Pharma, Healthcare Sectors Urge 3% Budget Allocation Increase Ahead of Union Budget 2025

Union Budget 2025: India's pharmaceutical and healthcare sector is poised for growth, with industry experts anticipating significant support from the Union Budget 2025. CareEdge Ratings' recent analysis underscores the importance of increased government funding to bolster infrastructure and foster innovation within the field.

Highlighting the sector's robust performance in FY24, where a nearly 9% growth led the market to reach an impressive USD 54 billion, the report stresses the necessity for further financial reinforcement to maintain this upward trajectory. It draws particular attention to the 10% rise in exports and a 9% expansion in the domestic market, fueled by growing demand for chronic therapeutic drugs and price adjustments by the National Pharmaceutical Pricing Authority (NPPA).

Seeking Enhanced Government Support

The healthcare industry is advocating for a 2.50% to 3% increase in budget allocation over the previous year. This additional funding is vital for improving healthcare infrastructure, especially in rural and semi-urban regions, ensuring that medical services become more accessible to a larger portion of the population. By focusing on these areas, the goal is to bridge the healthcare gap and provide equitable medical services across the country.

Advancing Research and Innovation

To propel research and development within the pharmaceutical sector, there's a strong call for the reintroduction of weighted average tax benefits, a previously available incentive that encouraged innovation in vital therapeutic areas. Additionally, the industry is advocating for the reduction of the GST rate on health insurance premiums from the current 18% and suggests raising the deduction limit for health insurance premiums under Section 80D of the Income Tax Act. This move aims to make health insurance more affordable for a broader segment of the Indian populace, thereby increasing coverage and access to healthcare services.

The industry also seeks to extend Section 115BAB, which offers lower tax rates to pharmaceutical R&D companies, alongside a boost in budget allocation for the Production Linked Incentive (PLI) scheme. These measures are deemed crucial for enhancing domestic manufacturing of pharmaceutical products and medical devices, contributing to the sector's growth and stability.

Reducing Barriers and Strengthening the Ecosystem

Another key recommendation includes the reduction of customs duties on life-saving drugs and the establishment of a robust ecosystem for domestic healthcare device manufacturers. By lowering the financial and regulatory hurdles, India can ensure a steady supply of essential medications and healthcare equipment, supporting both patient care and the sector's economic health.

As CareEdge Ratings forecasts, the industry is expected to continue its 9% annual growth, driven equally by domestic and export markets. The proposed reforms, if implemented, have the potential to further cement India's status as a leading global pharmaceutical hub, reflecting the country's growing influence in the healthcare and pharmaceutical sectors on the international stage.

In summary, the Indian pharmaceutical and healthcare industry is at a critical juncture, with significant opportunities for growth and innovation. The Union Budget 2025 presents a pivotal opportunity for the government to invest in the sector's future, enhancing infrastructure, supporting research and development, and making healthcare more accessible and affordable. Through strategic investments and policy reforms, India can achieve its goal of becoming a global pharmaceutical powerhouse.