In 2015, India's system of fiscal devolution underwent a radical transformation. This paper uses the experience of Brazil, China, and Mexico to draw important lessons on how India can use the opportunity of fiscal devolution to create a better system of health financing through better policy coordination between federal and local governments.
Since 2015, India has devolved an increasing share of its national tax yield to state governments and undertaken reforms to other kinds of centre-to-state grants. For many, the increased revenue via the tax devolution was considered good news but some health experts worried that states would give little priority to health under these conditions of greater autonomy. We find that at least two states, Bihar and Uttar Pradesh, have much more to spend in general and are budgeting more for health in 2015-2016 as compared to previous fiscal years.
Doing Business Differently with Subnationals: Recommendations for Global Health Donors in Highly Decentralized Countries
In the big decentralized countries where global disease burden is concentrated, such as India and Indonesia, most public money for health isn’t spent by the national ministry of health, the traditional counterpart for global health funders and technical agencies. Instead, most money is programmed and spent subnationally.
Greater subnational public spending reflects growing democratization, power-sharing, and local self-determination. It also responds to the conviction that local decision-makers understand local realities better than a bureaucrat sitting in the capital city. Yet evidence on the effectiveness of subnational spending on health care and outcomes is mixed at best, and incentives for greater spending and better performance can be weak.
Most money and responsibility for health in large federal countries like India rests with subnational governments — states, provinces, districts, and municipalities. The policies and spending at the subnational level affect the pace, scale, and equity of health improvements in countries that account for much of the world’s disease burden: India, Indonesia, Nigeria, and Pakistan.