Health expenditure is an important determinant of the health status and economic development of a nation. Experience has revealed that countries which assign due recognition to this aspect have healthier and more productive human capital. This in turn raises the GDP of a nation, in contrast to countries which spend less on health sector. Health care users, particularly in poor and developing countries have to spend more on ‘out of pocket’ expenses, because in such countries public health expenditure falls short perhaps due to inadequate resources. Expenditure on health sector therefore has higher return in terms of health outcomes and economic development in poor and developing countries in comparison to already developed countries. The present work with the help of data from all the states and union territories of India examined the impact of per capita health expenditure on infant and child mortality separately for the urban and rural sector of India using lagged multiple regression models. The findings of the study reveal that health expenditure taken alone do not have any impact on the health parameters. However, inclusion of mother’s education and the poverty level of the household represented by per capita income, increases the effectiveness of health expenditure, which then becomes an effective tool for improving the health parameters of infant and child mortality. This implies that where the health beneficiaries are poor, level of education is low, awareness is less, and particularly in the rural sector public health expenditure is not incurred judiciously. However, consciousness of educated health beneficiaries make the ones who incur the health expenditure to be more careful as how the money is spent. Proper management, supervision and monitoring thereby assumes more importance. Ultimately therefore it is not always the amount of finance, but more important becomes how the money is spent. The study also reveals that there is a clear dichotomy in India between the rural and urban sector. Rural sector representing the less developed nations of the world, whereas urban India has situation similar to the developed world. This clearly focuses attention to the fact that uniform policies of health expenditure for the entire country may not be very effective and separate policies which should be based on the specific need and problems of spatial differences needs to be devised.
Keywords: infant and child mortality,per capita health expenditure,female education,poverty,health policies