What India’s 2026 Budget Needs to Fix in India’s Healthcare System

As India approaches Budget 2026, healthcare finds itself at a hinge moment. Last year’s allocations signaled intent by expanding coverage, strengthening research, and widening the safety net, but they also laid bare enduring structural weaknesses.

From the health security of gig workers to chronic shortages of specialists and long-standing underinvestment in medical research, expectations from the upcoming budget are rising. That pressure is intensifying as technology-led solutions mature faster than the policy frameworks meant to govern them.

Budget 2025 made a notable welfare promise by extending healthcare coverage under the PM Jan Arogya Yojana (Ayushman Bharat), India’s flagship public health insurance scheme, to gig workers, alongside identity cards and registration through the e-Shram portal, the government’s national database for informal and gig workers. The move acknowledged the growing informal workforce that underpins India’s digital and services economy but remains largely outside formal social security systems.

Whether that promise translates into meaningful, on-ground access is a test Budget 2026 will be expected to address, through clearer funding mechanisms and execution clarity.

Health Data and Talent

Overall healthcare allocation in 2025 stood at ₹983 billion, an 11.7% increase from ₹880 billion in 2024–25. While the rise points to continuity, many experts said it falls short of what is required for a country with India’s population size and disease burden.

Plans to add 10,000 medical seats immediately and 75,000 over the next five years reflect a long-term push to expand capacity. But the impact of such investments will unfold slowly, measured in years rather than budget cycles.

The gap is most visible in specialized care. India has an estimated 12,000 radiologists serving a population of 1.4 billion. For Kalyan Sivasailam, Founder and Chief Executive of healthcare AI platform 5C Network, this is a structural constraint that medical college expansion alone cannot resolve in the near term.

“No amount of medical college expansion solves this in the next decade. AI does,” he says. According to him, Indian companies have already built diagnostic AI trained on billions of medical images, delivering clinical accuracy on par with global benchmarks at a fraction of the cost. 

The technology, he says, is no longer the bottleneck. Policy is.

Sivasailam outlines three priorities. First, AI-driven diagnostics should be treated as healthcare infrastructure rather than software, including a reduction of goods and services tax (GST) to 5% and eligibility under Ayushman Bharat reimbursement frameworks.

Second, he argues for a production-linked incentive-style program, which ties government incentives to domestic manufacturing and scale, for domestic medical AI companies built on Indian datasets, warning that reliance on foreign platforms could carry strategic risks.

Third, he points to the absence of dedicated compute capacity, proposing a national health AI compute cluster to accelerate research and retain specialized talent within the country.

Research Beyond Bigger Allocations

While AI dominates much of the debate, health research funding remains a quieter but no less critical concern. The Department of Health Research received a 15% increase in FY26, rising to about ₹3,901 crore from ₹3,392 crore a year earlier.

About ₹3,126 crore of that allocation went to the Indian Council of Medical Research, a near 9% increase. Funding for biosecurity preparedness, pandemic research, and One Health platforms rose sharply, reflecting lessons learned from Covid-19.

Even so, India’s health research spending remains low by global standards. A parliamentary standing committee has noted that India spent just 0.02% of GDP on health research in 2021–22, when compared with 0.65% in the US and 0.44% in the UK in 2017.

Yet, in a global context, India’s health research spending remains strikingly low. Parliamentary data show that public spending on health research has hovered at about 0.02% of gross domestic product (GDP) since 2021–22, a level far below international benchmarks.

The World Health Organization (WHO) recommends that countries with research capacity devote at least 0.05%–0.10% of GDP to health research, while high-income economies typically spend several multiples of that. Even allowing for differences in reporting cycles and definitions, the gap underscores how thin India’s investment in health research remains relative to global norms.

The Parliamentary Standing Committee on Health and Family Welfare has repeatedly flagged this shortfall, recommending that India raise health research spending to at least 0.1% of GDP and allocate 5% of the Ministry of Health and Family Welfare’s budget to the Department of Health Research. Budget 2026 will be closely watched for signs that these recommendations are finally being taken seriously.

India’s Healthcare Future

India’s healthcare ambitions are increasingly outward-looking. Medical tourism is emerging as both an economic and reputational lever. Dr. Na’eem Sadiq, Medical Director at specialized neuroscience center Plexus Neuro Centre, estimates that more than 131,000 foreign patients sought specialized care in India last year.

“To sustain this momentum, the focus must be on early intervention and the creation of multidisciplinary teams across therapies and specializations,” he says.

India’s cost-efficient, high-quality care, combined with family-centered support systems, gives it an edge over competing destinations, Sadiq argues. Targeted budgetary support for hospital upgrades, wellness infrastructure and advanced care facilities could bolster access for Indian patients while deepening tourism-linked growth.

As Budget 2026 approaches, the question is not only how much India spends on healthcare, but how deliberately it does so. Expanding welfare coverage, correcting research underinvestment, enabling AI-led diagnostics and leveraging medical tourism demand more than incremental increases. They require policy resolve.

India already has the data, the talent and growing clinical validation. What healthcare stakeholders are looking for in Budget 2026 is a signal that the government is ready to connect these strands and move from intent to execution.