By Invitation. Union Budget: Hopeful of an investment blueprint for healthcare

India’s healthcare sector witnessed a remarkable year in 2023, characterised by significant mergers and acquisitions, consolidation, robust private equity investments, a notable upsurge in stock prices, and enhanced financial performance. The healthcare industry sustained its robust growth trajectory, achieving a valuation of $372 billion. This growth was propelled by vigorous contributions from both the private sector and government initiatives.

The private sector displayed healthy investment patterns, focusing on expanding capacities in various domains such as hospitals, diagnostics, and medical devices. Now, amid the fast-changing healthcare landscape and with Covid-19 once again in the spotlight, the upcoming Union Budget 2024 holds significant importance in strengthening India’s healthcare ecosystem. The healthcare industry and the diagnostic sector expect the Budget to serve as a driving force, channelling investments towards critical areas such as innovation, research and development, technology, upgrading healthcare infrastructure and bolstering patient safety measures.

Upskilling to battle NCDs

In the sprawling healthcare landscape, diagnostics play a vital role in the early identification of diseases, precise diagnosis, customisation of treatment strategies, disease progression monitoring, infectious disease management, cost reduction in healthcare, and the advancement of medical research and innovation. Given the rising burden of Non-Communicable Diseases (NCDs), there is a clear necessity for regular and inclusive screening and diagnostics programmes along with more skilling courses for health professionals to attract as well as upskill talent in the diagnostic space.

The Budget would do well to encourage partnerships between the government and private sector to enhance healthcare professionals’ expertise. Prioritising funding for screening and diagnostic programs targeting NCDs like cancer and cardiac ailments, in collaboration with the private sector, will greatly benefit healthcare. Early diagnostics for diseases such as cardiovascular issues and cancer are crucial for crisis management and better outcomes. As a matter of priority, the Budget could also allocate funds for training doctors, nurses and allied healthcare workers, with a focus on digital learning and smart certifications.

GST exemptions

While budgetary support for the diagnostic sector would be welcome, the critical diagnostic elements that warranted investment but were overlooked in the previous budget require immediate attention. The healthcare industry faces substantial challenges due to indirect taxation and the absence of input credits for providers. We would strongly urge the government to consider zero GST on diagnostic services and facilitate refunds for GST paid on input tax credits. This move could potentially decrease the cost of these services. Furthermore, allowing refunds for unused input tax credits would offer additional working capital to industry players.

Leveraging the input credit from GST payments can empower healthcare providers to reduce prices for patients, making services more accessible, especially in smaller towns.

Recognising that 60 percent of India’s diagnostics are reliant on imports, it becomes paramount for the government to rationalise import tariffs on healthcare products. Lowering the substantial customs duty on imported diagnostic equipment and kits could enhance efficiencies for major diagnostic chains, and foster increased investments in research and development. Currently, high GST rates on diagnostic equipment, reagents, lab supplies and devices act as obstacles to bringing down the cost to the consumer. Healthcare costs would reduce considerably if the Budget removes GST from diagnostics equipment and consumables, at least for products made in India.

Low-cost financing

Hopefully, the Budget would also address the need for low-cost financing schemes on a priority basis to enable private players to upgrade and add diagnostic infrastructure in tier 2 and 3 geographies. The healthcare industry requires a favourable business environment to remove significant obstacles to investments and funding.

Designating healthcare as a national priority sector would enable banks to offer extended, more affordable financing options to private healthcare institutions, thereby mitigating the high cost of financing. Tax exemption for fresh projects and tax relief for existing projects could serve as reinvestment support. These initiatives will not only enhance accessibility and affordability but also lay the groundwork for a robust healthcare ecosystem that can effectively combat present and future healthcare challenges.

Way forward

At 2.1 per cent of the GDP, India’s healthcare expenditure remains inadequate. We anticipate a significant rise in the allocation for public health, aiming to eventually achieve 2.5 per cent of GDP, aligning with the government’s objective by 2025.

However, it must be borne in mind that since two-thirds of Indians prefer treatment in the private healthcare sector, the government would do well to focus on the private sector by formulating industry-friendly policies and holding it accountable to ensure that minimum quality standards and patient safety are maintained. The challenges facing the diagnostic

sector require a comprehensive strategy encompassing investments in healthcare infrastructure, workforce training, quality control protocols, and public health education. Boosting investment in research and development and fostering public-private collaborations will also play a crucial role in augmenting India’s diagnostic capacities for emerging infectious diseases surveillance and detection. The diagnostic sector is looking forward to a strategic investment blueprint in the upcoming Budget to make it as future ready as possible.

Ameera Shah, Promoter & MD, Metropolis Healthcare

(The writer is Promoter and MD, Metropolis Healthcare. Views are personal.)

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