Union Budget 2020 – Indian medical device manufacturers keep their hopes high for a level play to contribute for Affordable and Accessible Healthcare

It’s that time of the year when India Inc. puts forth their suggestions and expectations from the Government in allocating policies and budgets for the year that will be, and healthcare is no exception.

The Indian healthcare industry is on a progressive track and the diagnostic industry in particular is expected to steadily grow at a CAGR of 13-14% through 2020. Having said that, the industry looks forward to crucial government reforms that will help achieve these numbers.

While technology is expected to continue to make in-roads, I reiterate that affordability and accessibility of healthcare need to take centre-stage. I am hoping that a major focus in the Union Budget 2020 will be given to the diagnostic industry, as it is the starting point to building a Healthy and Happy India.

Hard reality of the USD 7 bn Indian medical device industry is that imports still constitute to 72-80%. While Make in India continues to remain the central focus for the government, as an Indian manufacturer, we wish there would have been some more efforts on reducing the dependency on imports. Ironically, the government wants to reduce the healthcare cost in India; however, there is no beneficiary scheme for the local manufacturers of medical devices. As an industry body member, I expect the following from the Union Budget 2020, to encourage Make in India:

Revision in GST rates requires immediate attention - The implementation of GST has led to imported devices being cheaper by 11%. In addition, there being no import duty on blood analyzers, makes it difficult for the Indian manufacturers to compete with the Chinese imports, especially in Government tenders. The interests of the domestic manufacturers need to be protected through a revision in the GST regime so that not everyone gets the benefit of input credit.

Providing free healthcare to every citizen of India is the Government’s constitutional responsibility. It needs to focus on reducing the medical expenditure burden on general public, which currently bears almost 70 percent of all medical expenditure. While the government has exempted the healthcare services from GST, the taxation on the medical supplies and devices, ultimately is a hindrance in bringing down the cost of treatment. The common man can get some relief from this burden by a reduction in the GST rate on medical supplies, diagnostic equipment and devices. The GST rate, which currently stands at 18 percent, should be no more than 5 percent.

Increase in import duty on finished goods - Even now, the import duty on raw materials is higher than that on finished products. In fact, the import duty levied by India is the lowest among all the BRIC countries. To reduce the dependency on imports, we expected the Government to provide reasonable tariff protection for enabling Make in India.

Tax holiday - To encourage R&D in India, we expected the Government to provide weighted tax deduction on expenditure made on R&D of medical devices.

Encouraging exports - Introduction of export incentives would lead to further encouraging this growth engine for the economy and help India become a global leader in medical devices.

Preferential pricing for quality – While ICMED (India’s first homegrown quality certification) is a great initiative to encourage quality. The government needs to incentivize it further through preferential pricing for quality instead of the lowest price in public healthcare procurements.

This in effect, would then fulfill the Government’s commitment to an affordable healthcare system.

Authored by:

Suresh Vazirani
Chairman & Managing Director
Transasia-Erba group