India’s Healthcare Boom Hides a Public-System Deficit

Healthcare Expansion vs Public Spending

India has witnessed substantial expansion in visible healthcare infrastructure, including medical colleges, medical seats, AIIMS and Ayushman Bharat.
However, government health expenditure was only 1.43% of GDP in 2022–23, below the 2.5% target of the National Health Policy, 2017.
The key challenge is therefore not merely expanding healthcare capacity but ensuring that it is publicly accessible, affordable and geographically distributed.
The Parliamentary Standing Committee on Health and Family Welfare has highlighted persistent gaps in capacity, affordability and regulation.

India now has 818 medical colleges and 1,28,875 undergraduate medical seats, indicating a major expansion in medical education.
Yet substantial shortages persist at the primary and secondary healthcare levels:

The core problem is therefore not simply a shortage of doctors, but their uneven geographical distribution and inadequate supporting infrastructure.
Growing private and PPP participation in medical education also makes regulatory quality and institutional accountability increasingly important.

More than 60% of hospitalisations and around 70% of outpatient care are provided by the private sector, according to the cited NSSO data.
Average hospitalisation expenditure is approximately:

Weak public capacity effectively pushes households towards expensive private healthcare, even when the State does not directly charge them for treatment.
Out-of-pocket expenditure (OOPE) has declined substantially but still constituted 43.4% of total health expenditure in 2022–23.
More than 40 crore Indians, often described as the “missing middle”, remain outside comprehensive financial health protection.

Ayushman Bharat has expanded financial protection and enabled many vulnerable families to access hospital treatment.
However, insurance primarily finances treatment; it does not necessarily control the underlying price of healthcare.
Rising treatment costs can ultimately increase the financial burden on governments, insurers, employers and households.
Private investment in healthcare is increasing through hospital chains, diagnostic networks and consolidation of healthcare businesses.
Such investment can help bridge infrastructure gaps, but its social value depends on whether it:

Increase public health expenditure towards the National Health Policy target and prioritise primary and preventive healthcare.
Address rural and underserved-area shortages through better deployment of specialists, infrastructure and incentives rather than focusing only on increasing medical seats.
Strengthen regulation of medical education, hospitals, diagnostics and healthcare pricing to ensure commercialisation does not undermine quality or affordability.
Expand comprehensive financial protection beyond the current insurance architecture to cover the “missing middle”.
Use public and private capital to create additional healthcare capacity where it is most needed rather than concentrating investment in profitable urban markets.
The broader goal should be a citizen-centred health system in which a family does not have to choose between an under-capacity public hospital and an unaffordable private hospital.
Universal healthcare ultimately requires a strong publicly financed and publicly provided system, with private healthcare complementing rather than substituting for public capacity.