The estimated additional requirement has to be met eitherwith additional mobilization of resources at the State-levelor through Central transfers. The next section assesses theextent of resources that can be mobilized at the State level.



Fig 7

Per capita additional requirement of resourcesin health and related sectors and per capitaincome of states

Fig 6

Per capita additional requirement of resourcesin health and related sectors, 2009-10Note: The requirements for Gujarat are affected by problems in

data on schooling.

Mobilization of resources by States to meetadditional resource requirements for health andrelated expenditure

To identify the extent to which resources can be mobilizedat the State level to meet health requirements, two possibil-ities have been explored: first, reprioritization and realloca-tion of the existing resources towards health and second, gen-eration of additional revenues.

Reallocation of resources

To examine the extent of reallocation possible, expendituresin States are classified into two groups: committed and dis-cretionary (non-committed). Committed expenditures arethose for which the States are assumed to assign high prior-ity and are committed to spend on. Although all expendi-tures may be considered discretionary in the long term, thedistinction is legitimate in the short and medium term andthe policy-makers are always confronted with this distinction.For the purpose of this analysis, it is assumed that States arecommitted to meet the expenditure on wages and salaries,interest payments and pensions on a priority basis and thatthe resources used up for meeting these expenditures can-not be reallocated. The residual revenue that remains withStates after meeting expenditures on wages and salaries, inter-est payments and pensions is termed as discretionary and isassumed to be available for reallocation towards health.

An analysis of the extent of discretionary resources available

with States calls for an evaluation of the extent of expenditureon pensions, interest payments and salaries that would beincurred in each State during the next five years. Such an assess-ment has been carried out for interest payments and pensionsby the Twelfth Finance Commission (TFC) using various assump-tions on the States’ capability to contain these expenditures.While the projections of interest payments and pensions in theStates by the TFC may seem to be on the lower side relative towhat it would be if the past rate of growth of these expendi-tures continued, the TFC estimate provides a benchmark forthese expenditures, which the States should strive to achieve.Given the objective of this exercise to arrive at the maximumdiscretionary resources available with the States, these bench-mark estimates for interest payments and pensions have beenused in this analysis. The salary expenditure, however, is likelyto be difficult to contain in the immediate future. Althoughthe TFC has suggested that States should attempt to achievethe ratio of salary expenditure to revenue expenditure at 1996-97 levels, these levels may be difficult to achieve in the nextfive years. Salary expenditures in this analysis are thereforeprojected based on their growth rate between 1994-95 and2002-03.11

An examination of the share of committed expenditures intotal revenues over the next five years (Table 11) indicates thatin many cases, a large portion of States’ revenues will be usedup for meeting the committed expenses, leaving very little fordiscretionary expenditure.12States such as Assam, Orissa, Bihar,Punjab and West Bengal are unlikely to have any resources avail-able for discretionary expenditure in the next five years. In five



I II

States Health sector Water andsanitation Nutrition Total(I) Primary schooling Roads Total(II) Total(I+II)

Andhra Pradesh 944 0 0 944 4,338 873 5,211 6,155

Assam 976 1,349 1,379 3,704 11 6,061 6,072 9,776

Bihar (including Jharkhand) 7,150 897 11,204 19,251 18,782 12,902 31,684 50,935

Gujarat 634 0 1,979 2,613 23,037 1,714 24,751 27,364

Haryana 554 0 736 1,290 54 0 54 1,344

Karnataka 10 415 703 1,128 0 489 489 1,617

Kerala 0 3,532 910 4,442 0 77 77 4,519

MP (including Chhattisgarh) 2,983 1,842 7,365 12,190 11,963 27,419 39,382 51,572

Maharashtra 223 2,455 2,471 5,149 0 2,063 2,063 7,212

Orissa 1,210 2,336 2,478 6,024 3,006 12,065 15,071 21,095

Punjab 405 175 775 1,355 2,956 166 3,122 4,477

Rajasthan 990 300 3,876 5,166 4,321 6,085 10,406 15,572

Tamil Nadu 612 0 0 612 0 855 855 1,467

UP (including Uttaranchal) 8,463 1,834 17,814 28,111 23,728 14,513 38,241 66,352

West Bengal 1,286 2,459 4,693 8,438 13,811 8,485 22,296 30,734

Total 26,439 17,593 56,383 100,415 106,008 93,765 199,773 300,188

Table 10

State-wise additional requirement of resources in health and related sectors between 2005-06 to 2009-10(Rs in crore) at 2005-06 prices

11 Data on salary expenditure between 1994-95 and 2002-03 have been taken from the TFC.12 Projections of total revenues in States were based on the past growth rate of revenues between 1993-94 and 2002-03 based on data provided by the TFC

out of the remaining ten States, committed expen-diture will use up more than 80% of their resourcesin the recent future. It is disturbing to note that Stateswhich have a high requirement of health expendi-ture are particularly stressed in terms of availabilityof resources for reallocation towards health.

Whatever discretionary resources are available, thisanalysis assumes that at the most 5% of resourcesavailable for discretionary expenditures in the years2005-06 to 2009-10 can be reprioritized towardshealth. This would mean that 5% of the discretionaryresources would have to be extracted from non-healthsectors and reallocated towards health. Diversion ofresources from non-health to health sectors how-ever would require a detailed cost-benefit analysis ofexpenditure on various sectors and needs to be care-fully worked out.13 The additional resources that canbe reallocated towards health, family welfare, watersupply and sanitation through 5% reallocation of dis-cretionary expenditures are shown in Table 12.

