Field Notes on South Asian Development
Spending on People: What a Decade of Education and Health Budgets Says About South Asia's Future
Ask any economist what builds a nation over the long run and most will eventually land on the same two words: people and skills. Roads can be built quickly. Factories can be financed overnight if the capital is willing. But a literate workforce and a healthy population take years to grow and decades to lose.
Between 2016 and 2025, four of South Asia's largest countries, India, Bangladesh, Sri Lanka and Pakistan, each ran their own version of this experiment, choosing how much of their national wealth to put into classrooms and clinics. The results are now visible in their growth charts, their poverty numbers, and their standing on every major index of human development.
None of these four countries spent what their own policy documents say they should.
India's National Education Policy calls for six percent of GDP on schooling. Bangladesh's own economists have called for the same target plus five percent on health.
Sri Lanka once came close to international norms before a financial collapse forced cuts.
Pakistan never came close at all. What follows is not a ranking exercise. It is an attempt to trace, country by country, how a decade of budget choices shaped the lives of more than one and a half billion people, and what that history suggests about where each economy is headed next.
The Decade in Four Numbers
Start with India, because its scale alone makes its choices matter for the whole region. World Bank figures show education spending sitting between three and four percent of GDP through most of the decade, well short of the global average near four and a half percent and far below the six percent that India's own 2020 education policy promised to deliver.
Health has trailed even further behind. Even during the worst year of the pandemic, when hospitals were overwhelmed and oxygen ran short in major cities, government health spending reached only about three point three percent of GDP. China spent five point four percent that same year. Brazil spent close to ten. The pattern is not new for India and it has not meaningfully shifted since.
What makes the Indian case especially telling is the gap between announced budgets and actual spending.
According to analysis from The Secretariat, real spending on education has consistently fallen short of what was budgeted in the first place, meaning the headline numbers already understate the true shortfall. Part of the problem is structural. Education sits on India's concurrent list, shared between federal and state governments, while health is left almost entirely to the states. When six states recently declined to take part in a national school improvement scheme over funding disputes, the money meant for classrooms simply went unspent.
A constitution built for shared responsibility has, in practice, produced shared inaction.
And yet India's progress, while incomplete, should not be dismissed. Life expectancy has climbed from fifty eight years in 1990 to seventy two years today, a gain the 2025 Human Development Report credits in part to national programmes such as Ayushman Bharat and the National Health Mission.
Children can now expect to spend thirteen years in school, up from just over eight in 1990. These are not small achievements for a country of India's size. But inequality continues to eat into the gains.
The same report finds that inequality reduces India's overall HDI score by nearly thirty one percent, among the steepest losses of any major economy in the region, a sign that the benefits of growth and the benefits of social spending are not reaching everyone in equal measure.
Pakistan offers the starkest contrast in the entire region, and the numbers are not from outside critics but from the government's own Economic Survey for 2025 to 2026. Public spending on education stands at zero point eight percent of GDP.
Health spending stands at exactly the same figure. Combined, the two sectors that determine a nation's future productive capacity receive one point six percent of national income, a level so low that it places Pakistan among the weakest performers anywhere in the world on this measure.
Nearly four in every ten Pakistani children under the age of five show signs of stunting, a form of malnutrition that causes permanent damage to physical and cognitive development. No later investment in schooling can fully reverse harm done in a child's first years of life.
Pakistan's position in the 2025 Human Development Report reflects this history plainly. It ranks one hundred and sixty eighth out of one hundred and ninety three countries, below every other country examined here and below most of its regional neighbours.
The country has entered more than two dozen IMF programmes since the late 1950s, each one designed to restore short term fiscal balance, yet the structural underinvestment in people has persisted through every cycle. Debt servicing and provincial fiscal targets continue to crowd out the budget space that education and health would need to recover.
