Budget 2022: Healthcare sector expects substantial increase in budgetary allocation, tax sops

By Gyanendra Kumar Keshri
New Delhi [India], January 21 : Coronavirus crisis has brought healthcare to the focus of priorities for the common people and the policymakers alike. Finance Minister Nirmala Sitharaman is likely to give a big push to investments in health infrastructure and provide some other financial support to healthcare sector in the Union Budget 2022-23 scheduled to be presented on February 1.
Public expenditure on healthcare in India is among the lowest in the world. As per the government data, it stands at around 1.2 per cent of the country's gross domestic product (GDP).
Compare it with other countries: the United States spends over 16 per cent of its GDP in public healthcare. The countries like Japan, France, Germany and Canada spend around 10 per cent. Even the poorer countries like Pakistan and Bangladesh spend around 3 per cent of their GDP on public health system. The world average is around 6 per cent of GDP.
Clearly, India requires to give a big push to investment in health sector. In 2021-22 budget presented in the parliament on February 1, 2021, the finance minister announced to more than double the budgetary allocation for health sector. The budgetary allocation to health sector was increased to Rs 2,23,846 crore for the financial year 2021-22, which is 137 per cent higher when compared with the outlay of Rs 94,452 crore in 2020-21.
Sitharaman not only announced 137 per cent increase in the budgetary allocation to health sector in 2021-22 budget but also gave assurance of continued support and enhanced allocation in the future.
While presenting the 2021-22 union budget, Sitharaman stated that while the investment on health infrastructure in this Budget has increased substantially, "progressively, as institutions absorb more, we shall commit more".
According to a survey conducted by the industry body ASSOCHAM, the finance minister is likely to give top priority to health sector.
As many as 47 per cent of the respondents in the industry survey expressed hope that the finance minister will give top priority to healthcare in 2022-23 Budget.
According to 'COVID-19 Induced Healthcare Transformation in India' report published jointly by FICCI and KPMG in October 2021, public health sector allocation is expected to increase to 2.5 per cent of GDP by 2024-25 from around 1.2 per cent of the GDP in 2021-22.
The report notes that the COVID-19 pandemic not only brought into focus that the healthcare sector is the backbone of a country but also opened a floodgate of opportunities for the country to head towards a more resilient and robust healthcare system one that is capable of not only fighting the current situation but also in safeguarding populations against any unanticipated challenges in the future.
"The COVID-19 pandemic exposed weaknesses in our health systems and amplified already existing challenges pertaining to gaps in health infrastructure, workforce, accessibility and equity in health services. But at the same time, it also reinforced an urgent need to make greater investments in augmenting health preparedness and quality of care," said Alok Roy, Chair, FICCI Health Services Committee & Chairman, Medica Group of Hospitals.
The Confederation of Indian Industry (CII) has suggested that the public investment in healthcare should be increased to at least 3 per cent of the GDP by FY 2025.
The industry body has also pitched for creation of a Medical Innovation Fund that should support private sector and empower them to innovate and conduct research and development (R&D). The Fund should also support in implementation of new digital healthcare platforms and adoption of new technologies.
The healthcare sector also expects some tax sops from the finance minister. The industry has been pitching for reduction in GST on raw materials that goes into active pharmaceutical ingredients (API) from 18 per cent to 12 per cent. There has also been demands for reduction import duties on medical devices.
There has also been demands for simplification of norms related to foreign direct investment (FDI) in healthcare.
"FDI investment process should be simplified, and taxation-related compliances should be kept to a minimum. As the medical industry does not pay GST and wellness being a part of it, the GST rate for wellness services should be 5 per cent rather than the current 18 per cent. In terms of GST, the wellness industry should be on par with the business industry," said Mugdha Pradhan, CEO and Founder of iThrive.
Harminder Singh Multani, CEO, My Dental Plan Private Ltd, emphasises for the need for special attention to oral healthcare.
"While there is a lot of impetus being laid of healthcare, (and rightly so), oral health is still not getting the importance that it deserves. It is a well-established fact that oral well-being is the gateway to overall health. This year, the government should look at steps to give a fillip to this segment," said Multani.