April 2010

Union Budget 2010-11 Roadmap for Healthcare in India : Saba Firdaus, Research Assistant, eHEALTH

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Healthcare, expected to reach over US$75 billion by 2010 and US$150 billion by 2017, has a huge potential for growth in India.

Saba Firdaus, eHealth, attempts to analyse the prospects that the current budget unfolds in terms of financial allocations and policy measures to give a boost to healthcare industry in India.


 

Healthcare undoubtedly is one of the pillars of social sector reforms in India. Ensuring right to food, health and education to all citizens has been the prime objective of our government since independence.  Good health implies ensuring right to life which is universally acclaimed fundamental  human right under the 1948 Human Rights Declaration of the United Nations. But a big chunk of our population   lack affordability and  proper access to healthcare facilities in the country due to which death due to diseases, epidemics, birth and  accidents occur at a high rate in India. The Government of India has been unable to fulfill its commitment of ‘Health for All by 2000 A.D.’ till now. In fact, primary health care services are difficult to obtain for people living especially in urban slums, villages or remote tribal regions. The condition of government hospitals has worsened over time.  In many of the government hospitals there is inadequate staff, the supply of medicines is insufficient and the infrastructure is also inadequate. There are very inadequate facilities for safe deliveries or abortions in government hospitals. Given the fact that women do not even get adequate treatment for minor illnesses such as anaemia, services for problems such as the health effects of domestic violence remain almost completely unavailable. At the village level, there is no resident health care provider to treat illnesses or implement preventive measures. All hospitals are located in cities, and here too public hospitals are increasingly starved of funds and facilities. Thus there is lack of availability of government health care services on one hand and the exorbitant cost of private health services on the other. This often leaves common people in rural areas with no other option but to resort to treatment from quack doctors who often practice irrationally. Thus most of the population is being deprived of the basic right to health care, which is essential for healthy living. In this backdrop, the Union Budget 2010-11 has unleashed a new wave of optimism for the healthcare industry which is welcome by almost  everyone associated with the sector. However its no denying the fact that the budget still has some ‘hits as well as misses’ which are clearly spelt out in the document.

Budget ProposalsAn Annual Health Survey to prepare the District Health Profile of all Districts shall be conducted in 2010-11.

  • Increase in planned allocation for the Ministry of Health and Family Welfare from Rs.19,534 crore in 2009-10 to Rs.22,300 crore in 2010-11.
  • Reduction in customs duty on all medical, surgical, dental and veterinary equipment (including parts and accessories) from 7.5% to 5%. These goods are also being exempted from special CVD.
  • Imposed CVD of 4% on the imports of hospital equipment for use in specified hospitals and life-saving equipment.
  • An excise duty of 4% is imposed on blood glucose monitoring system (Glucometer) and test strips and patent ductus arteriosus/artial septal defect occlusion devices.
  • The basic custom duty is exempted on specified inputs used for the manufacture of orthopedic implants.

Dr. Pervez Ahmad
CEO and Managing Director
Max Healthcare Institute Ltd

“The healthcare industry appreciates Finance Minister’s focus on improving healthcare systems in the country. Steps such as increased budget outlay for the Health Ministry will go a long way in improving the overall health scenario of India and the uniform, concessional 5% duty on all medical appliances will also have a mildly positive effect. The absence of tax holiday extension is a bit disappointing for the industry though.”

The Indian Constitution has granted the ‘Right to Life’ as a basic human right to every citizen of India under article 21. In article 47 of the Directive Principles of the Indian Constitution, the Government’s responsibility concerning public health has also been laid down. In this light budget is not merely a financial statement but also an expression of the government’s intent and commitment that it wants to fulfill for creating a socially equitable society. Before getting into the details of what the proposals  imply  vis-vis healthcare-comprising of both private and public health there is need to first take account of what already exists in healthcare in India so that the task of analysing the implications of the current budget on chalking out a roadmap for this sector is an easy exercise. Healthcare is a US$35 billion industry in India, is expected to reach over US$75 billion by 2010 and US$150 billion by 2017. Therefore there is a huge potential of growth in the sector. Hospital industry is an important component of the value chain in the Indian healthcare industry rendering services and recognised as healthcare delivery segment of the healthcare industry. A rapid growth in the past three years in India has brought about a health transition in terms of health demographics, socio-economic transformations and changes in disease pattern. The healthcare infrastructure is poorly developed to meet the needs of the ailing population. 1.1million additional beds were required in the financial year 2008-09 and this number would rise to 3.1 million by 2018. India requires an immediate investment of US$85 million over the next 15 years to make up for the backlog. India is also lacking in terms of medical manpower. Currently there are 6 lack doctors and 1.6 million nurses in India. As per the World Health Organisation guidelines, it translates into a gap of approximately 1.4 million doctors and 2.8 million nurses. The major growth drivers identified for the sector are growing and ageing population, growing urbanisation, rising income levels, increasing burden of chronic diseases, healthcare finacing transition and medical tourism.

