Health and Sustainable Development: Investing in Human Capital

Good health is not just a personal asset. It is one of the foundations on which a nation builds its economy, its workforce, and its future. When people are healthy, they learn better, work longer, and contribute more. When they are sick, malnourished, or burdened by preventable disease, that potential is lost. This is why health sits at the heart of sustainable human development, and why economists increasingly treat it as a form of human capital, an investment that pays returns across a person’s entire lifetime.

Why health is central to human development
The link between health and productivity
The challenge of low health spending
Out-of-pocket spending and its burden
Health disparities in maternal and child health
Progress and persistent gaps
Tackling micronutrient deficiencies and malnutrition
Safe water, sanitation, and the hidden link to health
Policy responses and the road ahead

Why health is central to human development

Sustainable human development is about expanding people’s capabilities so they can lead lives they value. Health is the most basic of these capabilities. Without it, education, income, and participation in society all become harder to achieve. The World Bank notes that children growing up today are likely to be only about half as productive as adults as they could have been with full education and good health. That gap represents lost wages, lost output, and a slower path out of poverty for millions of households.

The idea of treating people as a resource worth investing in is not new. As early as 1776, Adam Smith pointed to individual abilities as a source of national wealth, an idea later formalised as human capital. Modern policy frameworks build directly on this thinking. Investment in health, education, and skills is now widely seen as essential to economic growth, social mobility, and the achievement of the Sustainable Development Goals.

The link between health and productivity

The connection between health and economic performance works in both directions. A healthier population means higher life expectancy, fewer days lost to illness, and stronger physical and mental capabilities at work and in school. It also reduces the money households and governments must spend on treating preventable conditions, freeing resources for other priorities. This is why public spending on health is best understood not as welfare expenditure but as an investment with measurable returns.

There is also an important conceptual distinction worth keeping in mind. The human capital approach values health and education because they raise productivity, treating people as a means to economic ends. The human development approach, by contrast, values health and education as rights and ends in themselves. Both views support strong investment in people, but the second reminds us that good health matters even when it cannot be tied to a rupee figure.

The challenge of low health spending

One of the clearest obstacles to better health outcomes in low- and middle-income countries is simply that not enough is spent on health. According to comparative data, total health spending here stood at around 3.31 percent of GDP in 2022, well below the world average of roughly 6.74 percent across 185 countries. Government spending specifically has historically hovered close to 1 percent of GDP.

This low level of public spending has consequences. Underfunded public hospitals, shortages of doctors and nurses, and uneven access in rural areas all push people toward private care, which is often far more expensive. The National Health Profile once showed public health expenditure trailing even several lower-income neighbours. Recognising this, the National Health Policy of 2017 set a target of raising public health expenditure to 2.5 percent of GDP, a goal designed to align domestic spending with the wider Sustainable Development Goals.

Out-of-pocket spending and its burden

When public funding falls short, families pay the difference directly. This is known as out-of-pocket expenditure (OOPE), and it remains stubbornly high. A systematic review found that OOPE accounted for about 47.1 percent of total health expenditure in 2019-20. Even after recent declines, this means nearly half of all health spending comes straight from household pockets.

High out-of-pocket costs do more than strain budgets. They can push families into poverty when a single hospitalisation wipes out savings, a situation researchers call catastrophic health spending. This is precisely the problem that schemes like Ayushman Bharat and the Pradhan Mantri Jan Arogya Yojana aim to address, by offering health insurance coverage to economically vulnerable households and reducing the financial shock of serious illness.

Health disparities in maternal and child health

Some of the sharpest health inequalities show up in maternal and child health, where the consequences of inadequate care are immediate and severe. A mother’s health directly shapes her child’s survival and development, making these two areas tightly linked. Poor maternal nutrition, limited antenatal care, and unsafe deliveries contribute to high rates of maternal and infant mortality, especially among poorer and rural populations.

Progress and persistent gaps

There has been measurable improvement. Findings from the latest National Family Health Survey show institutional deliveries reaching 90.6 percent and antenatal care coverage rising to 95.9 percent, with full child immunisation improving to 87.1 percent. These gains reflect sustained investment in primary healthcare, immunisation drives, and nutrition programmes.

Yet gaps remain. Maternal healthcare services are meant to be free at the point of delivery, but a multilevel analysis of national data found that the majority of households still reported paying for maternal care, with those using private facilities paying several times more than those using public ones. Indirect costs, transport, and lost wages add to the burden, particularly for rural and poorer families. Progress in headline indicators does not automatically mean care is affordable or equally accessible.

Tackling micronutrient deficiencies and malnutrition

Beyond access to clinics, the quality of nutrition shapes health outcomes profoundly. Micronutrient deficiencies, often called “hidden hunger”, affect a large share of the population. Anaemia, the most common form, affects an estimated 50 to 60 percent of preschool children and women, while deficiencies in vitamin A, iodine, vitamin B12, and others remain widespread.

The economic cost is significant. Research published in the medical literature estimates that micronutrient deficiency can cost a developing economy around 1 percent of GDP through lost productivity, illness, higher healthcare costs, and premature death. Deficiencies impair learning, weaken immunity, and trap families in a cycle of malnutrition and poverty that passes from one generation to the next.

Addressing this requires more than supplements. Nutrition programmes typically combine iron and folic acid supplementation, deworming, vitamin A and calcium support, universal access to iodised salt, and dietary diversification. Food fortification, adding micronutrients to staples such as rice and wheat, has emerged as a cost-effective way to improve nutritional status across whole populations. Because maternal malnutrition feeds directly into child malnutrition, improving women’s nutrition is treated as a priority intervention.

Safe water, sanitation, and the hidden link to health

Health outcomes also depend heavily on factors outside the clinic. Access to safe drinking water and proper sanitation may be the most underrated of these. Contaminated water and open defecation spread infections that directly undermine nutrition, even when food intake is adequate.

The link is concrete. Soil-transmitted helminth infections, spread through poor sanitation, cause chronic blood loss and block nutrient absorption, fuelling both anaemia and malnutrition. Evidence suggests that improved sanitation can reduce the risk of these infections by around 40 percent. In other words, a toilet and clean water can do as much for a child’s health as a nutrition supplement. This is why effective health policy treats water, sanitation, food, and healthcare as parts of a single, connected system rather than separate problems.

Policy responses and the road ahead

The policy direction is clear even if implementation remains uneven. Flagship programmes now combine insurance coverage, primary care through Health and Wellness Centres, nutrition support, immunisation, and sanitation drives. The deeper challenge, as analysts at policy research bodies argue, is strengthening delivery mechanisms so that funding actually reaches the people who need it, with transparency and accountability.

Investing early offers the highest returns. The economist James Heckman has shown that interventions in early childhood, covering health, nutrition, and learning, produce gains that compound over a lifetime and even across generations. For a country with a large young population, getting this right is the difference between a demographic dividend and a demographic burden. Health, in this sense, is not a cost to be minimised but the foundation on which sustainable development is built.

What do you think? If health spending were doubled tomorrow, would you prioritise building more hospitals, expanding nutrition and sanitation programmes, or strengthening insurance for the poorest, and why? And how should a society balance treating health as an economic investment against treating it as a basic right that everyone deserves regardless of their productivity?

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Table of Contents

Why health is central to human development 🔗

The link between health and productivity 🔗

The challenge of low health spending 🔗

Out-of-pocket spending and its burden 🔗

Health disparities in maternal and child health 🔗

Progress and persistent gaps 🔗

Tackling micronutrient deficiencies and malnutrition 🔗

Safe water, sanitation, and the hidden link to health 🔗

Policy responses and the road ahead 🔗