It is evident that the extent of additional resourcesthat can be directed towards health, family welfare,water supply, sanitation and nutrition through real-location of discretionary resources are limited at themoment. This, however, does not mean that overtime, it is not possible to take appropriate measuresto reprioritize expenditure in favour of these sec-tors. The TFC has pointed out that the debt situa-tion is particularly bad in Bihar, Himachal Pradesh,Kerala, Orissa, Punjab, Rajasthan, UP and West Ben-gal, which has led to high interest payments in theseStates. Debt rescheduling and a reduction in inter-est rates would provide some relief to the State gov-ernments. The incentive-based debt write-off toowill help the State governments in exercising fiscalprudence and reducing the revenue deficits. Effectsof such measures, however, are likely to fructify onlyin the long run.

Generation of additional revenue

States can generate additional revenue either throughtax or non-tax sources. In this section, the potentialfor generating additional tax revenue is examined.

The issue of tax potential has attracted the atten-tion of researchers in the past. At one level, thereare some scholars such as Colin Clarke who preferredto make judgements about tax revenue thatshould/could be mobilized and he suggested thatthe ratio of 25% of GDP as the norm. In contrast,e.g. Musgrave has suggested that absolute taxablecapacity is a myth and specifying this involves mak-ing arbitrary judgements. Therefore, the scholarsshould be concerned with ‘optimal budgets’ whichmeant that each country should determine deci-



Table 11

Committed expenditure as percentage of the total revenuesin States between 2005-06 and 2009-10

State 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 70.38 68.50 66.69 64.95 63.27

Assam 105.58 108.01 110.54 113.17 115.90

Bihar (including Jharkand) 101.69 101.25 100.86 100.49 100.16

Gujarat 46.41 45.29 44.21 43.17 42.15

Haryana 79.28 79.75 80.11 80.43 80.72

Karnataka 71.17 70.87 70.59 70.32 70.06

Kerala 96.36 95.63 94.92 94.23 93.56

Madhya Pradesh 76.37 77.75 79.22 80.78 82.44(including Chhattisgarh)

Maharashtra 92.80 94.08 95.44 96.87 98.38

Orissa 105.26 104.97 104.76 104.62 104.54

Punjab 117.02 117.60 118.33 119.21 120.25

Rajasthan 95.79 95.90 96.09 96.36 96.69

Tamil Nadu 83.15 82.93 82.72 82.53 82.34

Uttar Pradesh 86.64 85.41 84.25 83.13 82.07

(including Uttaranchal)

West Bengal 138.88 139.17 139.60 140.18 140.91

Table 12

State-wise additional resources that can be directed towardshealth, family welfare, water supply, sanitation and nutritionby reallocating 5% of discretionary resources

Percentage of GSDP

State 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 0.20 0.22 0.23 0.25 0.27

Assam 0 0 0 0 0

Bihar (including Jharkand) 0 0 0 0 0

Gujarat 0.37 0.37 0.38 0.38 0.38

Haryana 0.13 0.13 0.13 0.13 0.13

Karnataka 0.18 0.18 0.18 0.18 0.18

Kerala 0.02 0.03 0.03 0.04 0.04

Madhya Pradesh 0.20 0.18 0.17 0.16 0.14(including Chhattisgarh)

Maharashtra 0.04 0.03 0.02 0.02 0.01

Orissa 0 0 0 0 0

Punjab 0 0 0 0 0

Rajasthan 0.03 0.03 0.03 0.02 0.02

Tamil Nadu 0.12 0.12 0.11 0.11 0.11

Uttar Pradesh 0.10 0.11 0.12 0.12 0.13(including Uttaranchal)

West Bengal 0 0 0 0 0

Note: Projections of GSDP have been made using the prescriptive growth rates suggested by the Twelfth Finance Commission

13 The 5% of discretionary resources that can be reallocated towards health is over and above the discretionary resources already allocated towards health.

sions to raise revenues depending on the degree of marketfailure and the extent of state intervention envisaged. Hereagain, Musgrave suggests the need to make a crucial differ-ence between public provision and public production of serv-ices (Musgrave 1973).

While absolute taxable capacity is difficult to conceptual-ize and impossible to measure in any objective sense, Mus-grave (1959) emphasized the relevance and importance of rel-ative taxable capacity. This can be estimated by comparingdifferent countries or sub-national units in a federation. Thus,two countries or sub-national units in a country which aresimilar in economic circumstances should be able to gener-ate equal amount of revenue and the differences could thenbe attributed to the differences in their preference patterns.Thus taxable capacity of different units in a federation canbe estimated by estimating the ‘average’ behaviour of theStates in raising revenues after controlling for economic fac-tors that can cause differences in taxable capacity.

Thus, taxable capacity of a country/State is defined as therevenue it can generate if it levied an average effective rateof tax on its base (Bahl 1971, 1972). Alternatively, one canalso specify and estimate taxable capacity with respect to thehighest effective tax rate or any other exogenously specifiedeffective tax rate. Given that the ability to raise tax revenuesmay be more than proportionately higher in a more devel-oped country/State, the effective tax rate will have to be deter-mined with respect to the development of a particular Stateand a simple average would not serve the purpose. This, there-fore, has to be estimated using statistical techniques to takeaccount of the non-linear relationship between the level ofdevelopment and taxable capacity.

Variations (variance) in tax revenues between differentStates (σt2) may be due to variations in their capacity to raiserevenues (σtc2) or variations in the efforts put in by them (σte2).

σt2 = σtc2 + σte2 ..............................(1)

If one were able to identify all the factors that contributedto taxable capacity variation, it would be possible to esti-mate it. Alternatively, if one controlled for variations in taxeffort among States, it would be possible to derive their tax-able capacity.

There are three alternative methods employed to estimatetaxable capacities of the States. These are: (i) aggregate regres-sion (AR) approach; (ii) representative tax system (RTS) approach;(iii) tax frontier (TF) approach. Appropriateness of a methodto be employed to estimate taxable capacity depends on theavailability of disaggregated data, the extent to which therelationship between taxable capacity and the variables rep-resenting it are perceived to be non-linear, and the degree ofinterdependence of the tax base with tax rate. It is useful todiscuss the three methods used in some detail.

