The Indian healthcare industry can be divided into pre-COVID and post-COVID eras. It has come a long way from an old-school healthcare infrastructure to a robust, world-class infrastructure that leverages the limitless possibilities of cutting-edge technologies like telemedicine. A strong testament is e-Sanjeevani, India's national telemedicine service, which, based on recent data, serves over 300,000 daily consultations. Given the high-growth environment, it is no wonder that the budget2025 expectations are humongous.

The med-tech and healthcare sectors are suggesting changes that might transform the industry and establish India as a global leader in accessibility and innovation as the Union Budget 2025 draws near.  Leaders are voicing for policies to support local manufacturing and rural healthcare, as well as measures to encourage research and development (R&D) in cutting-edge technology and lower import levies on medical equipment.

Expectations from Healthcare Leaders

Sanjay Vyas, President and Managing Director, Parexel India says, “India's pharmaceutical and clinical trials industry is experiencing rapid growth, positioning itself as a key global player. As discussions around Phase 1 clinical trials intensify, one key area of focus could be expanding government research grants and financial incentives to include private Contract Research Organizations (CROs). Currently, these grants are limited to academic institutions, but extending support to private CROs will encourage their active involvement in early discovery and clinical research.”

“Building upon the foundation laid by previous initiatives, the Union Budget 2025 could prioritize targeted incentives for AI in research and development, which will accelerate innovation in drug discovery, clinical trials, and personalized patient care. Also, continued efforts in the establishment and maintaining a single, unified regulatory authority for biopharmaceuticals to simplify compliance, minimize delays, and enhance the ease of doing business will foster growth and attract greater investment in the sector,” adds Sanjay.

Abrarali Dalal, Managing Director and CEO, Sahyadri Hospitals Pvt Ltd says, “As we approach the upcoming budget 2025, India is poised for transformative advancements in healthcare, aimed at enhancing cancer care and improving infrastructure in Tier 2 and Tier 3 cities. Anticipated reductions in customs duties and GST on oncology radiation equipment are crucial for increasing access to advanced treatments and reinforcing India’s position as a global leader in healthcare innovation. Hospitals are hopeful for a reduction in GST rates on goods and services necessary for their operations. Currently, healthcare services for patients are GST-exempt, but hospitals still face high costs due to GST on procurements and vendor payments. This situation leads to GST becoming a cost factor, affecting the ability to invest in advanced medical technologies, infrastructure, and training. Lowering or rationalizing GST rates for hospitals would help alleviate financial strain and improve the affordability and quality of patient care.”

“Additionally, a comprehensive approach to cancer care is crucial, incorporating state-of-the-art facilities, widespread screening, and palliative care to improve survival rates and ensure holistic patient care.

 

Improving healthcare in rapidly growing Tier 2 and Tier 3 cities through mobile clinics and community health programs is essential to enhance service delivery and educate on preventive care. Furthermore, supporting the burgeoning medical tourism sector can boost the economy and elevate India’s global healthcare reputation. An increase in budget allocation to over 2.5 percent of GDP is advocated to meet these ambitious goals,” adds Abrarali. 

Tax reforms

The healthcare sector has long supported lowering import taxes and levies on cutting-edge equipment and life-saving medical products. About 80 percent of India's medical equipment is imported, according to the Indian Medical Devices Industry (IMDI). Hence, lowering import taxes may help patients and healthcare providers save money. Industry experts emphasize that tax breaks for value-added and research and development activities in Global Capability Centres (GCCs) have the potential to stimulate innovation and create jobs.

Another important requirement is that medical devices be subject to a standard Goods and Services Tax (GST) rate of 12 percent. The current GST rates on medical products vary from 5 to 18 percent, which makes things difficult for distributors and producers. According to research by the National Institute for Transforming India (NITI Aayog), a consistent tax system will reduce costs in the industry, enhance operational efficiency, and make compliance easier.

Encouraging Local Manufacturing

The Production Linked Incentive (PLI) program, which has been effective in industries like electronics and pharmaceuticals, has been called for to be extended by the Indian healthcare sector. According to a Frost & Sullivan analysis, India's domestic medical devices market was valued at around Rs. 75,000 crore in FY24. Going forward, the medical devices category is anticipated to grow at a compound annual growth rate (CAGR) of 12–15 percent. Manufacturers would be able to increase production, lessen their need for imports, and support the ‘Make in India’ campaign if the PLI plan is extended.

On the other hand, the change in healthcare may be significantly aided by technological developments, particularly in the area of artificial intelligence (AI). According to a PwC analysis, AI in the healthcare market in India was estimated to be worth Rs.5,000 crore in 2022 and is expected to increase at a 40 percent compound annual growth rate (CAGR) to reach Rs.50,000 crore by 2030. AI tools can significantly improve image analysis, virtual healthcare support, early disease diagnosis, and providing underprivileged people with quality care. Another top focus is sustainability, with the industry working to build green hospitals and medical facilities that run on renewable energy. It would be interesting to see how the government perceives these opportunities and how much they are willing to invest in these areas.