Towards a robust healthcare sector

Suneeta Reddy | Updated on February 17, 2021

While the Budget initiatives are welcome, the private sector must be incentivised to strengthen the system

Unprecedented crises call for unparalleled measures. Budget 2021-22 announced a record healthcare spending of over ₹2-lakh crore over a six-year period. The immediate effect would be short-term fixes necessitated by the devastating effects of the pandemic. However, the expenditure is bound to pave the way for structural improvements in the healthcare sector over the long-term.

The Budget has rightly addressed the issue of well-being as the path to better health. The tone for holistic progress is set in bold letters. The next step is to lay out tangible intermediate plans that enable us to achieve sustainable well-being.

India’s GDP is seen contracting by 7.7 per cent in 2020-21 — the worst decline since 1952. The budgeting exercise is a gargantuan task, even in normal times. The event assumes greater significance as the country manoeuvres a vulnerable state of economic affairs. A comprehensive coverage, measures to establish a rational policy stance, and the willingness to acknowledge and remedy fiscal fragility are some its strengths.

Allocation to healthcare

Out of the ₹2-lakh crore, ₹35,000 crore has been earmarked for Covid vaccination. A chunk of the allocation is towards preventive healthcare. The Departments of Health and Family Welfare, Drinking Water and Sanitation receive considerable allocations. While this is expected to contribute to the ideal goal of ensuring good health through wellness and prevention, the increase in the allocation to the National Health Mission could have been more robust.

Another welcome move is the provision of ₹64,180 crore to the newly launched Pradhan Mantri Atmanirbhar Swasth Bharat Yojana. The plan aims to strengthen health systems. The government’s proposal to support 17,000 rural and 11,000 urban health and wellness centres will augment the level of care and outreach across different strata of society. The marginalised sections will be beneficiaries of these centres. The allocation focusses on addressing pressing issues of equity and inclusion.

Investment in health infrastructure has multiplier effects through growth and employment. The government’s move to launch a new plan augurs well for the healthcare sector, especially at a time such as now, when the country’s health systems have been tested by a distressing pandemic. The intention of investing in health infrastructure, research and vaccination is in the right direction. Particularly noteworthy are the focus on primary, secondary and tertiary care centres, the emphasis on Centres for Disease Control and Prevention, and research labs to monitor instances of the emergence of viruses.

The decision to set aside ₹20,000 crore for the establishment of a Development Finance Institution (DFI) is timely. The DFI is expected to build an infrastructure lending portfolio of ₹5-lakh crore in three years. This is a great opportunity to beef-up the health infrastructure in India, which currently has less than nine beds per 10,000 population.

The government, it is hoped, will formulate investment-linked incentives that encourage private sector investment in healthcare. Given that over 80 per cent of Indians rely on private healthcare, it is important that the government offers incentives to the private sector to strengthen the health systems. As such a strategy proved successful in the manufacturing sector, that can be replicated in private healthcare too.

Both research and practice have shown how effective collaboration between the public and private sectors is, especially for a large nation like ours. The government has expressed support to the private sector. In this regard, a more granular plan from the government regarding the next steps would be required.

The Government coffers were stressed even before the virus surfaced. With the fiscal deficit projected to rise to 9.5 per cent of GDP in 2020-21 as against the previous target of 3.5 per cent, it is natural to turn to non-tax receipts for resources. A major disinvestment programme was Hobson’s choice. In addition to monetising public sector assets, the disinvestment exercise will try to bring in private sector efficiencies.

Given that the fiscal deficit glide path to 4.5 per cent has been charted out, public sector spending ability over the next four years should facilitate the rationalisation of GST, Customs and other taxes. Currently, the healthcare sector pays GST on inputs, injectables, and so on, but is unable to recover it from billing. This has resulted in a significant negative impact on healthcare providers. A coordinated effort by the government in reducing these taxes will help private healthcare players offer services at more reasonable rates.

Long India

This is a Budget that has made us sit up especially with a sustained surge in the Sensex. Market capitalisation of international stocks surged during the lockdown, thanks to surplus cash and low interest rates. The Wall Street threw up a surprise as investors profited from a short position. With the IMF forecasting GDP growth of 11.5 per cent in FY-22, India is definitely a destination to go long on. The focus on primary, secondary and tertiary care centres, the emphasis on Centres for Disease Control and Prevention, and research labs to monitor instances of the emergence of viruses are particularly noteworthy.

The IT sector offered high returns over the last couple of decades, thanks to government support in terms of offering free land, a 15-year tax holiday and other benefits. If a similar level of support is extended to the healthcare sector, the dividends that society will reap will be much higher. Both in terms of better health and more jobs. And, of course, the accompanying multiplier effect.

The writer is MD, Apollo Hospitals

Published on February 17, 2021

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