Aggregate regression approach

In the AR method, the actual tax revenue (termed as taxperformance) is regressed on all factors representing varia-

tions in taxable capacity. Thus, tax-GSDP ratio or per capitatax revenue of the States are regressed on taxable capacityvariables. Taxable capacity variables essentially represent thevariables representing the tax bases or their proxies. Thiscan be done in a cross-section model or, in order to get greaterdegrees of freedom, by combining cross-sections in a co-variance model. The estimated parameters of the equationprovide behavioural relationship between tax-GSDP ratio(or per capita tax revenue) and various capacity factors esti-mated in the equation. If it is hypothesized that the taxablecapacity is a non-linear function of taxable capacity vari-ables, it is possible to make the hypothesized functional spec-ification in the model.

Once the behavioural relationship is estimated, it is easy toestimate the taxable capacity by substituting the actual val-ues of the taxable capacity variables in the equation. The esti-mated coefficient for each capacity variable gives the ‘aver-age’ behavioural relationship and substituting the actualcapacity variables provides the estimate of taxable capacityof each State. The estimation of tax capacity above assumesthat the coefficients of the respective bases (which indicatethe average effective rate at which the bases are used acrossStates) represent the normative rates at which States oughtto raise taxes. The residual term, which is the difference betweenthe actual tax revenue and the estimated tax capacity, is thenused to indicate the tax effort of the respective States.

There are a number of shortcomings in this approach. First,it may not be able to include exhaustible list of taxable capac-ity factors and, therefore, the unexplained variation, which isattributed to tax effort may actually be due to omitted vari-ables. Second, even if it is assumed that all taxable capacityfactors are included, the residual variation is the combina-tion of variations in tax effort and the random error term andto attribute it entirely to tax effort may not be appropriate.Finally, some variables may impact on both taxable capacityand tax effort and it may not always be possible to isolatethe effect of capacity from effort variables. Thus, higher percapita GSDP or urbanization in State may also represent bet-ter organization of the economy and ensure greater effort.

Later studies have tried to improve upon this implicit assump-tion by separating out the effect of tax effort of individualStates from the random error element by combining cross-section observations over time and introducing State-specificfixed effects in the regression specification using panel data(First Report of the Ninth Finance Commission 1988, Con-doo et al. 2000). However, it is important to note that theState-specific (fixed) effect may also be due to a variety ofother factors and not entirely due to tax effort. Any omittedvariable that is specific to the State and changes slowly (ordoes not) over time will also be captured by the State-spe-cific fixed effect. Hence, what portion of the State-specificfixed effect can be attributed exclusively to tax effort may bean arguable issue.

Representative tax system approach

The representative tax system (RTS) approach to measuring



taxable capacity was first employed by the Advisory Com-mission on Intergovernmental Relations (ACIR) in the UnitedStates. In this approach, taxable capacity is estimated for eachof the taxes levied by the States. The taxable capacity of eachtax is estimated by applying the ‘representative’ rate to thetax base of the State. The representative rate is the averageeffective rate of each of the taxes levied in States. This is esti-mated by dividing all States’ revenue collection from the taxwith the sum of the value of the tax base over all the States.As in the AR approach, this assumes that the average effec-tive tax rate of the States is the normative rate at which theStates ought to levy. The taxable capacity of different taxesis summed to arrive at the aggregate taxable capacity of aState. The ratio of actual tax collection to the tax capacity(as estimated above) then provides an indicator of the rela-tive tax efforts of different States.

The major shortcoming of this approach is that it assumesthat individual tax bases are independent of each other (Sec-ond Report of the Ninth Finance Commission). Second, theapproach assumes that tax bases and rates are independentof each other and the average effective rates adequatelycapture the non-linear relationship between the tax bases andrates (Sen and Tulasidhar 1988). Besides, the data require-ment for applying this approach is large and in most casesdisaggregated data on various tax bases or even their closeproxies are simply not available. The method is also suitableonly when there is significant homogeneity in the tax struc-tures (Chelliah and Sinha 1982).

Tax frontier approach

In the tax frontier (TF) approach, the taxable capacity of Statesis conceived as a production frontier and the distance from thefrontier is considered as the tax effort. Thus, technical efficiencyis interpreted as the tax efficiency of States or the tax effort.The main difference of the TF approach with the AR and theRTS approach is in the way in which the normative rate forestimating tax capacity is indexed. While in the TF approachthe normative rate is equated with the highest rate, it is the‘average’ rate that is used as the norm in the AR and RTSapproaches. The TF approach has however been criticized onthe grounds that the formulation of tax capacity as a produc-tion frontier is ill-conceived. It is argued that unlike firms, whoseobjective is to maximize profits, the primary objective of Statesis not to maximize tax revenue (Coondoo et. al. 2000).

Thus, all the existing methods to measuring taxable capac-ity and effort have shortcomings. In addition, there is a seri-ous problem in the States’ tax system in India which preventsthe objective assessment of the taxable capacities of the States.It must be noted that States’ sales taxes, which contribute toabout two-thirds of own tax revenues, are not destinationbased. The system of cascading sales taxes coupled with thelevy of inter-State sales tax results in significant inter-Statetax exportation (Rao and Singh 2005). When there is full for-

ward shifting of the tax, inter-State tax exportation is fromthe richer to poorer States. Thus, tax revenues collected byState Governments include collections from non-residents.

In this exercise, we have used the AR approach to measuretaxable capacity of the States with some modifications. As theemphasis is on generating additional revenue to create fiscalspace for financing incremental expenditure in the health sec-tor, the study first tries to project tax revenues at average effortand then tries to measure the revenue gains through increasein the effort itself.

