India has demonstrated a commitment to expanding health financing in recent years, yet it remains far from attaining universal health coverage (UHC). Despite increasing budgets, large parts of the system still operate with shortfalls, signalling a gap between ambition and outcomes. Government health expenditure (GHE) rose from 1.4 percent of the gross domestic product (GDP) in FY18 to 1.9 percent in FY24. Between FY21 and FY25 (budget estimates) alone, GHE increased at a compounded annual growth rate of 18 percent, rising from INR3.2 lakh crores to INR6.1 lakh crores. By FY22, GHE’s share of total health expenditure had also increased to 48 percent (from 29 percent in FY15), while the share of out-of-pocket expenditure (OOPE) fell to 39.4 percent (from 64.2 percent in FY14), supported by publicly financed insurance schemes.
However, despite this progress, GHE continues to remain below the National Health Policy (NHP) 2017 recommendation of 2.5 percent of GDP, leaving a persistent gap between current spending and policy objectives. Further, according to the World Health Organization (WHO), India’s UHC Service Coverage Index — a proxy for service access rather than financial protection — stood at 69 percent (on a scale of 0-100) in 2023. A study that adapted the WHO UHC framework found substantial geographic and wealth-based disparities, with district-level coverage ranging from 26.4 percent to 69.4 percent across 687 districts.
INR154,574 crore is required annually to achieve targets across five priority programmes — non-communicable diseases, tuberculosis, vector-borne diseases, mental health, and trauma and burns — which together account for 66 percent of the nation’s disease burden. However, in 2022–23, Union and State expenditures associated with these priority programmes amounted to INR50,477 crore, falling short by INR104,097 crore.
The National Health Systems Resource Centre’s 2025 financial gap analysis uses a normative costing approach to estimate that INR154,574 crore is required annually to achieve targets across five priority programmes — non-communicable diseases, tuberculosis, vector-borne diseases, mental health, and trauma and burns — which together account for 66 percent of the nation’s disease burden. However, in 2022–23, Union and State expenditures associated with these priority programmes amounted to INR50,477 crore, falling short by INR104,097 crore. In parallel, estimates suggest that, with the adoption of new technologies and a greater focus on prevention and wellness, India will require an additional US$156 billion to achieve the health-related Sustainable Development Goals (SDGs).
Given the magnitude of underfunding, government financing is likely to remain insufficient to adequately support India’s public health priorities and infrastructure gaps. Further, while healthcare in India is predominantly domestically financed, in the context of declining foreign development assistance for health globally, even modest losses in external assistance may register as significant. Collectively, this points to the need to mobilise additional resources and private capital — through corporate social responsibility (CSR), public-private partnerships (PPPs), and innovative financing mechanisms — to finance public health priorities, infrastructure development, and health innovation.
Mobilising Private Capital for Health: Opportunities and Challenges
Beyond government budgets, in 2013, India became the first country to mandate CSR spending (two percent of the average net profit from the previous three years for companies of net worth ≥ INR 500 crore, or turnover ≥ INR 1,000 crore, or net profit of ≥ INR 5 crore), which has since become a significant source of health financing. In FY 2023-24, CSR allocations to healthcare amounted to INR 7,150.81 crore, representing 20.48 percent of total CSR spending. While the legislation has helped generate additional funds for human development and improve transparency, the United Nations Educational, Scientific and Cultural Organization (UNESCO) notes that it comes with challenges, including the lack of government guidance on fund distribution, unequal distribution of funding across states, a focus on spending targets over social impact, and the need for greater oversight and enforcement mechanisms.
Further, while India’s NHP 2017 encourages PPPs, a 2021 review by the National Health Systems Resource Centre of PPPs under the National Health Mission finds that, in India’s healthcare sector, PPPs operate largely as government-funded service contracts rather than as tools for capital mobilisation. Ambiguity in contracts, differences in objectives, limited performance monitoring, and inadequate capacity building across actors constrain their potential. However, the review recognises PPPs as essential in India, requiring course correction before further expansion.
Collectively, this points to the need to mobilise additional resources and private capital — through corporate social responsibility (CSR), public-private partnerships (PPPs), and innovative financing mechanisms — to finance public health priorities, infrastructure development, and health innovation.
Beyond traditional private contributions, innovative financing mechanisms have also begun to emerge. The Impact Investors Council (IIC) documents that in 2024, investments in the Indian health sector reached US$648 million, positioning it as the third-largest impact investing sector, accounting for 13.4 percent of total impact investment flows. However, the majority of the investments between 2022 and 2024 were directed towards sub-sectors such as diagnostics and decision support, pharmacies (both online and offline), and medical devices, with primary and secondary healthcare receiving significantly smaller shares.