The coming fiscal year requires provinces to generate roughly one point nine trillion rupees in surpluses while contributing close to one trillion more to federal targets, and since education, health, water and sanitation are mostly provincial responsibilities, the room left for human development spending looks set to shrink further rather than grow.
| Country | Education spend, % GDP | Health spend, % GDP | HDI rank, 2025 | Average growth, 2016 to 2024 |
|---|---|---|---|---|
| India | about 3.9 to 4.6 | about 3.3 at pandemic peak | 131st | about 6.5 percent |
| Bangladesh | about 2.0 | about 2.9 total, mostly private | 130th | about 6.8 percent |
| Sri Lanka | about 1.8 | about 4.1 before the crisis | 89th | about 2.8 percent, crisis affected |
| Pakistan | about 0.8 | about 0.8 | 168th | about 3.2 percent |
Figures compiled from World Bank data, UNDP Human Development Reports, WHO and IMF sources. Methodologies and reference years vary across sources.
It is worth pausing here to look at what each government actually put on the table in its most recent budget, because the freshest numbers tell the same story as the decade long trend, only with sharper edges.
Pakistan's federal budget for the 2026 to 2027 fiscal year, presented in June 2026, sets total federal spending at roughly eighteen point seven trillion rupees. Within that outlay, health receives just twenty five point one billion rupees at the federal level, covering tertiary care and critical care services, according to a detailed breakdown of the budget.
Higher education fares somewhat better, rising to forty six billion rupees from thirty four point nine billion the year before, with the Higher Education Commission receiving a separate sixty five billion rupees, and basic education and college programmes receiving twenty six point three billion rupees, most of which goes to the Danish Schools initiative for disadvantaged children. Science and technology, the budget line most closely tied to future innovation capacity, gets just three point six billion rupees, a figure that barely registers against an eighteen trillion rupee budget.
These numbers need context to be understood properly. According to independent analysis of the federal budget, debt servicing alone consumes close to seven point eight trillion rupees, and when combined with defence spending, these two items absorb more than sixty percent of the entire federal outlay before a single rupee reaches development, education, health or social protection. Interest payments alone now eat up more than half of everything the Federal Board of Revenue collects in taxes for the entire year.
Most of Pakistan's education and health responsibility in any case sits with the provinces rather than the federal government, and there the picture is mixed. Punjab, the largest province with roughly sixty percent of the national population, has proposed up to seven hundred and fifty billion rupees for education and four hundred and twenty billion rupees for health in its own 2026 to 2027 provincial budget, a genuinely large allocation in nominal terms.
But the same analysis notes that more than five hundred billion rupees of Punjab's own budget is earmarked for debt servicing and pensions before any new programme begins, and the province remains bound by an IMF linked requirement to run a fiscal surplus rather than expand spending freely. The federal and provincial figures together explain how Pakistan's combined education and health spending still lands at only about one point six percent of GDP nationally, even after this year's nominal increases.
India's most recent Union Budget, presented on the first of February 2026, moved in the opposite direction. The Ministry of Education received a total allocation of one lakh thirty nine thousand two hundred and eighty nine crore rupees, an increase of more than eight percent over the prior year, according to figures from the Ministry of Education's own release.
Of that amount, eighty three thousand five hundred and sixty two crore rupees goes to school education and fifty five thousand seven hundred and twenty seven crore rupees to higher education, with new funding directed toward artificial intelligence linked skilling programmes and industry aligned training.
Health spending rose by a similar margin. The Ministry of Health and Family Welfare received one lakh six thousand five hundred and thirty crore rupees, nearly ten percent higher than the revised estimate for the previous year, with the increase concentrated in healthcare infrastructure, medical education and the Ayushman Bharat digital health programme. In cumulative terms, the health ministry's budget has grown by more than one hundred and ninety four percent since 2014, a genuinely large increase even after accounting for inflation and currency depreciation over that period.
The direction of travel in India's most recent budget is clearly upward, even if the resulting share of GDP still falls short of the six percent target set out in national policy.
Bangladesh's most recent full year budget, for 2025 to 2026, proposed ninety five thousand six hundred and forty four crore taka for education and forty one thousand nine hundred and eight crore taka for health, according to the official budget announcement from the country's interim government.
