Budget 2025: Indian Pharma and Healthcare Sectors Anticipate Increased Allocation
As regards expectation from the budget 2025, Indian Pharma and Healthcare can look forward with great expectations ahead of the unveiling of the same. The current report by CareEdge Ratings places a strong accent on government impetus for upgraded infrastructure and facilitation of greater innovation in boosting growth. Looking at the statistics, it presents an expectation at between 2.5% and 3%, over last year's budget and also calls on more improvement measures by healthcare infrastructure particularly in rural/semi-urban territories.
The pharmaceutical industry has long advocated for greater focus on these underserved regions, where improved healthcare facilities can significantly reduce the urban-rural divide. By enhancing infrastructure in these areas, the industry aims to increase accessibility to quality healthcare services across the nation.
In addition to infrastructure development, the industry is advocating for the reinstatement of weighted average tax benefits on R&D in the pharmaceutical sector. This provision, which had been in place, is expected to spur innovation and the development of critical therapeutic solutions.
Another key recommendation is bringing down the Goods and Services Tax (GST) rate from 18% to health insurance premium. The report further suggests increasing the deduction limit of health insurance premium under Section 80D of the Income Tax Act, reducing the cost of healthcare to the citizen.
Further R&D in the pharmaceutical sector calls for an extension of Section 115BAB, under which tax benefits are offered to companies that have R&D as the focus. In addition, enhancing the budget for the PLI scheme is expected to help support domestic manufacturing of pharmaceutical products and medical devices.
The report further suggests that the customs duty on life-saving drugs be reduced, and the ecosystem for domestic healthcare device manufacturers should be strengthened.
The Indian pharmaceutical market grew vigorously, reaching almost USD 54 billion during FY24, on the back of growth in demand at the domestic end at 9 percent and a 10 percent growth in exports, notably in chronic therapies.
India Budget: There is high anticipation among the pharmaceutical and healthcare sectors that the Indian Union Budget 2025, which will be unveiled later this week, should support their need for government facilitation, particularly on strengthening the sector's infrastructure, the CareEdge Ratings said in a report.
According to the report, a 2.50 per cent-3 per cent increase in health budget allocation above last year would be necessary; it also focused on the requirement of using that extra money on upgrading health infrastructures in the rural and semi-urban sectors.
It cited, "Increase healthcare budget allocation by 2.50 percent-3 percent over last year to enhance infrastructure in rural and semi-urban regions".
To boost research and development (R&D) in the pharmaceutical sector, the industry is seeking the re-introduction of weighted average tax benefits. This measure, previously available, is expected to incentivize innovation and development in critical therapeutic areas.
The report also underlines the need for making healthcare services and insurance affordable. It has suggested reducing the GST rate on health insurance premiums from the existing 18 percent and increasing the limit of health insurance premium deduction under Section 80D of the Income Tax Act.
The industry feels that the lower tax rates provided by Section 115BAB must be extended to support pharmaceutical R&D companies. The budgetary allocation for the PLI scheme must also be increased as this will drive domestic manufacturing of pharmaceutical products and medical devices.
The customs duties on life-saving drugs should be reduced and a robust ecosystem must be created for domestic healthcare device manufacturers.
The report indicates that the Indian pharmaceutical sector was in good form in FY24, with growth in the country's pharmaceutical market standing at about 9 percent year-on-year, reaching nearly USD 54 billion. This growth had been driven by a 10 percent increase in exports and 9 percent rise in the domestic market, facilitated by higher demand for chronic therape.
