Business Today

Budget 2011-12: Pharma & healthcare left out

Talk about the budget with players in the pharma and healthcare sectors and you hear little about what it does to their sector.

twitter-logoE Kumar Sharma | February 28, 2011 | Updated 19:17 IST

Talk about the budget with players in the pharma and healthcare sectors and you hear little about what it does to their sectors and more about the initiatives the finance minister has taken or considered on fiscal consolidation, inclusive development and even infrastructure. Reason: the budget seems to have done precious little for both sectors, even though the finance minister has increased the allocation for health sector by 20 per cent.

"Yet again, initiatives to reform the healthcare agenda have gone unanswered in the Union Budget," says Dr. Prathap C Reddy, Chairman, Apollo Hospitals Group. "Personally, I was hopeful that the Union Budget would accord the 'National Priority Sector' status to Healthcare, which would have been the perfect motivator to attract funding, create gainful employment for millions and act like an energy enzyme for the GDP." Feeling that perhaps the healthcare sector may now need to make an even better presentation to the government and make a better case on the long pending need to grant it a priority sector status, Malvinder Mohan Singh, chairman, Fortis Healthcare, nonetheless feels it is a "good budget" and one that has announced several good initiatives.

On how it will impact the pharma sector, Dr Reddy's CFO Umang Vohra says while there is nothing specific for the pharma sector and the impact would be largely neutral, he does say that the "the most encouraging announcements of the budget were the fact that the fiscal deficit would be lower at 4.6 per cent (with a FY 14 target of 3.5%) and that the net borrowing of the government would reduce in the next year and trend lower with every passing year. This combined with the focus on infrastructure development would be beneficial to industry as it creates a more productive industrial environment and a stable liquidity and interest rate regime." Other than this, he says, there were no significant changes for pharma industry and the budget has continued to focus on inclusive development.

For instance, the budget does little to correct the inverted duty structure that the pharma sector has been complaining about.  The current structure favours imports of finished dosage forms. Plus, at a time when countries like China, Israel and Taiwan are proactively promoting research and development in the pharmaceutical sector, the budget does little to boost efforts at R&D in this space.

Apollo's Dr Reddy however points out that "the Union Budget has levied service tax on hospital and diagnostic service providers and with this the end user, the patients will end up paying much more than earlier. This is detrimental to the concept of preventive healthcare and early diagnosis."

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