Healthcare Sector Expectations from the Union Budget Amidst the Pandemic

Introduction

Healthcare is one of the biggest priorities for India's people and its government. With Covid cases resurging once again on account of the third wave of the pandemic, the sector will find itself stretched thin once again. The previous two waves exposed several issues in India's healthcare infrastructure, and to fix this, experts and key players in the sector have certain expectations from the Union Budget.

Apart from increased allocations, the healthcare sector expectations also include more investment in research and development, support for telemedicine and a greater focus to vaccinate the country's population.

Outlined below are some of the critical healthcare sector expectations from Budget 2022:

1. Greater Resource Allocation

In the Union Budget announcement of 2021-2022, the Finance Minister allocated *1.2% of the gross domestic product to the public health sector. According to industry experts monitoring the situation, India needs to increase its public healthcare spending to 2.5%-3.5% of GDP to assist the transformation in supporting the ongoing healthcare crisis.

2. Funds for Vaccination Programs

As of 30^th December 2021, only **64% of India's adult population is fully vaccinated. That leaves almost one-third of the adult population to be jabbed. Then, children need to be vaccinated too. Healthcare sector expectations include allocating appropriate resources for vaccination drives, booster shots and children's doses in Budget 2022.

3. Reduction in Taxes for Drugs

The Goods and Services Tax on drugs ranges from 0% to 18%***. While some life-saving medicines fall under the zero GST slab, most drugs are taxed 12%*. Given the crucial role of the healthcare and pharmaceutical industry during the pandemic, they expect a cut. Healthcare players are also hoping for a tax deduction on product development and in-house R&D.

4. Increased Credit Line

Apart from higher GDP allocations and reductions in taxes, the healthcare sector is also seeking additional support in increased credit lines. Hospitals are hoping for more incentives or added depreciation for greenfield hospitals boosting the healthcare infrastructure in the country.

5. Support to Telemedicine

Another area of contention for healthcare players is telemedicine and digital healthcare. During the pandemic, many people resorted to digital healthcare facilities. Telemedicine in smaller cities, towns and rural areas helped ease some of the strain on the healthcare infrastructure. Industry experts and even the common public are hoping for more resource allocation and support to this sector so that private players and startups can increase their coverage further to reach more individuals requiring these services.

Conclusion

In the previous Budget, the government made many budgetary allocations and announcements to aid the healthcare sector. Given that the pandemic is still ongoing, healthcare and pharmaceutical industry support should be utmost priority in the upcoming Union Budget.

*1.2% of GDP (source – The Economic Times as of 21^st Oct 2021)

**64% (source – BBC News as of 31^st Dec 2021)

***0% to 18% (source – Cleartax as of 12^th Jan 2022)

****12% (source – Cleartax as of 12^th Jan 2022)

Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.