Modi likely to keep tight rein on health spending - sources

By Aditya Kalra

NEW DELHI (Reuters) - India is unlikely to announce any significant increase in its health budget for the financial year that begins in April, two sources said, dampening hopes the central government would allocate more funds to overhaul the public health system.

Prime Minister Narendra Modi's government will present its first full-year budget on Feb. 28 for the fiscal year 2015/16. Modi has vowed to revamp India's healthcare sector and make services more affordable, and accessible, for the poor.

The Union Health Ministry's budget for 2015/16 will be about 244 billion rupees ($4 billion), in line with the current year's budget, two government sources told Reuters.

The government had a planned budget allocation of 306.45 billion rupees ($5 billion) for healthcare in 2014/15, but it was later cut by about 20 percent because of under-utilisation of funds by the health ministry.

Health ministry officials, however, told Reuters in December the cut was imposed because of the government's deteriorating fiscal situation. India is scrambling to contain its fiscal deficit at 4.1 percent of gross domestic product (GDP).

"The funds (health budget) for next year would suffice if the government does not impose a spending cut later this year," said one of the two sources, neither of whom wanted to be identified because of the sensitivity of the matter.

India spends just 1 percent of its GDP on public health, less than Afghanistan and Sierra Leone.

Despite rapid economic growth over the past two decades, successive central governments have kept a tight rein on healthcare expenditure. States have separate health budgets.

Modi's government is also working on a universal health coverage plan that would provide all citizens with free drugs and diagnostic treatment. The programme is estimated to cost $26 billion during 2015-19, but one source said it was not clear how it would be funded.

($1 = 62 rupees)

(Reporting by Aditya Kalra; Editing by Frank Jack Daniel and Mike Collett-White)