The upcoming Budget session will be the second one under the cloud of a full-fledged pandemic, which should, ideally, drive higher allocations to long-term healthcare. The duration of pandemic specific spends will be built on disease severity which has been easing, but neither contagiousness nor commentary from the scientific community is offering any hope of an endgame.

FY2021-22 BE included an outlay of ₹73,932 crore for the Department of Health & Family Welfare (excluding outlays for vaccine, water and health), which is a 10 per cent growth over previous year, but less than 0.3 per cent of provisional GDP for FY21-22. This is overwhelmingly low and should ideally see a bump up. The government’s own National Health Policy calls for an increase in public health expenditure to 2.5 per cent of GDP by 2025 which in itself is seen as a bare minimum (Economic Survey 2021 observes that India ranks 179/189 countries in public healthcare allocation).

But last year’s numbers also included a ₹35,000-crore allocation to vaccines and a ₹96,000-crore allocation towards Water & Sanitation (346 per cent YoY growth) and ₹13,192 crore allocation to health, from the Finance Commission which, together, pushed the overall health and welfare budget to over 1.1 per cent of GDP. On the vaccine front, as booster doses are expected to be a yearly feature, allocation to vaccine budget as well as provisions for other options (pills, symptomatic treatment, laboratory testing and medical devices) will be a key monitorable.

Long-term plans like PM AtmaNirbhar Swasth Bharat Yojana (FY21-22 BE outlay of ₹64,180 crore over 6 years) for supporting health infrastructure and ‘One Health’ Mission (integrating health care surveillance across the country) can be expected to be fleshed out in more detail. The ones that already found good traction - Jal Jeevan Mission for water & sanitation (₹2,87,000 crores over 5 years) and Swachh Bharat (₹1,47,000 crore over 5 years), may find higher allocation.

The FDI limit in insurance has been inching up and is now at 74 per cent, with no tangible results in penetration or pricing, as was hoped for. This implies a need for a different approach in driving private participation in insurance, starting with lower taxes for the industry. The universal insurance coverage scheme (Ayushman Bharat – ₹6,400 crore in FY21-22) witnessed no increase in allocation last year. Given the strong traction in coverage and pandemic impact, higher allocations on this front are expected. Regulatory or fiscal support to latest digital based health solutions, including tele medicine and digital record-keeping, may be expected.

From the industry point of view, restoring R&D weighted tax deduction which had been halved to 100 per cent in 2020 is a key for enhancing research capabilities. The healthcare service providers would benefit from lowering GST on device imports, from 18 per cent currently. The hospital industry would benefit from a tax holiday of 10-15 years for setting hospitals - akin to one provided to IT earlier – helping drive the investment cycle.

Key expectations
Boost healthcare allocation to reach 2025 target of 2.5% of GDP
Vaccine budget should consider booster dose
Industry demands tax incentives for insurance and hospital industry
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