Health Care Spending and Hidden Poverty in India

43 Pages Posted: 6 Feb 2018

See all articles by Michael P. Keane

Michael P. Keane

University of New South Wales

Ramna Thakur

Indian Institute of Technology (IIT), Mandi

Date Written: January 21, 2018


India has a high level of out-of-pocket (OOP) health care spending, and lacks well developed health insurance markets. As a result, official measures of poverty and inequality that treat medical spending symmetrically with consumption goods can be misleading. We argue that OOP medical costs should be treated as necessary expenses for the treatment of illness, not as part of consumption. Adopting this perspective, we construct poverty and inequality measures for India that account for impoverishment induced by OOP medical costs. For 2011/12 we estimate that 4.1% of the population, or 50 million people, are in a state of “hidden poverty” due to medical expenses. Furthermore, while poverty in India fell substantially from 1999/00 to 2011/12, the fraction of the remaining poverty that is due to medical costs has risen substantially. Economic growth appears less “pro-poor” if one accounts for OOP medical costs, especially since 2004/05, and especially in rural areas.

Keywords: Poverty, Consumption, Healthcare, Medical Costs, Inequality, Growth

JEL Classification: I14, I32, O15, O53, N35

Suggested Citation

Keane, Michael P. and Thakur, Ramna, Health Care Spending and Hidden Poverty in India (January 21, 2018). UNSW Business School Research Paper No. 2018-02, Available at SSRN: or

Michael P. Keane (Contact Author)

University of New South Wales ( email )

Sydney, NSW

Ramna Thakur

Indian Institute of Technology (IIT), Mandi ( email )

Mandi, Himachal Pradesh 175 001

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