The Budget 2010-11 proposes to conduct an annual health survey in 2010-11 to prepare a   district  health profile of all districts. This survey will enable the industry identify business opportunities in rural markets. On the healthcare side the government has continued with its agenda of boosting primary healthcare. The total allocation  for the Ministry of Health and Family Welfare  has been increased from INR 19,534 crores to INR 22,300 crores. Health insurance has been extended to more than  20% of the Indian population covered by the National Rural Employment Guarantee Act. The uniform customs duty of 5% plus CVD of 4% on import of medical equipment has been introduced against current general maximum rate of 16.78%. An excise duty of 4% is imposed on blood – glucose monitoring system and test strips and patent ductus arteriosus/artial septal occlusion devices. The basic custom duty has been exempted on specified inputs used for the manufacture of orthopedic implants. The increased outlay would favourably impact companies involved in healthcare sector. Further, the simplification of duty structure for the medical equipment and exemption provided to specified inputs for the manufacture of orthopedic implants from import duty would be positive for the sector; however increase in MAT rate from 15% to 18% would have an adverse impact on the hospital projects owing to their long gestation period. As far as taxes are concerned, budget 2010 did not unfold any significant change for the industry. However the government recognised the last decade as a decade of innovations and steps taken in the direction of incentivising research and development activities. As regards the pharma industry this year’s budget proposes an increase in weighted reduction from 150% to 200% on expenditure incurred on in house R&D activities and from 125% to 175% on activities outsourced to specific institutions.

The pharmaceuticals space in India has witnessed action, transaction and growth in the past few years. The industry has achieved a growth of over 25% in the last year; but it is yet to achieve its optimal. The pharmaceutical industry is still on its growth path, the key drivers being market expansion and development and innovation. To ensure the continual double digit growth, more government attention than what came forth in this budget is warranted.

There is also a partial roll back in excise duty from 8% to 10%. The increase in weighted reduction on R&D activities is positive for the industry and would continue to support higher investments by research-led pharmaceutical companies in areas of NCE/NDDS related R&D activities. The move is likely to be positive for contract research organisations as well. The findings of the Health Survey that the budget proposes should be of immense benefits to major public health initiatives especially the National Rural Health Mission which successfully addresses the gaps in the delivery of critical health services in rural areas. Over Rs.139 billion have been earmarked for this programme (NRHM), launched in 2005, to improve availability and access to quality healthcare for people living in remote areas. The amount was for carrying out various schemes under the NRHM and has gone up from Rs.120.96 crore. The main focus is on 18 states that have weak public health infrastructure – Arunachal Pradesh, Assam, Bihar,Chhattisgarh, Himachal Pradesh, Jharkhand, Jammu and Kashmir, Manipur, Mizoram, Meghalaya, Madhya Pradesh, Nagaland, Orissa, Rajasthan, Sikkim, Tripura, Uttarakhand and Uttar Pradesh. Equal focus has also been given to public health with the government allocating money for the AIDS control and mental health programmes and the prevention of diabetes and cardiovascular diseases.

S.L.Narayan
Chief Financial Officer
& Director – Strategic IT
Max Healthcare Institute Limited

“The fiscal deficit goals of this budget is dependent on the success on the disinvestment plan and the timely closure of 3G licensing process; any slippages in these two activities can create huge risks in terms of deteriorating public finances.”

Of the total budget, about Rs.3,181 crore has been earmarked for various schemes to benefit the health of the people – up from Rs.1,928 in 2009-10. While India’s AIDS control programmes saw an increased allotment of Rs.403 crore – up from Rs.888.15 crore to Rs.1,291 crore this fiscal – the National Mental Health Programme saw a rise of Rs.103 crore, up from Rs.50 crore – an increase of Rs.53 crore. Also, the national programme for the prevention and control of diabetes, cardiovascular diseases and stroke got Rs.90 crore – an increase of Rs.73 crore from the previous budget. As the country faces a shortfall of trained doctors, nurses and paramedics, the government has earmarked Rs.323 crore for creating more trained human resource in the health sector. According to a Planning Commission report, India faces a shortage of about 600,000 doctors, one million nurses, 200,000 dental surgeons and a large number of paramedical staff. However, top hospitals and medical colleges like the All India Institute of Medical Sciences (AIIMS) in Delhi and the Post Graduate Institute (PGI) in Chandigarh have got substantially less money in the coming fiscal as against the current financial year.