Even with this increase, the Daily Star's analysis found the education allocation amounted to just one point seven two percent of GDP, well short of the UNESCO benchmark of four to six percent. For the coming 2026 to 2027 fiscal year, the education minister has signalled an allocation of around one lakh twenty three thousand crore taka, which independent commentary notes still works out to only about two percent of GDP, a modest improvement on the one point five three percent recorded for 2025 to 2026 but still far below international norms.
Sri Lanka's 2026 budget, presented by President Anura Kumara Dissanayake in his capacity as finance minister, allocated seven hundred and four billion rupees to education, described by the government as the highest education allocation in the country's history and equivalent to roughly two percent of projected GDP, according to Daily FT's budget analysis.
Health received a comparable rise, though independent commentary from the World Socialist Web Site's coverage of the budget points out that the increases, around twenty nine billion rupees for education and forty billion rupees for health over the prior year, are modest relative to the scale of need following years of austerity.
Sri Lanka's own Public Financial Management Act now legally caps total government primary expenditure at thirteen percent of GDP, a self imposed ceiling designed to preserve debt sustainability under the IMF programme, but one that all but guarantees education spending will remain frozen near two percent of GDP through at least 2028, according to the same Daily FT analysis. Combined education and health investment for 2026 is reported to exceed one point three trillion rupees, a meaningful figure in absolute terms, but one still constrained by a fiscal framework built around austerity rather than expansion.
Latest National Budgets at a Glance
Reading these four budgets side by side makes the underlying pattern harder to miss rather than easier. India and Bangladesh are both increasing nominal spending year on year, even if the share of GDP still lags policy targets. Sri Lanka has legally bound itself into a low spending equilibrium through 2028 in order to preserve debt sustainability after its crisis.
Pakistan's federal health allocation, at twenty five point one billion rupees, is smaller than what a single Indian state government's education department now spends in some Indian states, against a national population of over two hundred and forty million people. The gap between
Pakistan and its three neighbours on this measure is not narrowing with each new budget cycle. It is, if anything, becoming more visible precisely because the other three countries are moving, however slowly, in the opposite direction.
Bangladesh tells a different and in some ways more puzzling story. For most of the past decade it was one of the fastest growing economies on earth, expanding at an average pace near six point eight percent a year, powered by garment exports and money sent home by workers abroad.
By most conventional measures this counts as a success story, and in many respects it is. Yet the government has spent only around two percent of GDP on education through this entire run of growth, roughly half the global norm and well short of what its own economists argue is needed. Health spending tells an even more uneven story.
Joint Learning Network data show that government sources cover barely a fifth of total health spending in Bangladesh, with families paying the rest directly out of pocket. That out of pocket share runs close to seventy two percent of all health spending nationally, among the highest such figures in the world.
The human cost of that arrangement is measurable. According to research summarised by the South Asian Network on Economic Modelling, out of pocket health costs alone push close to seven percent of the Bangladeshi population below the international poverty line each year, a finding the World Bank flags as unusual even among developing economies.
A family that escapes poverty through wages can be pushed straight back into it by a single hospital bill. Growth without protection from this kind of shock is growth standing on one leg. The World Bank's own Human Capital Index gives Bangladesh a score of zero point four eight, meaning a child born there today can expect to reach less than half of the productivity they might achieve with full access to education and health care.
Sri Lanka is the exception that proves how much social investment can achieve, and also how quickly it can be undone. For decades the country ran one of the most successful public education and health systems in the developing world, free at the point of use and genuinely far reaching.
The payoff was real. Literacy is close to universal. Maternal and child health indicators have long outperformed countries with far higher income levels. As a direct result, Sri Lanka entered this decade ranked far ahead of its neighbours, and it still sits at eighty ninth in the global Human Development Index, a position India, Bangladesh and Pakistan are nowhere close to matching.
Then came 2022. A currency crisis, an unsustainable debt position and years of narrowing tax revenue collided at once, and the government had no choice but to cut spending sharply across the board. Education funding, which had stood near seventeen percent of total government spending in 2016, fell to just over five percent of government spending by 2021 according to figures from
The Global Economy, before recovering only partially since. Measured against GDP, education spending sat at about one point eight percent in 2023, a fraction of what the country had managed in better years. The lesson is double edged. Sri Lanka proves that sustained social investment delivers real, durable human development gains. It also proves that those gains are not permanent. They depend on a government's continued ability and willingness to pay for them, and that ability can vanish within a single fiscal year if debt and currency pressures spiral out of control.
