Examining the state level heterogeneity of public health expenditure in India: an empirical evidence from panel data

This study explores the relationship over an extended period of time between an increase in per capita public health expenditure and per capita state’s domestic product (per capita income) of 16 states of India from 1980 to 2014. We consider eight panels of states based on geographical region and levels of economic development for examining the level of heterogeneity in the share of public health expenditure with respect to states’ domestic product by using panel unit root, panel co-integration and panel Granger causality techniques. The empirical result shows that public health expenditure and states’ domestic product are co-integrated in the long-run. The result also shows a positive and significant effect of per capita income in the growth of public health expenditure in the long-run. It finds that there is a bi-directional Granger causality between per capita income and public health expenditure in the short-run while the causality is unidirectional in the long-run. The overall result implies the existence of inequalities in the share of government health expenditure with respect to state’s level of economic development in India. This study would offer effective fiscal policy instruments to minimising geographical inequity of health finance for achieving universal health coverage of Indian states.