As per the 2010-11 budget allocation, the AIIMS will get Rs.800 crore in 2010-11 as against Rs.886.5 crore in 2009-10, while the PGI Chandigarh has been allocated Rs.82 crore less in the new budget. In 2009-10, the medical college got an allocation of Rs.392 crore. The budget has a whopping 46% of plan allocation for infrastructure development, but healthcare infrastructure is yet to make its place in the Finance Minister’s agenda which will take years in bridging the affordability and accessibility gap in the sector. Healthcare is unaffordable to most Indians and by adding additional taxes on medical equipment, the situation is not going to get better.

The government still needs to do more by creating policies, regulation and tax benefits to make healthcare more affordable for the common man. Achieving health standards similar to those living in urban India in the foreseeable future should be the goal of the government. To change the current status-quo of neglect in healthcare will bring about social justice for human rights of all people.

Dr Shakti Kumar Gupta
HOD, Hospital Administration & Medical Supritendent
(Dr. R P Centre for Ophthalmic Sciences), AIIMS,
New Delhi, India

“The Union budget 2010-2011 increased the allocation for health care by Rs.2,700 crore increasing the allotment to Rs.22,300 crores. This budgetary allocation is only 2 per cent of the total budget, and is still very far from the target of three percent of GDP.

Through increased allocations in the flagship public health programme, NRHM, an overall directional continuity has been maintained. The budget aims at benefiting all sections of the society but lacks specific provisions to boost private investment in healthcare sector especially in rural areas. Considering that there is a severe shortage of health infrastructure and health human resources there remains a lot that can be achieved through PPP models, which are the need of the hour. However, the five percent reduction in tax while importing medical equipment will be of some benefit.

The expansion of the service tax net to include health check-ups undertaken by hospitals for employees of business entities, and for health services provided under health insurance schemes may prove to be a deterrent at a time when preventive health care has to be promoted.

The Annual health survey is a  welcome step under which the district health profile of the rural populace would be prepared. This would be a very useful tool for  the authorities to objectively monitor the effectiveness of various health programmes being run in the district over a period of time, particularly the National Rural Health Mission (NRHM).

The proposal to extend Integrated Child Development Services (ICDS) to every child by March, 2012 is also a welcome step as it would ensure nutritional security to the children under the age of six years.

Inclusion of all BPL (Below Poverty Line) families  under Rashtriya Swasthya Bima Yojana (RSBY) through increased budgetary allocations is a step in right direction to increase overall health insurance coverage of Indian population which is abysmally low at present.

The hike in excise duty on cigarettes is very encouraging step, as it will discourage tobacco consumption.

Although the issues of availability and access to quality healthcare for people living in remote areas are being addressed through NRHM, the bigger issues of creating more & better health infrastructure with skilled manpower still remain to be addressed.”

The year 2009 presented a lot of uncertainties and grave challenges for the Indian economy because of the financial and economic crisis that the world was facing and India was no exception to it. Growth had started decelerating and business sentiments were weak. The economy’s capacity to sustain high growth was under serious threat and it was not clear to the policy makers about its impact on the pace of growth of the Indian economy. But to the delight of the countrymen, India emerged from this crisis after having weathered all odds only to usher in an era of sound economic situation aiming for a consistent 9% growth. The aim of the government outlined in the budget 2010-11 is to achieve inclusive growth by bringing the rural masses within the ambit of the development agenda.

Strengthening food security, improving education opportunities and providing health facilities at the level of households, both in rural and urban areas are sine-qua-none for inclusive growth to  which the government and policy makers have attached utmost significance and  priority. The financial year 2010-11 marks the beginning of reverting to  a high growth rate and moving towards greater fiscal consolidation and economic vibrance. This is going to be a new beginning for all the sectors of  the economy and thus there is new hope and optimism for each of them. Healthcare industry has been one of the largest and most critical one for healthy people, healthy country and an healthy economy.  The last few years have seen consistent growth in the Indian healthcare sector, which has a promising future. And it is expected that the  reform proposals enshrined in the budget would help in accelerating and sustaining the growth path in the industry. Undoubtedly healthcare sector would help India become a global giant over the next decade. 

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