Budget 2025 expectations: What’s in store for the healthcare sector?

SUMMARY

All eyes will be on Finance Minister Nirmala Sitharaman, when she presents Budget 2025 on February 1, for announcements on healthcare spending as the industry players have been seeking to raise the allocations to 2.5% of GDP. The government allocated ₹90,958 crore for FY 2024-25 for the sector in the previous Budget.

Tax Relief to Infrastructure Upgradation: Key Expectations of Healthcare Sector from Budget 2025 | Image: Shutterstock

As the Union Budget 2025 is approaching, the healthcare sector is looking forward to increased allocation and friendly measures to propel growth. Increased budgetary allocation and policy measures will support the healthcare sector spanning pharmaceutical, medical devices manufacturing, hospitals, and allied segments.

The healthcare and med-tech industry experts are hopeful of tax rationalisation, the policy focuses on tech-driven innovation, and infrastructure upgradation, among other initiatives. All eyes will also be on Finance Minister Nirmala Sitharaman, when she presents Budget 2025 on February 1, for announcements on healthcare spending as the industry players have been seeking to raise the allocations to 2.5% of GDP.

Ahead of the Budget 2025, as healthcare and med-tech industries have high hopes from the Finance Minister, here is a look at the major expectations of the stakeholders.

Higher healthcare spending

Industry experts are expecting a hike in healthcare spending in Budget 2025. The government allocated ₹90,958 crore for FY 2024-25 for the sector in the previous Budget.

The National Health Policy 2017 has laid out a roadmap to increase healthcare spending to 2.5% of the GDP by FY2025. The government’s healthcare spending stood at 1.9% of the GDP in FY 2023-24, as per the Economic Survey 2023-24. The industry awaits a big leap in this spending with a focus on addressing the rising cost of healthcare. Higher allocations for the sector will not only ease the pressure on private hospitals but also offer a big relief to the public, who have been battling high hospital bills.

Healthcare Infrastructure Expansion

Industry insiders have been seeking higher allocation as it will help in the much-needed infrastructure upgradation and opening of new hospitals to expand public healthcare facilities to smaller towns and remote areas. One key challenge in India's healthcare industry has been the consolidation of infrastructure in certain pockets. The existing healthcare facilities are often consolidated in the state capital or big cities. Patients travel from far-off locations to these healthcare clusters adding to their cost of spending on healthcare. Experts are of the view that FM Nirmala Sitharaman may announce new initiatives to attract healthcare professionals and entrepreneurs to remote locations, which need attention. India is experiencing a rising talent drain, with nursing and paramedical professionals migrating to countries such as the Middle East, Australia, and the UK in search of better opportunities and quality of life.

Ayushman Bharat

The healthcare sector experts are hopeful that the government will increase the allocation under the Pradhan Mantri Jan Arogya Yojana (PMJAY), which will help in expanding the coverage under the Ayushman Bharat program. Public health experts have been demanding to include more families in the program and to expand the coverage to more areas like patient care, communicable diseases, and life-sustaining treatments such as dialysis.

Tax Relaxation

The government could announce tax relaxation on healthcare spending, such as diagnostic services and preventive health care. By placing healthcare consumables in the lowest tax bracket, the government could look to reduce the financial burden on healthcare providers. This will also help to lower the cost for the patients. The medical device manufacturers and med-tech industry players have also been demanding tax rationalisation for various equipment and medical device categories.

Insurance coverage

In line with the target of the 'Insurance For All By 2047' vision, the government is expected to announce measures to increase health insurance penetration, according to experts. A recent report by the State Bank Of India, the government should consider exemption on GST and taxes on health insurance premiums. The report proposed, "No GST/Tax on Term/Pure Life Insurance and health insurance premiums. In line with NPS, a separate deduction for life/health insurance in the new/old tax regime, say ₹25,000/50,000. All the government-sponsored pension schemes, APY, PM-SYM, PM-KMY, and NPS-Traders may be brought under one umbrella.”