Budget 2021: API, PLI & R&D sops can be a shot in the arm for healthcare

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Budget 2021: API, PLI & R&D sops can be a shot in the arm for healthcare


NEW DELHI: The healthcare sector is all set to see a rise in allocation in the forthcoming Union Budget, with the government likely to partially bear the cost of Covid-19 vaccination. Marketmen tracking the sector expect Finance Minister Nirmala Sitharaman to offer incentives to boost the healthcare infrastructure, announce higher allocation under schemes such as Ayushman Bharat, Pradhan Mantri Jan Arogya Yojana (PMJAY), standardise hospitalisation costs for Covid-19 treatment, rationalise GST structure for hospitals and increase export incentives to boost export of formulations and finished dosages.

Rating agency ICRA said even if 50 per cent of the population is to be provided vaccination by the government at a negotiated price, the Covid vaccine cost will be Rs 27,000 crore, which will in itself lead to a 40 per cent jump in healthcare allocation.



At present, India spends 1.3 per cent of its GDP on healthcare. The government has a target of raising this to 2.5 per cent by 2025.

“To boost investment in the sector, in addition to the VGF (viability gap funding) already announced, tax incentives for private sector investments in modernising medical facilities and developing greenfield hospitals will be a welcome step. A rise in budgetary support to the Rashtriya Swasthya Bima Yojana scheme will help expand the network and coverage, while providing affordable healthcare facilities to the beneficiaries. The same is also expected to boost performance of the service providers,” ICRA said.

Nomura India expects higher outlay for health budget and extra provisions for vaccine-related costs. It expects extension of tax benefits related to healthcare spending and insurance premiums, especially related to Covid-19.

Besides, it sees announcement of standardisation of hospitalisation costs for Covid-19 treatments, incentives for healthcare infrastructure, rationalisation of GST structure for hospitals, tax sops for new hospitals, a dedicated fund for healthcare startups and increased focus on preventive health and wellness segments.

Angel Broking expects the government to further incentivise domestic manufacturing of APIs. As of now, India imports more than 70 per cent of APIs from China. The brokerage believes the government can increase the export-linked benefits to domestic manufacture to boost export of formulations and finished dosages.

As of now India exports more than $20 billion every year. The move, if announced, can help companies such as

and , the brokerage said.

HDFC Securities said there could be an extension of tax benefits related to healthcare spending and insurance premiums, especially related to Covid-19. The industry, it said, expects the tax deduction on R&D expenses to increase to 150-200 per cent from 100 per cent currently, especially for novel drug discovery.

It expects rationalisation of GST structure for hospitals and tax sops for new hospitals and incentivisation through the PLI scheme for bulk chemicals and intermediates.

Companies such as Lupin, Cadila Healthcare, Alembic Pharma, Cipla, Alkem Labs, Laurus Labs, HCG and

could be likely beneficiaries if such announcements materialise, HDFC Securities said.





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