MUMBAI, India — In what would be a landmark increase in the Indian government’s spending on public health, New Delhi is completing a proposal to provide hundreds of essential drugs free to patients in government-run hospitals and clinics at a cost of nearly $5 billion over five years, officials said Thursday.


The proposal, which could receive government approval next month, would try to fill a gaping hole in the provision of health care at state-owned hospitals, many of which require patients to buy their own drugs, including substances as basic as intravenous fluids. Specialists say it could also be the first step toward a more comprehensive universal health care system in India, which, with 1.2 billion people, is the world’s most populous country after China.


Drugs account for more than 70 percent of out-of-pocket medical costs for Indians. Government hospitals and clinics provide free or low-cost care, but most of them struggle to keep up with demand, and the quality of care can be poor.


For Western drug makers, which have long chafed at India’s comparatively weak protection of their patents, the government’s plan could be another blow. Although they only have a tiny share of the Indian market, Western drug companies are looking at India and other emerging markets as a vital source of growth as sales flatten in the United States and Europe. Under the proposal, the government would only buy cheap generic versions of drugs, making it more difficult for brand-name drugs to be sold.


The policy move is part of India’s stated goal of increasing spending on health care to about 2.5 percent of its gross domestic product from about 1.4 percent. By contrast, the Chinese government spent about 2.3 percent of its G.D.P. on health care in 2009 and Sri Lanka spent about 1.8 percent.


An official in the India’s Ministry of Health and Family Welfare said the federal government would spend about 200 billion rupees ($3.6 billion) on the program over five years. State governments, which are being consulted on the proposal, would be asked to chip in another 66 billion rupees ($1.2 billion). The proposal is part of the country’s 12th five-year plan, which covers the government’s big spending programs from 2012 to 2017 and is expected to be approved in August.


“This new initiative, if approved as a part of the five-year proposal, would be a giant step in vastly expanding the access to medicines,” the official, Dr. Arun K. Panda, a joint secretary in the ministry, said in an e-mail message.


Dr. K. Srinath Reddy, who led a committee advising the government on health care for the five-year plan, said the distribution of free drugs could be the first step in a process of providing tax-supported universal health care in India, which he said could take 10 to 15 years.


Initially, India would probably provide 350 drugs that are on a government list of essential medicines, said Dr. Reddy, who has no connection to the Indian generic drug company Dr. Reddy’s Laboratories. Many of the drugs probably would be produced by India’s many generic drug companies, which include Cipla, Lupin and Ranbaxy. In February, Prime Minister Manmohan Singh announced that the Health Ministry had begun setting up an agency to buy drugs in bulk.


Big Western pharmaceutical companies like Abbott Laboratories that have acquired Indian generic drug makers could also supply the government, but the program would exclude more lucrative brand-name drugs like Lipitor and Plavix produced by those companies..


Spending on drugs in India was $14.3 billion in 2011, including $3.3 billion for brand-name drugs, according to the IMS Institute for Healthcare Informatics. Total drug spending is expected to more than double by 2016, to $29 billion.


For Western drug makers in India, the target is not the poor but the growing middle and upper-middle classes, many of whom use private clinics and doctors, which are excluded from the current subsidy proposal. Given questions about the quality and regulation of India’s generic-drug manufacturers, Western companies are hoping that Indians with money to spare will decide to opt for brand-name drugs or so-called branded generics, which carry the names of major drug makers.