What Healthcare System Expects From Union Budget 2021

By Rahul Vig and Neha Gupta Also Read – Budget 2021: Will Govt Bring Cheer to Pandemic-hit Middle Class? A Look at Expectations This Year

While discussions around the Budget are doing the rounds and our eyes are fixed on the ”Budget as Never Before” as announced by our Hon’ble Finance Minister, one pressing sector which is expected to be looked at from different lens is the healthcare sector. Also Read – Budget 2021: Nirmala Sitharaman Holds Pre-Budget Meeting With Finance Ministers From All States

To nullify the effect of the ongoing pandemic, the economy is required to be manoeuvred in a rather focused manner so as to enable a stable economy while also keeping in mind the objective of sustainable growth. A new canvas would be required to shape the picture of India’s healthcare sector and act as a roadmap to overcome and plug in the lacuna this pandemic has created. Also Read – Fifth Session of Seventeenth Lok Sabha To Commence On January 29, Likely to Conclude on April 8

Certain measures like increasing public spending through subsidized loans, providing land for new hospitals, and encouraging Corporate Social Responsibility (CSR) spend by allowing it as a tax-deductible expense will also improve funding in the healthcare sector.

Despite new policies around innovation, a huge number of start-ups have failed in the past one year majorly due to financial crunch and investment deprivation. Government of India should include healthcare sector’s start-ups in the Micro, Small and Medium Enterprises (MSME) category so that such start-ups can avail the advantages that are offered to the MSME category and access funding.

Reintroducing tax holidays for rural hospitals, providing flexibility to select beneficial years and viability gap funding by the government for investors, setting up hospitals in smaller cities to increase Ayushman Bharat’s provided base would make India viable and an attractive destination for healthcare players to invest across India and boost the medical sector.

As per a report of the Ministry of Electronics, India has a trillion Dollar digital opportunity. The advancement of digital health largely propelled by health-tech firms has the potential to revolutionise and provide a new perspective to the healthcare sector. The pandemic has shown that telemedicine, in addition to many other applications in education, training and health sector management, can be handy to address the challenges of providing healthcare to rural and remote areas. A rational strategy is expected by the health-tech community which will help in developing sustainable business models with resilient digital health ecosystem. Applicability of lower corporate income tax rate to health-tech firms, will provide the sector with much needed momentum.

Although provision of healthcare services is currently exempt, tax on inputs continue to add to costs as there are no input tax refunds. Categorising life-saving drugs at the lowest rate of GST and “zero-rating” of GST for healthcare services will increase affordability. Further, the prescribed time limit (i.e., September of the next financial year in which the supply was made) to adjust the tax liability of credit notes should be relaxed for expired medicines returned to the manufacturer/wholesaler.

The government should also look at increased spending towards better preparedness in managing uncertain situations, arising out of emerging diseases. We need to have a connected healthcare ecosystem where data on real time basis from premier government and private hospitals, and diagnostic centres can be used to track and monitor any changes in the disease patterns. The National Digital Health Mission initiative is a step in the right direction. This needs to be strengthened and investment is needed to create infrastructure and capacity for collecting and analysing data for better management.

With regard to the Production Linked Incentive (PLI) scheme for manufacturing of APIs (active pharmaceutical ingredients) /KSMs (key starting material), announced during mid last year, currently financial incentives are available to the to manufacturers of identified APIs/KSMs (53 critical APIs) for 6 years. Government may consider introducing measures and ease norms to increase investment in drug manufacturing. The government may even consider extending the period of PLI incentives, given the gestation period to achieve commercial production.

Government’s plan of devoting 2.5% of the GDP by 2025 on the healthcare sector (as per the target in the National Health Policy, 2017), is expected to be implemented by announcement of significant allotments in this year’s Budget for annulling Covid-19 impact and creating a robust system for preparation and distribution of Covid vaccines. Having said that a balanced approach would be required for reducing stress on other sectors as well.

[Rahul Vig is Partner and Neha Gupta is Director with Deloitte Haskins and Sells LLP]

(Disclaimer: Views expressed here are of the authors and not of India.Com)