News

Government Allocates Rs 89,287 Crore to Boost Healthcare in New Budget: A Step Forward, But Is It Enough?

Finance Minister Nirmala Sitharaman, on Tuesday, announced a budget allocation of Rs 89,287 crore for the development, maintenance, and improvement of the country’s healthcare system.

• By Pooja Chaturvedi Sah
• New Delhi
• Jul 23, 2024

News

Finance Minister Nirmala Sitharaman, on Tuesday, announced a budget allocation of ₹89,287 crore for the development, maintenance, and improvement of the country’s healthcare system. The government's recent budget marks a notable, albeit modest, increase from the previous year's allocation of ₹88,956 crore. 

The increase in the budget underscores the government's ongoing commitment to strengthening the country's healthcare infrastructure. However, questions linger about whether this increment is sufficient to address the pressing challenges faced by the sector. 

Analyzing the Budget Allocations and Healthcare Reforms

Incremental Gains or Missed Opportunities?

The Department of Health and Family Welfare has received ₹87,656.90 crore, while the Department of Health Research has been allocated ₹3,301.73 crore. These figures represent a 12.59% increase over last year's revised estimates. However, considering the burgeoning needs of a rapidly growing population, the modest increase, though commendable, raises concerns about the adequacy of resources to tackle significant healthcare challenges such as infrastructure deficits, workforce shortages, and disease burden. 

Budget expenditures on research and development projects across industries have increased from ₹840 crore in 2023-24 to ₹1,200 crore in 2024-25. Under the Consolidated Funds of India (Capital Account), disbursements for medical and public health have risen from the revised estimate of ₹2,615.67 crore in 2023-24 to ₹3,510.55 crore in 2024-25. However, disbursements of loans for chemical and pharmaceutical industries have decreased from the revised estimate of ₹486.74 crore in 2023-24 to ₹120.12 crore in 2024-25. 

PLI Scheme and Custom Duty Exemptions: A Boost for Pharma?

The allocation of ₹2,143 crore for the Production-Linked Incentive (PLI) scheme for the pharmaceutical industry is a strategic move aimed at enhancing domestic manufacturing capabilities. Coupled with the exemption of customs duties on three more cancer medications—Trastuzumab Deruxtecan, Osimertinib, and Durvalumab—this initiative is expected to reduce treatment costs and improve access to life-saving drugs. However, the impact of these measures on the overall pharmaceutical landscape remains to be seen. 

In March 2023, the government had already exempted Pembrolizumab (Keytruda), a Merck cancer drug, from basic customs duty. Extending similar exemptions to drugs for rare diseases do alleviate the financial burden on patients. Yet, the broad impact of these exemptions on the healthcare system, particularly in terms of affordability and availability, warrants closer scrutiny. 

Additionally, significant changes in customs duty rates, such as the increase in basic customs duty on PVC flex banners from 10% to 25%, and full exemptions on all types of polyethylene for use in manufacturing orthopedic implants, special grade stainless steel, titanium alloys, and cobalt-chrome alloys, will likely influence the domestic manufacturing landscape. 

Significant Increases in Key Health Programs

The budget also highlights substantial increases in funding for critical health programs. The allocation for the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana has been raised from ₹7,200 crore to ₹7,500 crore, reflecting a continued focus on providing health coverage to economically disadvantaged sections through public policies and initiatives. Similarly, the Pradhan Mantri Ayushman Bharat Health Infrastructure Mission sees its funding nearly doubled to ₹4,108 crore. 

Programs aimed at early-stage healthcare services, such as the Saksham Anganwadi and Poshan 2.0 initiative, and the extension of healthcare coverage to ASHA and Anganwadi workers, are poised to make a significant impact. However, the effectiveness of these programs and policies in combating diseases and improve basic health infrastructure, especially in rural and tier-2/3 cities, will depend on efficient implementation and monitoring. 

The allocation for reproductive and child health, health system strengthening, the National Health Program, and the National Urban Health Mission has increased from ₹23,331 crore in 2023-24 (revised estimates) to ₹28,783 crore in 2024-25. Conversely, funds allocated for infrastructure maintenance under the Department of Health and Family Welfare have reduced from ₹7,980 crore in 2023-24 (revised estimates) to ₹7,000 crore in 2024-25. 

R&D and Innovation: A Mixed Bag 

The allocation of ₹1 lakh crore to operationalize the Anusandhan National Research Fund is a bold step towards fostering private sector-driven research and innovation. This initiative could potentially transform the pharmaceutical landscape by encouraging groundbreaking research and prototype development. Yet, the success of this venture hinges on creating a conducive environment for private investment and collaboration. 

The budget’s initiatives to promote employment in manufacturing, provide local training, and utilize public-private-partnerships to encourage women’s employment could also be a boost to healthcare and make-in-India medical devices’ sector. 

Employment and skilling initiatives highlighted in the budget include Scheme A aims to fund one month's wage for new entrants in all formal sectors in three installments up to ₹15,000, benefiting 2.10 crore youth. Scheme B offers direct incentives for first-time employees in the manufacturing sector concerning their EPFO contributions, expected to benefit 30 lakh youth. Scheme C proposes to reimburse EPFO contributions of employers up to ₹3,000 per month for two years for all new hires, aiming to generate 50 lakh jobs. However, the success of these initiatives will be in adapting to local challenges and embracing local solutions. 

Economic Survey Insights: Growth and Challenges

The Economic Survey 2023-2024, presented on Monday, 22 July by the Finance Ministe, paints a promising picture of the pharmaceutical sector. With exports rising to 6.4% of the global share and the market value reaching $50 billion, India solidifies its position as the "pharmacy of the world." However, the sector's dependency on imported active pharmaceutical ingredients (APIs), particularly for antibiotics, remains a significant challenge. 

The government's PLI schemes have partially mitigated this dependency by supporting domestic production of critical antibiotics. Yet, the sector's future growth will require sustained efforts in boosting R&D, skill development, and supply chain resilience. The projected market value of $130 billion by 2030 highlights the immense potential, but realizing this goal will demand strategic investments and policy support. 

Future Prospects and Strategic Imperatives

It remains to be seen whether the government's budget allocation for healthcare, though a step in the right direction, will be ambitious enough to meet the sectors’ extensive needs. Strategic focus on R&D, enhanced funding for health programs, and a concerted effort to reduce API dependency are essential. The PLI schemes and other initiatives are promising, but their long-term success will depend on effective implementation and continuous policy support. 

In conclusion, while the budget allocations and new initiatives reflect a positive trajectory, the healthcare sector's future will depend on the government's ability to address systemic challenges and foster an environment conducive to innovation and growth. 

The journey towards a robust healthcare system requires not just incremental changes but transformative reforms that can withstand the test of time. The sector’s future growth continues to rely on innovation, strong manufacturing, boosting ‘Make-in-India’ initiatives and policies, skill development, localized solutions, and a robust export and supply chain.