Where Each Country Stands on the Human Development Index, 2025
None of this is happening in a vacuum. The wider region is heading into a moment where the cost of underinvestment is about to become much harder to ignore.
The World Bank's October 2025 South Asia Development Update projects regional growth of six point six percent for 2025, easing to five point eight percent in 2026, and it points to artificial intelligence as a meaningful source of future productivity gains, particularly for the roughly fifteen percent of South Asian workers whose jobs could be strongly complemented by AI tools.
That opportunity, however, is not evenly available. It depends entirely on whether a workforce has the basic literacy, numeracy and digital skills to work alongside these tools in the first place. A country spending zero point eight percent of GDP on education is not preparing its people to seize that opportunity. It is preparing them to be left further behind by it.
The same divide shows up in global innovation rankings. India has climbed to thirty eighth place in the 2025 Global Innovation Index, helped along by strong performance in technology services exports and venture capital activity. That is a genuine achievement, built around a small number of elite institutions and a handful of urban tech hubs.
But it sits awkwardly alongside the fact that roughly thirty percent of Indian women remain non literate, a figure that has barely moved in a generation. An economy can lead the world in unicorn valuations and still leave the majority of its own population without the basic education needed to participate in that success. Those two facts are not contradictions. They are two sides of the same underspending problem, simply distributed unevenly across a very large population.
It would be a mistake to treat all of this as simple negligence on the part of governments, because real constraints are at work. Pakistan's budget is squeezed hard by debt servicing and by IMF conditions that, while aimed at restoring macroeconomic stability, have repeatedly forced cuts to social spending as the easiest short term lever available.
India's federal structure genuinely complicates coordination between national and state governments on both education and health. Bangladesh has poured its fiscal energy into infrastructure and export competitiveness in ways that produced fast growth without building the social safety net to match it.
Sri Lanka's crisis grew out of years of tax cuts that narrowed government revenue until a single external shock proved enough to break the system. These are real and serious constraints. But they are the product of choices made over time, not unavoidable facts of geography or history, and that means they remain choices that can still be changed.
What would changing course actually require. Analysis from EY India lays out one concrete path for India, arguing that government revenue would need to rise from roughly twenty one percent of GDP to around twenty nine percent, with about five and a half percentage points of that increase directed specifically toward education and health.
That is not a small ask, but it is also not an impossible one for an economy of India's size and growth trajectory. Bangladesh's economists have called for a doubling or more of current education spending, up toward six percent of GDP, alongside five percent on health, arguing this is the only way to avoid the well documented trap where rising wages erode export competitiveness before a workforce has developed the higher skills needed to compete on quality instead of price.
For Pakistan the math is more sobering. Reaching even the regional average for education and health spending, let alone international norms, would require a multiple of current allocations at a time when debt service already consumes a large share of the federal budget and provinces are being asked to generate fiscal surpluses rather than additional spending room.
The same report that produced the zero point eight percent figures was blunt about what continued underinvestment threatens. Productivity growth, export competitiveness and long term economic prosperity were all named directly as casualties of the current trajectory, and the report went further, questioning whether Pakistan's stated ambitions around artificial intelligence, startups and digital transformation can be taken seriously while the underlying education and research base needed to support them continues to shrink in relative terms.
Step back from any one country and a single thread runs through all four cases. Spending on education and health is not a reward a country gives itself once it becomes wealthy. It is one of the conditions that makes durable wealth possible in the first place.
India's life expectancy gains and Sri Lanka's literacy record both show what sustained, if still incomplete, investment can build over a generation. Pakistan's stunting rate and Bangladesh's out of pocket health crisis both show what happens when that investment is treated as optional. None of these four countries is the same as it was in 2016, and none of them will look the same again in another ten years.
The direction of that change, upward or downward, will be decided less by global economic conditions than by a much more ordinary and controllable factor, how much of next year's budget each government is willing to spend on the people it governs.
0 Comments