Convergence in Healthcare Expenditure among Indian States: Does Fiscal Space Matter?

Abstract

Healthcare is crucial for creating human capital, preserving global well-being, and contributing to development. The most significant obstacles to establishing universal health coverage in India are the unequal distribution of fiscal resources and the lower prioritization of budgets for healthcare. In this context, the paper examines the convergence in healthcare expenditure for 22 Indian states from 1990 to 2020. It employs the club convergence approach proposed by Phillips and Sul (2007) to investigate whether states converge toward a single steady-state equilibrium or multiple groups. The results reveal that Indian states haven't achieved a single steady-state equilibrium. Instead of overall convergence, the findings show two final club convergence and two divergence states for health expenditure.