By empowering Local Government Institutions (LGIs) with greater administrative authority and fiscal autonomy, decentralisation has made health systems more responsive to local needs across India. Kerala offers a compelling illustration. Decades of investment in public health, strong local institutions and favourable social outcomes have made it one of India’s best-performing health systems.
Yet, once health outcomes improve and begin to stabilise, conventional performance indicators become less effective at distinguishing between systems that merely sustain good performance and those that continue to improve. Success therefore raises a different policy question: how should governments evaluate decentralisation once health systems mature?
When Success Changes the Question
By 2021, Kerala’s Infant Mortality Rate (IMR) across districts ranged between 3 and 11, comparable to levels observed in several OECD countries. Similar progress is evident across maternal mortality, stillbirths and overall mortality. The state also ranks first nationally in the Panchayati Raj Index across Gram, Block and District Panchayats, reflecting the maturity of its decentralised governance system.
Even within this high-performing system, expenditure utilisation varies substantially across local governments. While some utilised barely half of their planned expenditure, others exceeded their original allocations. Yet these differences are not systematically associated with infant mortality, maternal mortality, stillbirths or overall mortality. Rather than indicating that decentralisation has ceased to matter, this suggests that traditional outcome indicators no longer capture the full contribution of mature decentralised institutions. Once health outcomes have largely converged, the policy challenge shifts from measuring improvements in mortality to understanding how local governments sustain performance, adapt to emerging public health challenges and continue to strengthen service delivery over time.
Success Changes How Systems Improve
Part of the explanation lies in how successful public systems evolve. The earliest investments in immunisation, maternal care, sanitation, nutrition and primary healthcare typically generate the largest improvements in health outcomes. As these interventions become widespread and health indicators improve, each additional investment tends to produce diminishing improvements. This is a familiar characteristic of mature public systems: as they approach the frontier of performance, further gains become progressively harder to achieve and even harder to observe.
The role of decentralisation evolves alongside this transition. In the early stages, expanding fiscal and administrative autonomy enables local governments to extend access to essential services and improve basic health outcomes. Once broad access has largely been achieved, however, differences in performance depend less on expanding coverage and increasingly on how effectively institutions organise, coordinate and improve those services. Continued progress therefore depends on capabilities such as administrative effectiveness, intergovernmental coordination, responsiveness to local needs, organisational learning and the ability to adapt to emerging public health challenges.
This distinction reshapes how decentralisation should be evaluated. In the earlier stages of health system development, governments primarily assess whether it improves health outcomes. In mature systems, they must also evaluate whether local institutions possess the capability to sustain, adapt and continuously improve those outcomes.
From Measuring Outcomes to Measuring Capability
Financial devolution and public expenditure remain indispensable because adequate resources are the foundation of effective service delivery. As health systems mature, however, evaluation frameworks need to examine how local governments convert those resources into effective public services through planning, coordination, implementation and adaptation.
Many of the capabilities that distinguish stronger local institutions are inherently difficult to observe because they reflect how organisations function rather than what they spend. Administrative effectiveness, coordination across tiers of government, quality of frontline service delivery, data-informed decision-making, responsiveness to local needs and organisational learning rarely appear in conventional expenditure statistics, yet they often determine whether mature health systems can sustain performance and respond effectively to new public health challenges.
Capturing these capabilities requires richer and more consistent local-level evidence than expenditure accounts or aggregate health indicators can provide. Kerala’s expanding digital public data systems offer an important foundation, but comparable longitudinal data across all tiers of local government will be essential if governments are to understand how institutional capability shapes health system performance over time.
When Evaluation Must Evolve
Kerala’s experience is distinctive, but its broader implications extend well beyond one state. As more Indian states strengthen their health systems and expand the role of local governments, they are likely to encounter similar evaluation challenges.
Where baseline health system capacity remains limited, greater fiscal and administrative autonomy can continue to generate substantial improvements in health outcomes. As health systems mature, however, governments need to better understand how institutional capability, innovation and service quality sustain and extend those gains.
Kerala’s experience suggests that decentralisation should now be judged not only by the outcomes it produces but also by the institutions it creates. As more health systems approach higher levels of performance, the challenge will shift from expanding access to strengthening the organisational capabilities that sustain improvement over time. Evaluation frameworks therefore need to evolve alongside the systems they are intended to assess. Only then can governments fully understand how decentralised institutions continue to create public value long after the largest gains in health outcomes have already been achieved.