The blended finance market in India — which involves the strategic use of concessional capital from public and philanthropic sources to mobilise private capital from commercial investors to support projects with high development impact potential but limited commercial viability — has grown eightfold between 2010 and 2022. In a decade, funding from blended finance transactions in India amounted to approximately US$5 billion, of which health-focused sectors secured 15 percent, primarily directed towards infrastructure and service delivery solutions. Upskilling healthcare workers for emergency response also saw significant funding in the post-pandemic period, alongside additional investments at the climate-health nexus.
However, blended finance in healthcare remains underutilised globally. NITI Aayog has highlighted that challenges such as the lack of a strategy to mobilise private sector investment, the need to shift from input-based budgeting to outcome-based funding, high transaction costs and long timelines in structuring blended finance solutions, limited transparency among concessional capital providers and private investors, and an underdeveloped ecosystem, among others, hamper its adoption at scale.
Social bonds (debt securities that raise funds for social projects) and impact bonds (outcomes-based contracts that use private funding to cover upfront capital for service delivery, with investors repaid only if outcomes are achieved) have also begun to emerge as financing tools for health. Between 2006 and 2024, the cumulative aligned social bond volume from India amounted to US$6.6 billion, of which US$5.5 billion was issued in 2024 alone. Healthcare accounted for 8 percent of cumulative social-bond proceeds. In parallel, Indian non-banking financial companies raised around US$1.8 billion in labelled social loans in 2024, earmarked to support microfinance, affordable housing, and education, among others. However, healthcare is underrepresented here.
Health-focused impact bonds such as the Utkrisht Impact Bond — the world’s first impact bond for maternal and newborn health in Rajasthan — and Pahal’s Tuberculosis Impact Bonds have also helped mobilise capital under pay-for-results structures. However, their potential remains largely unrealised due to limited government capacity to design and manage pay-for-results contracts, high transaction and design costs, and the need for robust data systems.
Additionally, according to a 2020 IIC analysis of 422 impact enterprises across sectors, there is an estimated debt financing gap of INR1,564 crore (approximately US$216 million), indicating that demand for impact debt significantly exceeds supply. For healthcare specifically, this gap is estimated at INR166 crore. Hurdles such as the inability of impact enterprises to meet collateral requirements, weaknesses in the management and data systems of young enterprises for financial reporting and creditworthiness assessment, and the absence of a regulatory framework defining impact investment as a distinct asset class hamper the sector’s growth. The study also indicates that healthcare is among the top three sectors served by both debt and equity impact investments. However, it also notes that investors tend to prefer ownership equity in emerging impact enterprises over debt.
Nevertheless, taken together, the private capital mobilised remains modest compared to the annual public health financing gap of INR104,097 crore and the additional US$156 billion required to achieve health-related SDGs. With declining international funding, it is imperative to increase efforts to mobilise private capital to attain India’s public health goals.
Way Forward
To scale private capital mobilisation, India must establish an institutional and regulatory architecture that lays the foundation for channelling private resources towards public health priorities. This requires the development of standardised criteria to build transparency and accountability, distinguish credible impact-focused entities, reduce information asymmetries, and improve the efficiency of capital flows. In parallel, by modifying the guidelines for CSR use, these resources can be deployed more efficiently through innovative financing structures.
While the private sector has a role to play, differences in objectives mean private capital should be mobilised as a complementary source of financing, with the government retaining primary responsibility.
Additionally, PPP models are currently used primarily as government-funded service contracts. Redesigning PPPs around performance-linked outcomes within pay-for-results structures can help improve their efficiency. Further, PPPs remain underutilised as tools for capital mobilisation, which should be actively encouraged. At present, India’s impact bonds remain at the pilot stage but can be scaled, which will require dedicated institutional architecture, robust monitoring mechanisms, and standardised results frameworks.
The debt financing gap across impact enterprises also reflects inadequate de-risking mechanisms that deter traditional lenders. Pair-lending models, where concessional development bank debt is matched with commercial lending, should be established with transparent pricing criteria (tied to creditworthiness and social impact metrics) and flexible debt structures. Regulatory frameworks must also formally recognise impact debt as a distinct asset class. Ring-fencing CSR allocations as first-loss provisions and portfolio guarantees would also simultaneously de-risk conventional lenders and address collateral gaps, transforming CSR into leverage-maximising catalytic capital rather than grant-making instruments.
However, it must be noted that while mobilising private capital can help increase the funding available for healthcare, a 2025 report by the World Bank highlights that increasing public resources is fundamental to achieving rapid progress in health and UHC, particularly in reducing financial hardship arising from high OOPE. The report notes that no country has achieved high levels of health coverage without public sources providing the majority of the funding, reflecting the ability of governments to effectively pool financial risks arising from healthcare concerns and promote equity. While the private sector has a role to play, differences in objectives mean private capital should be mobilised as a complementary source of financing, with the government retaining primary responsibility.
Nimisha Chadha is a Research Assistant with the Centre for New Economic Diplomacy at the Observer Research Foundation.
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