As mentioned earlier, the relative taxable capacity usingthe regression approach is estimated by regressing the vari-ables representing the tax bases and their proxies on the tax-GSDP ratio of the States in cross-section regression. Apartfrom tax bases, it also requires the identification of otherfactors that facilitate revenue collections, particularly thoserepresenting organization of the economy. Earlier studies haveused various indicators to estimate tax performance. The mostcommon indicator that has been used in almost all studieson the issue is the State income (Nambiar and Rao 1972, Sen1983, Oommen 1987, Finance Commission 1988, Coondooet al. 2000). Along with the State income, Oommen (1987)also used its components such as the proportion of incomefrom agriculture, proportion of income from manufacturingand proportion of income from hotels, trade and commerceto explain variation in tax performance. However, due to theinclusion of individual components of State income, the vari-able for aggregate State income was insignificant (possiblydue to multicollinearity problems) and was later dropped.Oommen (1987) argued that income from hotels, trade andcommerce would affect the sales tax revenue while incomefrom manufacturing would affect both the sales and excisetax revenue. Nambiar and Rao (1972), Sen (1983) and FinanceCommission (1988) also used non-agricultural income andnon-primary sectoral SDP in addition to State income toexplain tax performance. However, these variables are com-ponents of State income causing multicollinearity problems.14

Sen (1983) also used the percentage of population belowpoverty line. Also, Coondoo et. al. (2000) used per capita bankdeposits and per capita power consumption of States in addi-tion to State income. Apart from these variables, Nambiar andRao (1972) and Sen (1983) used the degree of urbanization,Finance Commission (1988) used inequality of consumptionexpenditure (indicated by Lorenz ratio) and Coondoo et. al.(2000) used the proportion of SC and ST population to explaintax performance across States.

Based on the above studies, our model employs the fourcommonly used determinants of taxable capacity namely: percapita State Domestic Product (SDP), share of manufactur-ing SDP, headcount measure of poverty and urbanization. Percapita SDP has been used in almost every study on taxablecapacity. Given the level of per capita SDP, the share of non-primary sector SDP or manufacturing SDP has been used tocapture the effect of industrialization. The inclusion of poverty



14 Finance Commission (1988) included both State income and non-primary sectoral SDP in the regression equation. Possibly due to the multicollinearity, they found that while the coefficient of State income was significant, the coefficient of non-primary sectoral SDP was insignificant.

has been primarily to measure income distribution. Urban-ization has been used to denote the organization of the econ-omy and the extent of monetized transactions that could betaxed. While these four indicators were used as explanatoryvariables in the model, either the tax-GSDP ratio or per capitatax has been employed as the dependent variable. Given thatthe objective of this exercise is to make future projections oftax revenue, per capita tax revenue (which gives a better fitof the model) is used as the dependent variable.15

Of the various capacity variables, after the 1990s, data onpoverty ratio is available only for 1993-94 and 1999-2000.Further, regression estimates for these years showed thatpoverty was highly correlated with GSDP and the share ofmanufacturing sector GSDP with total GSDP. The modelwith only GSDP and urbanization had the highest explana-tory power. Therefore, a pooled model using data for the period1995-96 to 2002-03 was estimated using State-specific fixedeffects. While GSDP figures were available from the TFC (basedon CSO), actual figures of urbanization were not readily avail-able. However, projected urbanization estimates of the Reg-istrar General (Census of India 1991) were employed to esti-mate the model.16

The specification of the panel data model including thecross-section observations for the years 1995-96 to 2002-03 was as follows:

Per capita tax revenue = αι + β1 (per capita GSDP)it+ β2 (urbanization)it + uit

where α1 = State-specific effect for the ith State

As in the OLS model, results in the pooled model includingState-specific fixed effects indicated that both per capita GSDPand urbanization had a significant effect on per capita taxrevenue (Model 1 in Table 13). The above regression specifi-cation was further modified keeping in view the first reportof the Ninth Finance Commission, which highlighted thatthe slope coefficients of the tax function were homoge-neous within similar income groups but not across groups.States were classified into relatively high and low incomegroups and an interaction term of per capita GSDP and thedummy variable distinguishing the two groups was includedin the regression specification to account for any differencesof slopes between the two groups. The dummy variable assumedthe value of 1 if a State belonged to the lower income groupand zero otherwise. Results indicated that the effect of percapita GSDP on tax revenue was higher for States with rela-tively higher income (Model 2 in Table 13). To take into accountthe non-linearity in the relationship, the model was re-esti-mated in the log linear form. The model in the log form was



Table 13

Regression results using panel data from 1995-96 to 2002-03

Model 1 Model 2 Model 3

Per capita GSDP 0.081(20.096)** .087(22.537)** 1.109(18.921)**

Interaction (per capita GSDP* group_dummy) -0.037(-4.893)**

Urbanization 26.948(2.328)* 30.053(2.866)** 0.945(3.696)**

West Bengal -1326.502(-4.415)** -954.297(-3.382)** -7.323(-10.215)**

Uttar Pradesh (including Uttaranchal) -885.430(-3.687)** -648.983(-2.917)** -6.906(-10.348)**

Tamil Nadu -876.039(-2.284)* -1120.289(-3.197)** -6.937(-9.040)**

Rajasthan -979.688(-3.696)** -642.722(-2.577)* -6.937(-10.022)**

Punjab -1241.804(-3.871)** -1505.611(-5.103)** -7.115(-9.602)**

Orissa -765.172(-4.413)** -506.074(-3.058)** -6.692(-10.948)**

Maharashtra -1350.57(-3.082)** -1641.411(-4.096)** -7.283(-9.145)**

Madhya Pradesh (including Chhattisgarh) -999.614(-3.548)** -709.784(-2.713)** -7.000(--9.992)**

