edited by: Mohammad Haris
Last Update: January 27, 2023, 13:37 IST
Budget 2023-24 needs to focus on the shift towards strengthening the infrastructure of the healthcare sector and promoting Make in India pharmaceuticals. (Photo: shutterstock)
Allocation for healthcare as a percentage of GDP is still low for India compared to most developing countries
The Union Budget 2023-24 will be presented on February 1 in the backdrop of fears of a global recession. However, the outlook for the Indian pharma sector looks bright with the significant progress made during the last two decades along with supportive measures from the government.
The COVID-19 pandemic has made us realize the importance of health and healthcare infrastructure. Therefore, the time has come for the nation to give its due share to health, which is long overdue. Allocation for healthcare as a percentage of GDP still low India Unlike most developing countries. The government needs higher allocations to reach its target of spending 2.5 per cent of GDP on health by FY25, compared to less than 1.5 per cent it currently spends. Therefore, this should include allocations for public hospitals, diagnostics, pharmaceuticals and digital health including R&D and capacity building for healthcare at all levels.
Several public sector schemes launched over the past few years, including the Pradhan Mantri Ayushman Bharat health infrastructure mission, have focused on building last-mile infrastructure. However, the allocation for these and other schemes needs to be substantially increased in the current budget.
Outlining the wish list for the sector in the upcoming Union Budget, Indian Pharmaceutical Alliance (IPA) Secretary General Sudarshan Jain recently said that the domestic pharma industry is currently $50 billion in size and will reach around $130 billion by 2030 and 2047. aspires to grow to $450 billion by 2020. “The government needs to set up R&D-focused incentives to boost investment, which remains a constant and essential demand of the sector,” he added.
The government understands the potential of India’s Active Pharma Ingredient (API) industry, and has recently pushed through the PLI scheme. The PLI scheme will add to India’s competitive advantage and reduce import dependence of Indian firms on key starting materials (KSMs) and APIs from Chinese manufacturers. The scope and quantum of PLI should be reviewed every year so that manufacturing remains competitive.
Measures to ease the ease of doing business will spur investments and contribute to the long-term growth of the industry. Additional budget should be allocated by the government for the Production Linked Incentive (PLI) scheme, which will encourage investment, attract key knowledge qualifications, boost employment and make the country a competitive player in global markets.
Budget 2023-24 needs to focus on the shift towards strengthening the infrastructure of the healthcare sector and promoting Make in India pharmaceuticals. Similarly, at the industry level, pharma companies need to set up their facilities that comply with international regulatory requirements such as WHO GMP and USFDA.
Another area where the government needs to focus is increasing policy support to encourage, facilitate, and facilitate medical value travel in India. Viability gap funding is essential for setting up hospitals in Tier-1 and Tier-2 cities by the government or PPP model, thereby boosting investment in healthcare infrastructure. Lastly, Budget 2023 should focus on simplified regulations and Goods and Services Tax (GST) norms to allow growth of the pharmaceutical industry.
(The writer is Deputy Vice President (Fundamental Research) at Kotak Securities Ltd.)
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