On 1 February, 2024, Finance Minister Nirmala Sitharaman is scheduled to deliver the interim Union Budget for FY 2024-25. The pursuit of a budget that fosters expansion, encourages novel ideas and enhances welfare of the society is a sentiment shared by stakeholders hailing from diverse sectors and industries. The upcoming budget session presents an opportunity to address existing gaps and set a new benchmark in healthcare and pharmaceutical excellence by building a resilient healthcare infrastructure, embracing technological advancements, and fostering a growth-oriented environment for the pharma industry.
India’s healthcare system has been grappling with challenges exacerbated by the COVID-19 pandemic highlighting the need for robust infrastructure and efficient healthcare delivery. The budget for FY 2023-24 witnessed a significant allocation of Rs86,175 crore to the Department of Health and Family Welfare, a substantial increase from the allocation for FY 2022-23. This highlights the government’s commitment to fortifying healthcare infrastructure.
The budgeted expenditure on health was approximately 2.1 per cent of GDP in the budget for FY 2022-23. This fell short of the target set in National Health Policy, 2017 which aims to attain universal health coverage and provide affordable, high-quality healthcare services to all by increasing public health expenditure to 2.5 per cent of GDP by 2025. Thus, there is an expectation of further augmented budgetary allocations to meet these targets.
The budget is also anticipated to emphasize on integrating technologies, such as AI, telemedicine, and blockchain, into India’s healthcare infrastructure. This integration is not just a technological upgrade but a strategic move towards enhancing healthcare delivery, efficiency and accessibility. The Ayushman Bharat Digital Mission (ABDM) is a prime example of this technological embrace, aiming to consolidate health records digitally for over 1.3 billion Indians. The ABDM saw a significant budget increase of 144 per cent in the budget for FY 2023-24. This signifies the government’s intent to enhance digital infrastructure and build a more connected and efficient healthcare system, enabling seamless access to medical services and data, thereby transforming the face of healthcare delivery in India. Expectations are that further increase in the allocation may happen in this year’s budget.
Initiatives like Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PMJAY) and the National Health Mission, which were allocated a budget of Rs7,200 crore and Rs29,086 crore in FY 2023-24, respectively, have been instrumental in the government’s efforts to provide free health coverage and achieve the Sustainable Development Goal Target 3.8 of universal health coverage. The upcoming budget is expected to further these efforts by providing additional budgetary allocation.
The budget for FY 2023-24 allocated merely 0.01 per cent (amounting to Rs 2,980 crore) of India’s GDP to the Department of Health Research. This figure starkly contrasts with the recommendation for increasing allocation to 0.1 per cent of GDP by 2025-26 made in the “144th Report on Demands for Grants 2023-24 (Demand No. 47) of the Department of Health Research” by the Department-related Parliamentary Standing Committee on Health and Family Welfare. This shortfall highlights the critical underinvestment in health research infrastructure thereby hindering India’s ability to manage health crises effectively and limiting advancements in medical research. Substantial increases in funding are necessary to strengthen health research and prepare for future healthcare challenges.
Meanwhile, the Indian pharma sector, known as the “pharmacy of the world,” is projected to reach $65 billion by 2024 and $130 billion by 2030. The upcoming budget could catalyse this transformation, supporting the pharma sector’s growth through favourable policies and budgetary support. Vision 2047 aims to transform the sector from a generics supplier to an innovation hub. Initiatives like the Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) and the Production Linked Incentive Scheme (PLI Scheme) support this vision and they are pivotal in attracting foreign direct investment (FDI) and enhancing domestic manufacturing, thereby reducing reliance on imports and strengthening the pharma sector’s global competitiveness. As on September 2023, the pharma sector drew in FDI inflows worth Rs4,456 crore in FY 2023-24.
The Association of Indian Medical Device Industry (AiMed) has expressed its displeasure with the budget for FY 2023-24 since limited measures were announced to support the domestic medical device manufacturers and reduce India’s dependence on imports. In light of the recent launch of the “National Policy on Research and Development and Innovation in the Pharma MedTech Sector” which aims to transform the pharmaceutical industry from cost-based to value-based and make the domestic medical devices industry self-reliant, expectations have arisen for further incentives to engage in high-value R&D.
In conclusion, the upcoming budget for FY 2024-25 brings a hopeful horizon for the healthcare and pharma sectors. With anticipated investments and reforms, these sectors stand at the cusp of transformation, promising improved healthcare access and innovation that is crucial for national health and economic growth.
Arvind Sharma is Partner and Vedant Kashyap is Associate Deloitte India. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.
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