Kerala -798.430(-2.641)** -1021.920(-3.686)** -6.789(-9.385)**

Karnataka -892.642(-2.516)* -1117.584(-3.448)** -6.902(-9.188)**

Haryana -907.476(-3.320)** -1146.720(-4.551)** -6.859(-9.641)**

Gujarat -1136.767(-2.915)** -1391.781(-3.904)** -7.107(-9.209)**

Bihar (including Jharkhand) -681.52(-4.206)** -514.970(-3.426)** -6.727(-11.414)**

Assam -744.811(-5.888)** -457.366(-3.556)** -6.569(-11.671)**

Andhra Pradesh -1013.684(-3.193)** -1215.839(-4.192)** -6.990(-9.595)**

F-test for no fixed effects 29.279** 13.169** 59.398**

**Significant at 1% *Significant at 5%

15 The source of per capita SDP was CSO, poverty figures from Sen and Himanshu (2004) and urbanization figures from NSSO.16 Analysis of the projected values of urbanization compiled by the Registrar General and the actual census figures of 2001 show that the correlation between the two was about 0.97 and the

rank correlation is 1.

used for projecting future tax revenues, specifically for theperiod 2005-06 to 2009-10 (Model 3 in Table 13).

The projection of taxable capacity from 2005-06 to 2009-10 was made by substituting the actual values of taxablecapacity variables in the equation. For the same period, pro-jections of own tax revenues were also made based on thepast trend from 1993-94 to 2002-03. The higher of the twoestimates was used to indicate the likely generation of owntaxes across States between 2005-06 and 2009-10. It maybe noted that at the past rate, four States-Gujarat, Kerala,Karnataka and West Bengal will fall short of the projectionsmade through the regression model and will have to gener-ate additional taxes to reach the levels predicted by the model.

A comparison of these projections with the TFC projectionsshows that, in general, the latter are on the higher side (Table14). In particular, this is true for States for which the require-ment of resources for health expenditure is particularly high.Given our objective to estimate the maximum own tax rev-enues that the States can possibly generate, one may behopeful of achieving the higher of the two projections, i.e.the TFC projections of own taxes. We therefore use the TFCprojections of own tax revenue to calculate the additional owntax revenues that can be generated in the States from 2005-06 to 2009-10 (Table 15). It is important to note that States,which will be unable to meet the committed expenditures inthe projected period, will have to generate additional revenuesto meet their committed liabilities in addition to their rev-enue generation for health expenditures.

The additional own tax revenues generated in the Stateswill be distributed across different sectors and therefore can-not be entirely allocated towards health and health-relatedsectors. The National Health Policy 2002 has set a goal of

spending 7% of State budgets to the health sector. Based onthis, we assume that 7% of the additional own tax revenuesgenerated can be directed towards health. Another 3% ofthis additional revenue is assumed to be directed towardsprimary schooling. The resources out of additional own taxrevenues that can be allocated towards health and related sec-tors and the corresponding deficits at 2005-06 prices areshown in Table 16 and Table 17. As the requirement ofresources for roads deals with the requirements of PMGSY,which is a Centrally Sponsored scheme, we do not assume anyadditional allocation towards roads at the State level. Fig-ures indicate that a total amount of Rs 38,758 crore can beadditionally allocated between 2005-06 and 2009-10 towardshealth and related sectors. This is about 13% of total require-ment of resources in the above period. Even if one concen-trates on the requirement of health, water, sanitation andnutrition alone, the total amount that can be additionallyallocated at the State level is about Rs 31,557 crore. Giventhe constraints on resources, if one wishes to focus only onthese sectors in the six States whose per capita additionalrequirements were relatively high, viz. Bihar, Assam, Orissa,MP, West Bengal and UP, the deficit at the State level is aroundRs 66,812 crore (Table 17).

The States of Bihar, Assam, Orissa, UP and MP not onlyhave a high requirement of health expenditures, but also havea relatively low capability of generating additional revenuesand therefore have a high deficit. Possibly recognizing this, theTFC has provided additional grants for health expendituresspecifically to the States of Assam, Bihar, Jharkhand, MP, Orissa,UP and Uttaranchal to equalize the health expenditures withinthe special and non-special category States. The TFC has alsoallocated additional grants for equalizing education expen-



Table 14

Comparison of own tax revenue projections (as percentage of the GSDP)

Present study Twelfth Finance Commission

State 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 8.0 8.4 8.8 9.2 9.6 8.0 8.1 8.3 8.5 8.6

Assam 5.4 5.6 5.7 5.9 6.0 5.9 6.0 6.1 6.2 6.4

Bihar (including Jharkhand) 5.1 5.2 5.3 5.4 5.5 6.3 6.4 6.5 6.7 6.8

Gujarat 7.6 7.5 7.4 7.3 7.2 7.8 8.1 8.3 8.6 8.9

Haryana 9.4 9.7 9.9 10.2 10.5 9.4 9.6 9.9 10.2 10.4

Karnataka 9.3 9.4 9.5 9.6 9.8 9.9 10.3 10.6 11.0 11.4

Kerala 10.8 11.3 11.8 12.3 12.9 9.5 9.8 10.1 10.4 10.7

MP (including Chhattisgarh) 8.0 8.1 8.2 8.3 8.4 8.1 8.2 8.4 8.6 8.8

Maharashtra 8.2 8.2 8.3 8.3 8.3 8.3 8.6 8.8 9.0 9.3

Orissa 7.1 7.3 7.5 7.7 7.9 7.2 7.4 7.5 7.6 7.8

Punjab 7.6 7.7 7.7 7.7 7.7 8.0 8.3 8.5 8.8 9.1

Rajasthan 7.4 7.4 7.5 7.6 7.6 7.6 7.8 8.0 8.2 8.3

Tamil Nadu 9.8 9.8 9.8 9.7 9.7 10.1 10.3 10.6 10.8 11.1

UP (including Uttaranchal) 6.9 7.0 7.2 7.3 7.4 7.1 7.3 7.5 7.6 7.8

West Bengal 4.8 4.9 5.0 5.1 5.1 5.8 6.0 6.2 6.5 6.8


ditures to the States of Assam, Bihar, Jharkhand, MP, Orissa,Rajasthan, UP and West Bengal. The total grant under thesetwo heads at 2005-06 prices is about Rs 13,927 crore. TheState-wise grants and the deficit even after the TFC grants forhealth and education are shown in Table 18.

