Union Budget is a much anticipated event every year and more so in FY 21-22, as expectations are running much higher this time.
The year that’s ending has been a year of pandemic disrupting lives & livelihoods & causing economic turmoil. From being one of the fastest growing economies, we are still battling with the pandemic gloom.
In 2021-22 budget, prioritization of Healthcare sector shall be of utmost importance. While India fought Covid 19 reasonably well and with vaccines just being rolled out, we must not forget the indomitable spirit of the private health sector which fought the pandemic alongside with the government despite severe financial losses in revenues.
Covid 19 has shown us all that Health is the new normal and going forward health shall be significantly measured by sanitation, hygiene and preventive healthcare. With a market size of 1.4 billion people government must look into attracting investments into these sectors via existing as well as start-ups.
Attracting investments in healthcare start-ups & “Atmanirbhar” in healthcare equipment
The key solution to address this gap in accessibility and affordability of healthcare is making homegrown technology-driven innovations that facilitate production and delivery of medical devices within the country, provided the policymakers use this opportunity to align the resources/budgets to ensure accessible, equitable, and quality healthcare for the citizens of India. The needs to be addressed in the budget this year with a specific allocation of the budget for healthcare delivery, healthcare personnel, infrastructural developments, and a special focus on innovations in healthcare by supporting start-ups in this field. It is evident that this pandemic has fast-tracked the need and adoption of technology-driven solutions in healthcare and this trend is here to stay. Healthcare providers have embraced technology with virtual consultations, robot-assisted procedures, wearables (AI in medical equipment), and many more innovations that aid smooth delivery of healthcare. Government can consider putting healthcare start-ups under MSME category which will enable them to get the extended advantages. Banks to also consider flexibility in lending to such start-ups as these will add the much needed boost to not just the start ups but also to the healthcare industry.
Digitization of healthcare and the impetus required
2020 has been the year of pandemic and the new normal which have changed the way we look at healthcare. The healthcare sector has been quick enough to change and adapt to the digital transformation. Going forward such changes are all set to go to the next level ably supported by AI, Big Data & Analytics, Electronic Records & Telemedicine. While we strive for seamless digitization we also have to work for protection against data breaches & safeguard all such data.
Expectations on taxation vis-a-vis healthcare
It is also crucial that the government provides appropriate fiscal incentives and creates sustainable public policy to encourage investment in private healthcare infrastructure. Hospitals should be included under the definition of ‘industrial undertaking’ u/s 72A of IT Act. This has been a long standing demand, critical to expedite private investment in healthcare capacity building and to ensure that healthcare is treated at par with other sectors.
Currently, the benefits of deduction for CAPEX are extended only to hospitals having a minimum capacity of 100 beds. No benefits are provided to encourage the setup of smaller hospitals/nursing homes in rural areas posing as an impediment for organizations to start chains of smaller hospitals. Given that there is an urgent need for expansion of healthcare facilities in smaller cities and rural areas, the benefits u/s 35AD of IT Act should be extended to hospitals having:
(i) min of 50 beds in tier II, III and IV cities and
(ii) min of 25 beds in rural areas
The pandemic has also substantiated that we cannot be over-dependent on only testing and treatment of diseases. Primary and preventive care is vital for a strong healthcare system. It is recommended that tax exemption on Preventive Health check-up be raised from the current Rs 5,000 per person (Rs 7,000 for senior citizens) to Rs 20,000 u/s 80-D of IT Act. This is an opportunity incentivizing health-oriented consumer behaviour for insulating individuals from effects of unanticipated healthcare spending and for institutionalising a Healthcare Savings Fund.
Further, while grappling with COVID-19, hospitals have had to make substantial capital expenditure towards making structural changes in the building layout, air-flows etc. and significant fresh investment in medical equipment, bringing in immense strain on hospital cash flow and operational sustenance. FICCI has recommended that some relief through weighted deduction on CAPEX u/s 35AD be provided to all hospitals who have made any capital expenditure for prevention and/ or treatment of COVID patients.
On the GST front, government need to consider zero rating of GST for healthcare services.
Healthcare Infrastructure investments
The Finance Ministry has devised an inspiring INR 111 lakh crore National Infrastructure Pipeline (NIP) for 2020-25, which includes INR 1.69 lakh crores for infrastructure development projects for healthcare.
There is also a need to increase proportion of Health Research allocation in overall Health Expenditure to at least 6% of the funds allocated to MoHFW. The pandemic has ascertained that Health Research is a critical component for forging an effective healthcare response and it is also important for attaining SDG-3 goals.
Healthcare should be accorded ‘National Priority’ status, as was done for the IT sector, to bring in requisite attention and investment. Innovative long-term financing structures, special healthcare zones, subsidized cost for land and electricity, higher FSI for hospital buildings are some of the measures needed for enhancing infrastructure creation in healthcare.
Overall, Budget 2021 must focus on allocation of higher spending towards healthcare with special attention to preventive health and wellness segments.