Public services to cost Rs 3.2 lakh cr by 2025: study

India could save Rs 3.3 lakh crore in annual expenditure by 2025 by increasing public-sector efficiency by 1.11% a year, says Accenture

Costs primarily associated with increased spending on citizens for healthcare and growth of the ageing population are estimated to require the central and state governments to spend an additional Rs 3.2 lakh crore ($70 billion), about 1.5% of GDP, to fund public services by 2025, a report said.

Accenture, the global management consulting, technology and outsourcing company, in its latest study, 'Delivering public service for the future: Navigating the shifts', said the cost is projected to total Rs 22.9 lakh crore, 11% of GDP, by 2025 in India.

The company had asked Oxford Economics to project total government spending on public services through 2025 in 10 countries � Australia, Brazil, Canada, France, Germany, India, Italy, Singapore, the United Kingdom and the United States.

Oxford analysed the impacts of projected economic and demographic changes on the costs of delivering all public services, including central, state and local spending (except debt interest payments).

One of the factors in the analysis of the drivers of the projected expenditure increase is wealth effects � assumptions based on historical evidence that suggests that as countries get richer, governments spend proportionally more per person on public health services such as healthcare.

The government has said it intends to increase its spending on health to 2.5% from 1.4% of GDP over the next five years. Another primary driver is growth of the ageing Indian population. The United Nations project a 76% growth in the population aged 65 or older by 2025, with 7.3% of the population aged 65 and over by 2025.

With the looming expenditure gap, the demand to improve public-sector efficiency has never been greater. India could save as much as Rs 3.3 lakh crore in annual expenditures by 2025 by increasing public-sector efficiency by 1.11% a year � enough to close the gap, the report said.

"More than Rs 3.2 lakh crore in projected additional costs for Indian public services by 2025 presents government leaders �at all levels � with a new reality," said Krishna Giri, who leads Accenture's global Health & Public Service business in India.