It must be noted that the release of additional grants fromthe TFC has been tied to various conditions. In general, therelease of grants for health and education has been made con-

ditional on States’ meeting the Commission’s projections fornon-plan revenue expenditure (NPRE) on health and educa-tion. Given that these projections of NPRE is higher than whatwould be achieved if the past growth rate of NPRE on thesesectors continued, fiscally stressed States may find it diffi-cult to actually access these grants.

Even if one assumes that the concerned States will be ableto access the TFC grants, there is still a substantial amount



Table 15

Additional own tax revenue projections

As percentage of GSDP At current prices (Rs in crore)

State 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 0.70 0.80 1.00 1.20 1.30 1712 2172 3013 4014 4,827

Assam 1.39 1.49 1.59 1.69 1.89 738 878 1040 1227 1,523

Bihar (including Jharkhand) 1.83 1.93 2.03 2.23 2.33 2330 2728 3185 3884 4,504

Gujarat 0.42 0.72 0.92 1.22 1.52 749 1448 2087 3122 4,388

Haryana 1.01 1.21 1.51 1.81 2.01 910 1221 1706 2291 2,849

Karnataka 1.39 1.79 2.09 2.49 2.89 2438 3542 4665 6269 8,207

Kerala 1.57 1.87 2.17 2.47 2.77 1836 2427 3126 3949 4,916

MP (including Chhattisgarh) 2.37 2.47 2.67 2.87 3.07 3664 4266 5152 6188 7,396

Maharashtra 0.58 0.88 1.08 1.28 1.58 2312 3929 5401 7169 9,911

Orissa 1.62 1.82 1.92 2.02 2.22 979 1221 1430 1670 2,037

Punjab 1.35 1.65 1.85 2.15 2.45 1383 1876 2335 3012 3,809

Rajasthan 1.37 1.57 1.77 1.97 2.07 1710 2211 2811 3529 4,183

Tamil Nadu 1.13 1.33 1.63 1.83 2.13 2333 3098 4283 5424 7,121

UP (including Uttaranchal) 1.62 1.82 2.02 2.12 2.32 4780 6011 7467 8772 10,744

West Bengal 1.54 1.74 1.94 2.24 2.54 3845 4900 6163 8027 10,267


Table 16

Additional revenues that can be directed towards health and related sectors (Rs in crore) at current prices

Total (through 5% reallocation and directing part of

From additional tax revenues the additional own tax revenues)

State 2005-06 2006-07 2007-08 2008-09 2009-10 2005-06 2006-07 2007-08 2008-09 2009-10

Andhra Pradesh 171.2 217.2 301.3 401.4 482.7 660 814 994 1238 1485

Assam 73.8 87.8 104 122.7 152.3 74 88 104 123 152

Bihar (including Jharkhand) 233 272.8 318.5 388.4 450.4 233 273 319 388 450

Gujarat 74.9 144.8 208.7 312.2 438.8 735 889 1071 1285 1536

Haryana 91 122.1 170.6 229.1 284.9 208 253 318 394 469

Karnataka 243.8 354.2 466.5 626.9 820.7 560 710 868 1080 1332

Kerala 183.6 242.7 312.6 394.9 491.6 207 282 356 459 563


Maharashtra 231.2 392.9 540.1 716.9 991.1 391 527 640 829 1054

Orissa 97.9 122.1 143 167 203.7 98 122 143 167 204

Punjab 138.3 187.6 233.5 301.2 380.9 138 188 234 301 381

Rajasthan 171 221.1 281.1 352.9 418.3 208 263 329 389 459

Tamil Nadu 233.3 309.8 428.3 542.4 712.1 481 589 717 868 1080

UP (including Uttaranchal) 478 601.1 746.7 877.2 1074.4 773 964 1190 1374 1676

West Bengal 384.5 490 616.3 802.7 1026.7 385 490 616 803 1027



Table 17

State-wise deficit of resources in health and related sectors, 2005-06 to 2009-10 (Rs in crore) at 2005-06 prices

State Total Health*

Requirement Additional allocation Deficit Requirement Additional allocation Deficit

Andhra Pradesh 6,155 4,433 1,722 944 4,033 0

Assam 9,776 463 9,313 3,704 324 3,380

Bihar (including Jharkhand) 50,935 1,427 49,508 19,251 999 18,252

Gujarat 27,364 4,721 22,643 2,613 4,426 0

Haryana 1,344 1,401 0 1,290 1,174 116

Karnataka 1,617 3,879 0 1,128 3,243 0

Kerala 4,519 1,585 2,934 4,442 1,171 3,271

MP (including Chhattisgarh) 51,572 3,710 47,862 12,190 3,024 9,166

Maharashtra 7,212 2,923 4,289 5,149 2,199 2,950

Orissa 21,095 629 20,466 6,024 440 5,584

Punjab 4,477 1,054 3,423 1,355 738 617

Rajasthan 15,572 1,409 14,163 5,166 1,040 4,126

Tamil Nadu 1,467 3,191 0 612 2,626 0

UP (including Uttaranchal) 66,352 5,114 61,238 28,111 4,146 23,965

West Bengal 30,734 2,819 27,915 8,438 1,973 6,465

Total 300,188 38,758 261,430 100,417 31,557 77,892

*Includes, health, water, sanitation and nutrition

Table 18

Additional (conditional equalization) grants provided to individual States for meeting health andeducation expenditures by the Twelfth Finance Commission (TFC) and the deficit after using the TFC grant(Rs in crore) 2005-06 prices

