Anjali Agarwalmoneycontrol.com
Finance Minister Arun Jaitley allocated Rs 33,150 crore for the healthcare sector today. The government also raised the health insurance premium from Rs 15,000 to Rs 25,000 and from Rs 20,000 to Rs 30,000 for senior citizens. Senior citizens above the age of 80 years, who are not covered by health insurance, will be allowed deduction of Rs 30,000 towards medical expenditures, added FM in his Union Budget speech.
The increase in health insurance premium will enable people to seek out for quality healthcare which is a huge concern in the country. However, Jaitley, once again disappointed the pharmaceutical industry with no major announcements. The only key announcement made by the FM in his first full year Budget for the Modi government today was the proposal of AIIMS in five new states, three new National Institute of Pharmaceuticals Education and Research in Maharashtra, Rajasthan and Chattisgarh and one Institute of Science and Education Research to be set up in Nagaland and Orissa each. The move will address issue of severe shortage of doctors and skilled staff.The Indian pharmaceutical market is expected to grow to USD 55 billion by 2020. According to a report by McKinsey, the industry has the potential to grow more than twice in the next six years, from a projected market growth of USD 24 billion by 2015 to USD 55 billion by 2020.Expectations* FM was expected to make some key changes in order to boost healthcare sector growth.
* A CARE report outlined that the sector seeks incentives to boost domestic innovation in medical equipments which could be in the form of income-tax write-off of 250 percent of research and development expenses as well as in the form of creation of medical technology parks. * The health sector was also looking forward to incentives to boost health insurance.
* The pharmaceutical industry was expecting enhanced tax incentives for research and development (R&D) activities from the FM this Budget.
* The Commerce Ministry, in its Budget proposal sought weighted average tax benefit of 400 percent for R&D activities for the sector.
* The bigwigs of the industry were hoping that Budget would provide them space to manufacture generic drugs and also some change in patent laws for their companies.
* The industry was also expecting initiatives to boost bulk drug manufacture. The current rate is 5 percent but the industry is expecting an increase in import duty on Chinese imports to 7.5 percent in order to boost domestic exports.
* The sector was keenly looking to incentivise medical/pharma research. Budget was expected to increase weighted deduction under section 35 (2AB) to 250 percent from 200 percent currently.
There were no major announcements on healthcare/pharmaceutical industry in Budget 2014.Stocks likely to get impacted: Sun Pharma, Lupin, Biocon.
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