Budget 2010 : Health Sector Perspectives

Mr. Pranab Mukherjee presented the budget for 2010-11 today. The budget has generally been welcomed by industry for being growth oriented. The stock market has also given the budget a thumbs-up with a modest 1.3% increase in line with the average increase in Budget days in the previous ten years. Increase in fuel prices which may have an inflationary impact and increase in Minimum Alternate Tax from 15% to 18% are the discordant notes in a otherwise positive budget.

So what are the implications of Budget 2010 for the Health Sector - here is a summary

Public Health
Increase in allocation for Ministry of Health and Family Welfare from Rs.19,535 Crores to Rs. 22,300 Crores marking an increase of 14% from previous budget is a welcome development. The increase has been in line with increase in outlays in previous budgets

Pharmaceuticals
Increase in the limit for weighted deduction for expenditure incurred on in-house R&D from 150% to 200% should incentivize increased R&D spending

Medical Equipment
Removal of multiple slabs for import duties on medical equipment is a welcome development. All medical equipment are now to be subject to a uniform 5% basic customs duty and 4% countervailing duty and complete exemption from special additional duty. Spares and accessories for manufacture of equipment will attract 5% duty with no countervailing duty and no special additional duty. Medical equipment industry will grow faster under this simplified duty structure. End user prices of some medical devices and equipment could also fall as a result of simplification of import duties

Existing duty exemptions for assistive and rehabilitative devices will be retained.

Import duty exemption on specified materials for orthopaedic implants will remove an anomaly and should reduce the end user price of the implants

Health Insurance
Expanded coverage for Rashtriya Swasthya Bima Yojana to include all families which are part of NREGA and performed at least 15 days work in FY 2010 is welcome as catastrophic medical expenses are a significant cause for poverty in India

Contributions to Central Government Health Scheme will be treated similar to other health insurance schemes for income tax purposes under Section 80D

The Disappointments
Private Healthcare Providers would however rue the fact that their repeated demands for infrastructure / priority sector status has not been granted by the Finance Minister. Requests for extensions of the time period for Tax Holidays for healthcare investments in Tier II and Tier III cities has also not been granted

In the balance a good budget for the healthcare sector !