State Deficit before TFC Deficit before Health Education Total Deficit after Deficit after

transfer for health* TFC transfer TFC transfer TFC transfer

(Total) for health (Total)

Andhra Pradesh 0 1,722 0 0 0 0 1,722

Assam 3,380 9,313 829 960 1,789 2,551 7,524

Bihar (including Jharkhand) 18,252 49,508 1881 2891 4,772 16,371 44,736

Gujarat 0 22,643 0 0 0 0 22,643

Haryana 116 0 0 0 0 116 0

Karnataka 0 0 0 0 0 0 0

Kerala 3,271 2,934 0 0 0 3,271 2,934

MP (including Chhattisgarh) 9,166 47,862 169 398 567 8,997 47,295

Maharashtra 2,950 4,289 0 0 0 2,950 4,289

Orissa 5,584 20,466 163 280 443 5,421 20,023

Punjab 617 3,423 0 0 0 617 3423

Rajasthan 4,126 14,163 0 88 88 4,126 14,075

Tamil Nadu 0 0 0 0 0 0 0

UP (including Uttaranchal) 23,965 61,238 2068 3861 5,928 21,897 55,310

West Bengal 6,465 27,915 0 340 340 6,465 27,575

Total 77,892 261,430 5110 8818 13,927 72,782 247,503

*Includes, health water, sanitation and nutrition

of deficit in the requirement of resources for meeting healthgoals (Table 18). These additional resources have to be metby other Central transfers. The next section discusses the natureof Central transfers that would be required and the norms thatshould be followed for Central transfers to States for meet-ing the resource gap.

Central transfers to States

The above analysis shows that State Governments will haveto augment considerable resources through better tax effortand release more resources for the social sectors throughbetter fiscal management and reprioritization. Even so, thiscan meet the requirements only partially and significant addi-tional resources will have to be committed to health and alliedsectors. Thus, achievement of the MDGs as well as the TenthPlan Goals in the health sector will crucially depend on addi-tional resources made available through the transfer systemand better targeting of these transfers.

Central transfers to States fall into three categories. The firstis the statutory transfers comprising tax devolution and grants,which are given on the basis of the recommendations of theFinance Commission. The second is the plan assistance givenby the Planning Commission on the basis of the consensusformula approved by the National Development Council (NDC).The third source is the transfer given by various Central min-istries for the Central sector and Centrally sponsored schemes.

Analytically, transfers can be given for general purposes, tooffset the general fiscal disabilities of the States, or for spe-cific purposes. While the former is given to enable everyState to provide a given level of public services at a given taxprice, the latter is given to ensure minimum standards of spec-ified services. The latter are given as these services are con-sidered to be meritorious and, therefore, everyone is entitledto a minimum level of their consumption. These transfers aretargeted to spend on specified purposes/sectors and they haveto be targeted to those States with shortfalls.

The statutory and formula-based transfers of the PlanningCommission are essentially general-purpose transfers. Theseare meant to offset the general fiscal disabilities of States aris-ing from the low revenue-raising capacity or higher unit costof providing public services. These are formula-based trans-fers meant for general augmentation of resources and can-not be pre-empted for spending on health and allied sectors.The important exception to this is the upgradation grantsfor health and education recommended by the TFC. As dis-cussed in the previous section, while these are useful supple-ments, they would be inadequate to meet the requirementsfor achieving the set goals.

Besides being general-purpose transfers, it is doubtful whetherthe Centre would be able to augment them much to bridgethe gap in States’ resources.for the health sector for at leasttwo reasons. First, given the compulsions of restoring fiscalbalance at the Central level itself and given further the com-pulsions of meeting the fiscal targets set by the Fiscal Respon-sibility and Budget Management Act, it would be difficultfor the Centre to make additional resources available for

general purpose spending. Second, the TFC has already maderecommendations with marginally increased transfers fromthe last Commission and these recommendations will bevalid during 2005-06 to 2009-10. Under this no additionalresources would be available.

This would imply that any increase in the transfers willhave to be for specific purposes under the Central sector andCentrally sponsored schemes. At present, a large number ofschemes are being administered by various ministries result-ing in the thin spread of resources, multiplication of bureau-cracy and often, poor targeting. To meet the shortfalls in thehealth sector, it is necessary to significantly augment spe-cific transfers to enhance the resources for health spending.In addition, it would be necessary to consolidate variousschemes under the broad heads of basic education, health-care, maternal and child health, nutrition, water supply, san-itation and rural roads. This will target the transfers to aug-ment spending in desired sectors.

Equally important is proper designing of the transfer sys-tem. It is useful to have purpose-specific grants. To have thesystem with right incentives and to ensure that the additionalresources provided by the Centre are used for incrementalspending and not merely to substitute States’ own spending,it is useful to mandate the States to make matching contri-butions. Of course, matching requirement places poorer andresource constrained States at a disadvantage, but the match-ing requirement itself can be varied with the level of percapita incomes in the States (Feldstein 1975). Thus, high-income States may be required to contribute, 50%, middle-income States 30% and low-income States a mere 10%. Sucha design of the transfer system for specific purposes will pre-serve the incentives, impart a sense of ownership and partic-ipation by the States and help to augment resources for thedesired sectors.

Conclusion

This study analyses the resource requirements for meeting cer-tain targets of the health sector and analyses the gap betweenthe required and the actual expenditure in 15 major States inIndia. It highlights the extent of resources that can be mobi-lized at the State level to meet the resource gap and estimatesthe residual gap that has to be met by Central transfers.

