Budget 2024 should strategically focus on enhancing healthcare infrastructure

By Shreyus G, Senior Consultant, Avalon Consulting

The Indian healthcare sector has witnessed a robust growth of 22% CAGR from 2016 to 2023, reaching a valuation of USD 350-400 billion, driven by a population of 1.4 billion, with 65-70% in the age bracket of 15-64 years. The healthcare infrastructure market stands at USD 350 billion. The medical tourism market stands at another USD 35 billion and the resurgence of medical tourism, with a 22% CAGR in 2022, is expected to further drive healthcare services demand.

Anticipating the Union Budget, there is a projected 10-15% increase in funding for the Ayushman Bharat scheme, designed to provide financial protection and enhance healthcare accessibility. The Ayushman Bharat scheme witnessed a commendable 12% increase from Rs 6412 Crore in 2022 to Rs 7200 Crore in 2023, solidifying its position as the world’s largest government-funded health assurance program.

To sustain healthcare industry growth, the budget should strategically focus on enhancing healthcare infrastructure, promoting digitization of health initiatives, and indigenization of the healthcare sector.

Focus on Healthcare Infrastructure: Insights from the ongoing pandemic highlight the need to fortify healthcare infrastructure in India. Presently, there are 23,391 primary healthcare centres and 145,894 sub-centres serving 72% of the rural population. However, the World Health Organization notes India’s low hospital bed ratio of 0.5 per 1000 people, is significantly lower than global benchmarks. To achieve the goal of a disease-free nation by 2047, increased budgetary allocations are essential for establishing and enhancing healthcare facilities, including new hospitals, medical equipment procurement, and telemedicine infrastructure development.

Addressing the shortage of skilled health workers requires a budgetary focus on establishing new institutes dedicated to healthcare education and training. This holistic approach aims to create a more resilient and comprehensive healthcare system, aligning with global standards.

Support for Digital Health Initiatives: The digital health ecosystem is expected to reshape the healthcare sector, with projections indicating a USD 9.3 billion market in 2024 and a 16.2% CAGR until 2028. The budget is likely to prioritize digital health, with increased usage across various healthcare areas, including Diagnosis Technologies, service delivery enhancement, healthcare delivery optimization, and Point of Care Testing (PoCT) in remote areas.

Indigenisation of Healthcare Services: In the fiscal year 2023 budget, the Ayush ministry witnessed a 20% increase, reaching a total allocation of Rs 3647 Crore. This financial boost acknowledges the effectiveness of indigenous holistic treatments, especially through Ayurvedic facilities. Beyond cost-effectiveness, these traditional therapies position India as an attractive destination for international medical tourism.

Promotion of local R&D in pharma & medical devices

The Indian pharmaceutical industry is anticipated to stabilize and sustain its robust position following the heightened growth observed during the COVID-19 pandemic. In the upcoming fiscal year, the domestic formulations market is projected to exhibit an 8% Compound Annual Growth Rate (CAGR), reaching a valuation of USD 20 billion, while formulations export is expected to grow at a rate of 10%, reaching USD 22 billion. However, API exports are anticipated to display a more subdued growth rate of 5%. Simultaneously, the medical devices sector, a substantial market, is poised to burgeon to USD 50 billion by the year 2025. Envisaging the forthcoming budget, we anticipate a strategic emphasis on fostering local research, innovation, and domestic production across APIs, formulations, and medical devices.

The encouragement of local manufacturing is exemplified by the approval of INR 6,000 crores for the Production Linked Incentive (PLI) scheme in 2023, with an outlay of INR 15,000 crores spanning from FY 21 to FY 29. The release of approximately INR 165 crore worth of incentives to four companies in 2023 signals the government’s commitment and a similar scale of disbursement is expected in 2024. The PLI scheme assumes critical importance as it facilitates India’s self-sufficiency, substituting imports from China and catalyzing the development of indigenous APIs and key starting materials.

In tandem with stimulating local manufacturing, the budget is likely to promote local Research and Development (R&D). The introduction of schemes in 2023 garnered positive responses from pharmaceutical stakeholders, with the government outlining plans for seven centres of excellence at an estimated cost of INR 700 crores. Modifications to the guidelines for investments in these centres are anticipated to encourage broader participation.

High Expectations

Expectations for the Union Budget 2024-25 are high as the expenditure towards the healthcare sector has been subdued for the past few years. Anticipated developments include increased allocations for healthcare infrastructure, research and development, digital health initiatives, heightened indigenization, and targeted measures to increase local manufacturing. The budget’s potential impact holds the promise of a more resilient, accessible, and innovative healthcare ecosystem.

**The views expressed by the author are his own.