It’s not a secret that the country’s healthcare system consistently needs more funds. Ideally, India should be spending at least 2.5- 3 per cent of its Gross Domestic Product on the healthcare system. Sadly, it does not. The healthcare sector and bodies affiliated with it have once again big expectations from the upcoming Union Budget. Take, for example, the growing dependence on imported medical devices flooding the market from China and the United States. 

Rajiv Nath, Forum Coordinator, Association of Indian Medical Device Industry (AiMeD) wants the government to protect the manufacturing base in India by increasing the basic customs duty (BCD) on the import of medical devices to at least 10/15 per cent. 

Currently, it’s up to 7.5 per cent. Nath says the WTO-bound rate is mostly 40 per cent. “Due to such low customs duty, India is over 80 per cent import dependent. This can be reduced to below 30 per cent with correct policies as done for mobile phones and consumer electronics,” Nath says.

India imported medical devices worth Rs 63,200 crore in 2021-22, up 41 per cent from Rs 44,708 crore in 2020-21, as per data from the Union Ministry of Commerce and Industry. “Despite PM Narendra Modi’s call for making the country Aatmanirbhar, India’s trade deficit with China has been rising sharply. The overall trade deficit with China widened to a record $72.9 billion in 2021-22,” says Nath pointing to the data. 

Increase Budget Allocation

Industry pundits opine that the country’s emphasis should not only be on enhancing the allocation for the healthcare sector but ensuring that there is effectiveness in healthcare spending. 

In FY23, even though the overall allocations were increased 16 per cent over FY22, the spending on ‘medical and public health’ fell from Rs 74,820 crore in 2021-22 to Rs 41,011 crore in 2022-23. This was because of the “lower requirement of vaccination”, as per the budget documents. 

The health sector was allocated Rs 86,200.65 crore as opposed to Rs 73,931 crore in 2021-22. Estimates from the National Health Accounts published in September 2022 revealed that the government expenditure in the financial year 2018-19 accounted for only 1.2 per cent of the country’s GDP.

Industry experts as well as the Economic Survey 2021 recommend that this spending needs to go up to 2.5 per cent to 3 per cent of the GDP for the sector to function optimally. “A continued emphasis is needed on Ayushman Bharat or the state health scheme framework, strengthening of the primary care system preferably through sustainable PPP models, PPP programmes for district hospitals and medical colleges, especially in underserved districts, and phase-wise implementation of the National Digital Health Mission objectives through regional pilot-based rollouts,” says Kaustav Ganguli, Managing Director, Alvarez & Marsal.

Increase Insurance Penetration 

Experts say there is an urgent need to increase insurance penetration in Tier-2 and Tier-3 cities. As per an industry forum report, currently, 48 per cent of the nation’s population travels upto 100 km to access healthcare. 

“Building formidable infrastructure in these cities through asset-light models powered by digital technology will improve access as well as affordability,” Nathealth, an industry forum said in its budget recommendations to the finance ministry. 

Shravan Subramanyam, President, Nathealth and MD WiproGE Healthcare said, “It is imperative to build infrastructural capabilities so that people have greater access to quality and critical healthcare services. Viability gap funding by the government is essential to set up hospitals in Tier-1 and Tier-2 cities, encouraging increased investment in the healthcare infrastructure.” 

Another argument in favour of increasing the budget for the expansion of healthcare services to the Tier-2, and Tier-3 cities is that these cities have the potential of contributing immensely because healthcare consumption is set to boost the next phase of the evolution of the healthcare sector, said Vikas Rastogi, Group CFO, CARE Hospitals Group. 

Zero GST 

The hospital sector is demanding zero rate GST which it says will eventually lower the cost of services for the patients, as the service providers will be able to avail of input tax credit.“Recently, the government imposed GST on certain room tariffs. "I believe healthcare should not only be completely exempted from GST but also be made a zero-tax category business and be made eligible for all input tax credits, as enabling this would ensure that these taxes are not added to the cost of services delivered to patients thus providing them with some relief,” states Rastogi of CARE Hospital Group. 

The finance ministry took recommendations from different sectors till 10th December 2022, and now has its task cut out as the developing nation’s healthcare sector is demanding higher public health spending, custom duty regulations on medical devices, GST reforms and a formidable infrastructure in Tier-2 and Tier-3 cities.