Estimates indicate that the additional expenditure requiredfor meeting the specific norms/targets in health and relatedsectors (which include safe drinking water, sanitation, nutri-tion, primary schooling and roads) is about Rs 300,168 crore.One can argue that the expenditure on primary schooling androads has various other positive externalities and are not exclu-sively incurred towards health. Although, not exclusivelytowards health, these expenditures have a significant bear-ing towards health outcomes and cannot be ignored if onehas to reach the health targets. Even if one focuses only onmedical, public health, safe drinking water and sanitation,which are directly incurred towards health outcomes, the totalrequirement is about Rs 100,415 crore. In general, there is adeficit of about Rs 247,503 crore at the State level. The require-



ments are particularly high in States with low per capita incomeand high poverty levels. These are also the States where theproductivity of expenditure and delivery of services are par-ticularly poor. If one is constrained on the resource front, theseaspects have to be specifically focused upon. Improving theproductivity of expenditure and delivery systems in these low-income States can actually reduce the resource requirement.

However, it would be too optimistic to expect any appre-ciable improvement in the productivity of healthcare expen-diture in the near future. In particular, it may be noted thatthe level of productivity and delivery systems are often affectedby a number of social, cultural and historical factors whichchange slowly over time. These improvements therefore can-not act as a substitute for increased allocation of funds inthe short run. One therefore has to find resources to makeincreased allocation to healthcare expenditure in the next fiveto ten years.

Increased allocation to healthcare expenditure can be doneby (i) raising more resources; (ii) reprioritizing the expendi-ture allocation in favour of medical and public health, watersupply and sanitation; and (iii) targeting the expenditures toStates and regions where the health indicators are poor andhave considerable catching up to do.

The possibility of raising additional resources has been dis-cussed at length. We have compared our estimates of tax-able capacity with the estimates made by the TFC. The abil-ity of the States to contribute additional resources to thehealth sector critically depends on their effort in raising rev-enues close to their capacity. In this context, two points areimportant. First, our estimates show that there is a possibil-ity of raising revenues, particularly in some States where theactual revenues raised are below their capacity. Second, thecapacity estimation itself is relative to other States and notin the absolute sense. In other words, if there is a generalundertaxation by all States, it does not show up in the esti-mates. For example, although the States have been assignedthe power to levy tax on agricultural income and wealth,they have mainly for political reasons desisted from this andeven the land revenue collections have declined over the years.It is certainly possible to raise the bar through better tax admin-istration.

The most important initiative in this regard is the intro-duction of value added tax (VAT) by most States with effectfrom 1 April 2005. Although this is expected to be revenueneutral, it is expected to increase the revenue productivity ofthe tax system in the long term. The extension of the tax netto the retail stage would broaden the base and is expected tomore than offset the loss of tax base due to giving credit toinputs. More importantly, the self-enforcing nature of the taxis expected to significantly improve the tax compliance andthis could improve revenue productivity. Thus, it should notbe difficult to improve the revenues by at least by 1% to1.5% of GSDP over the next five years.

The second way to release more resources to the health sec-tor is to reprioritize the expenditure in favour of the sector.This might have to be done within the limits imposed by theFiscal Responsibility and Budget Management (FRBM) Act

by each State mandated by the TFC. Although the TFC hasexpressed its concerns over the increase in expenditures onsalaries and wages it should be ensured that these do not imposeany reduction in expenditure on education and health sec-tors. Infact it is important to ensure that CHCs, PHCs andsubcentres are properly staffed to provide the required serv-ices. The debt rescheduling and reduction in interest ratesrecommended by the TFC would allow additional fiscal spaceto the States. Besides, the TFC has recommended incentive-based debt write off to the tune of Rs 32,198 crore over thesame period. It is important that the additional fiscal spacecreated by these recommendations is used for human devel-opment.

Another important strategy to be adopted to improve theeffectiveness of health expenditure is to target the allocationsto States where the health outcomes are poor. It is preciselyfor this reason that the TFC has recommended equalizinggrants to those States with less than average per capita expen-ditures within the revenue account. Although the TFC’s equal-ization does not entirely cover the shortfall in per capita expen-ditures, this type of targeting expenditures could help toimprove the health outcomes precisely in States with largeshortfalls from the norms.

The recommendations of the TFC, however, can cover onlya partial requirement of the States. Achieving the MDGs andthe Tenth Plan targets would require significant additionalresources and improved productivity in spending to focus onoutcomes rather than outlays. Much of the intervention inthis area will have to come by way of consolidation of a plethoraof Central schemes prevailing at present, and augmentationof specific purpose transfers for broadly defined purposes.This paper argues that the appropriate design for targeting,preserving the incentives and to ensure participatory provi-sion is to have a specific purpose transfer with matchingcontributions from the States, the latter varying with thelevel of their development.

From the above discussion, it would be reasonable to sum-marize that significant additional allocation to health sector iswithin the realm of possibility. This, however, would requirethat States be clear in their assignment of priority. Investmentin human capital is critical to both accelerating growth, enhanceproductivity and empowering the poor. Improving the healthstatus of population is a critical component of human devel-opment and the States will have to reassign their priorities infavour of the health sector in the interest of development.

Acknowledgements

The authors would like to place on record the help, guidanceand advise from Ms Sujatha Rao. They had the benefit of inter-action with her at every stage of the study. She not only helpedin the conceptualization and in evolving the methodology forthe study but also went through the successive drafts withmeticulous care. Thanks are also due to Dr Ajay Mahal whoseadvice and guidance in the initial stages of the study wereextremely useful. The authors are also indebted to the staffof the National Commission on Macroeconomics and Health



for discussions on various matters relating to the study. Theassistance provided by Ms Gita Bhatnagar is gratefully acknowl-edged. The authors own full responsibility for the viewsexpressed and for errors of omission and commission.

Note: The Governing Body of the National Institute of Pub-lic Finance and Policy does not take any responsibility forthe views expressed in this report. The responsibility belongsto the researchers who conducted the study.





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