Considerable progress has been made in improving the health status of the population over the last half-century. Despite this impressive progress, many challenges remain. The life expectancy is still 4 years below world average. So is under five mortality (12 per 1000 per year) higher that global average. Lot needs to be achieved in managing the communicable diseases. New disease patterns and non-communicable diseases are also emerging as major challenges. In this paper we make an attempt to explain the tardy progress in the health sector. The programme management by public sector, allocation of public resources to health sector, centre-state roles and financing of programmes, private sector role, contribution and role of NGOs, public-private partnerships in health have been discussed to paint a broad picture. The paper suggests that key challenge in the next century is the leadership challenge and reforms in the health sector require several measures. First, it requires a policy and programme emphasis that ensures access to quality primary health care for all. Second, there is need for inclusive political dialogue and decision making which will involve community groups representing voices of the poor, local private sector and the government in operationalizing the new vision of health sector. Third, the social capital in the sector needs to be built up which will promote trust, cooperation and other norms that enable health markets to function effectively.