Why India’s Health System Faces a Funding Crunch — and What Is at Stake

With a population of nearly 146 crore, India’s health-care challenges are expanding in scale and complexity. The country is grappling simultaneously with non-communicable diseases, resurging infections, climate-linked health risks, pharmaceutical quality lapses and chronic underfunding. As India prepares for future health emergencies, 2025 has exposed how fragile the system remains — and why realignment of priorities is urgent.

Why the Funding Gap Widened in 2025

A major shock to India’s health financing came from Washington. Early in 2025, Donald Trump withdrew the United States from the World Health Organization, triggering cuts to global health funding. India, a long-time beneficiary of American health assistance, felt the impact immediately.

Funding for key programmes supported by PEPFAR (the US President’s Emergency Plan for AIDS Relief) and USAID dried up in areas such as HIV/AIDS, maternal and child health, and population services. While USAID had committed $97 million to seven projects in India, this was only a fraction of the roughly $750 million spread across all projects. Union and State governments were forced to step in to plug the sudden gaps — often without prior budgetary provision.

Why Budget Allocations Still Fall Short

India’s public health spending has long hovered below 2% of GDP, far lower than global benchmarks for countries of comparable size. For 2025–26, the Union government allocated ₹99,859 crore to health — an 11% increase over the previous year, but still well below the National Health Policy target of 2.5% of GDP.

This persistent underinvestment raises doubts about India’s ability to achieve the long-articulated goal of “health for all”. While post-pandemic expansion has improved access to diagnostic labs and hospital beds, funding has not kept pace with rising demand, population growth and epidemiological transition.

Infectious Diseases Making a Quiet Comeback

Chronic funding inadequacy has direct consequences. Several infectious diseases are resurging, testing surveillance systems, laboratories and frontline care. The concern is not only about containing outbreaks, but about reducing mortality and long-term disability — goals that require sustained investment rather than episodic responses.

These pressures are unfolding even as India continues to battle a heavy burden of non-communicable diseases, stretching an already thin health workforce and infrastructure.

Air Pollution as a Public Health Emergency

Air quality, particularly in northern India during winter, has become a major health determinant. Toxic smog episodes have sharply reduced quality of life, disproportionately harming children, the elderly and those with respiratory or cardiac conditions.

Unless India adopts aggressive, coordinated measures — similar to those implemented by China to improve air quality in cities like Beijing — further deterioration appears inevitable. Addressing pollution is no longer an environmental choice but a health imperative.

Why India Missed Its TB Elimination Target

India set itself an ambitious goal: eliminating tuberculosis by 2025, five years ahead of the global target. That milestone now appears out of reach. While progress has been made — including improved diagnostics and newer drug regimens — the disease remains deeply entrenched.

Indigenous molecular tests such as TrueNat have improved early detection and identification of drug resistance. Yet multidrug-resistant and extensively drug-resistant TB cases continue to rise, and detection rates vary widely across States. Without stronger funding, staffing and follow-up systems, TB elimination will remain aspirational.

The Growing Threat of Antimicrobial Resistance

Antimicrobial resistance (AMR) is emerging as one of India’s most serious health threats. According to the WHO’s GLASS report, one in three patients with bacterial infections in India harbours resistant organisms — compared to one in six globally.

High resistance levels have been reported in infections caused by “E. coli”, “Klebsiella pneumoniae” and “Staphylococcus aureus”, particularly in intensive care units. Easy over-the-counter access to antibiotics, self-medication, incomplete treatment courses, pharmaceutical waste pollution and weak enforcement of regulations all exacerbate the problem.

Kerala stands out as the only State where stewardship efforts have actually reduced community-level AMR. Other States now face the challenge of implementing the second National Action Plan on AMR introduced this year.

Pharmaceutical Quality: A Repeated and Deadly Failure

The most disturbing episode of 2025 came in its final months, when 25 children in Madhya Pradesh died after consuming contaminated cough syrup. Laboratory analysis found diethylene glycol — an industrial chemical that causes kidney and liver failure — in a syrup manufactured in Tamil Nadu.

This tragedy echoed earlier disasters, including the deaths of 70 children in The Gambia linked to Indian-made cough syrups. Together, they raise uncomfortable questions about regulatory oversight, manufacturing practices and enforcement capacity.

For a country aspiring to be the “pharmacy of the world” under the Make-in-India banner, repeated quality lapses undermine global credibility and domestic trust alike.

Why Health Reform Cannot Be Deferred

India’s health challenges are interconnected: underfunding weakens surveillance, which allows infections to spread; pollution worsens chronic disease burdens; poor regulation erodes patient safety; and antimicrobial resistance threatens to reverse decades of medical progress.

As 2026 approaches, incremental fixes will not suffice. Substantial increases in public health spending, stronger regulation of pharmaceuticals, tighter antibiotic stewardship, and decisive action on air quality are essential. Without them, India risks higher mortality, greater inequality and mounting economic costs — precisely when it needs a healthy population to sustain long-term growth.

The promise of “health for all” remains achievable, but only if funding, governance and accountability are treated not as optional expenditures, but as core national priorities.