STATE CAPACITY AND HEALTHCARE PERFORMANCE IN INDIA: DO BETTER HEALTH OUTCOMES REFLECT HIGHER PUBLIC SPENDING OR GREATER EFFICIENCY?

The healthcare performance of Indian states exhibits considerable variation despite sustained public investment and numerous health sector reforms. While some states consistently achieve favourable health outcomes, others continue to experience high mortality and fertility despite increased expenditure. This raises an important policy question: are better-performing states simply allocating more financial resources to healthcare, or are they using their available resources more efficiently? This study seeks to answer this question by integrating econometric regression analysis with Data Envelopment Analysis (DEA). This study examines state-wise public health-sector capacity and efficiency in India by analysing the relationship between public health expenditure and population-health outcomes and assessing the efficiency with which states transform health resources into outcomes. The study employs a panel dataset covering 19 Indian states during 2012-2019. Fixed-effects regressions with Driscoll-Kraay standard errors are used to estimate the association of public health expenditure with life expectancy, infant mortality rate (IMR), maternal mortality ratio (MMR), and total fertility rate (TFR), controlling for per-capita Net State Domestic Product (PCNSDP). The results show that higher public health expenditure is significantly associated with higher life expectancy and lower IMR, MMR, and TFR. The study further applies an output-oriented Variable Returns to Scale Data Envelopment Analysis (DEA) to 17 states, using government hospital beds and public health expenditure as inputs and life expectancy and inverse IMR as outputs. The mean VRS technical-efficiency score of 0.962 indicates relatively high pure technical efficiency, although considerable scale inefficiency is observed.