Union Budget 2026-27: Pharma, hospitals and device makers flag rising costs, seek targeted fixes

Ahead of the Union Budget for FY 2026-27, India’s pharmaceutical, healthcare, medical devices, and chemicals sectors are pressing the government for focused interventions, warning that rising costs and longer payback periods are beginning to slow new investments. Industry leaders said attention will be on whether the Budget addresses sector-specific bottlenecks rather than broad intent.

India remains the world’s largest supplier of generic medicines by volume, with exports spanning more than 200 countries. However, with the economics of the business changing, large drugmakers are committing capital to complex generics, biosimilars and specialised therapies, areas that involve higher research spending, longer development timelines, and tighter regulatory scrutiny.

Satish Reddy, Chairman of Dr. Reddy’s Laboratories Limited said Budget 2026 must factor in these pressures.

“India’s pharmaceutical sector has earned global trust through its scale, quality, and affordability. As the industry undertakes a strategic shift from volume-led expansion to value-driven growth, closer alignment between science, policy and industry will be critical to advancing innovation across the value chain,” he said. With the government projecting a $500-billion pharma industry by 2047, Reddy added that “expectations from the Union Budget 2026 centre on the creation of a structured funding framework to deepen innovation and R&D across the country.”

Hospital chains, meanwhile, are seeking stronger policy backing for preventive care, arguing that late-stage treatment is driving up costs across the system. Government planning documents and official analyses, including the Economic Survey, peg public health expenditure at around 1.9 per cent of GDP for FY24-25, well short of the National Health Policy’s stated target of 2.5 per cent of GDP.

Shobana Kamineni, Promoter Director of Apollo Hospitals Enterprise Ltd. and Executive Chairperson of Apollo Healthco, said workforce health will increasingly determine economic outcomes.

“A Viksit Bharat will be built on a healthy youth and workforce, nearly one billion strong by 2047,” she said. “A prevention-first healthcare system, powered by mandatory check-ups, digitised records, and UPI-style data portability, can unlock early risk detection, personalised care, and long-term productivity at scale.”

Paediatric care has also emerged as a point of concern ahead of the Budget. Ramesh Kancharla, Founding Chairman of Rainbow Children’s Medicare Limited, pointed out that child-focused spending remains limited.

“Despite a marginal rise in the child-welfare budget to 2.29 per cent of the Union Budget, its share of GDP has slipped from 0.34 per cent to 0.33 per cent. For a country with such a vast paediatric population, this is simply inadequate,” he said. Kancharla called for higher allocations for child healthcare, more DNB seats in paediatrics and paediatric super-specialities, and tax deductions of up to ₹10,000 per child for diagnostics and annual health check-ups.

In the medical devices segment, companies are pushing for tax corrections to ease working-capital stress. “Affordability and access will remain constrained without a more rational duty structure, particularly amid currency volatility,” Dev Tripathy, Head of Finance at Philips Indian Subcontinent, said. He added that incentives for innovation, job creation and service exports through global capability centres need sharper focus.

Domestic manufacturers continue to flag the inverted GST structure as a bottleneck. Himanshu Baid, Managing Director of Poly Medicure Ltd., said finished devices often attract 5 per cent GST, while inputs and services are taxed at 18 per cent, leading to accumulation of input tax credit and pressure on cash flows. Aligning job-work GST rates with pharmaceuticals and revising refund rules, he said, would provide immediate relief. Baid also proposed a ₹1,000-crore MedTech R&D and clinical-validation fund to support domestic product development.

Chemical companies, which supply key inputs to pharmaceuticals and specialty manufacturing, are also looking to the Budget for clarity. "The sector is seeking fiscal support for research, downstream integration and simpler trade and regulatory processes to improve competitiveness and reduce import dependence," Akshay Dhar, Managing Director of DCM Shriram Fine Chemicals Ltd., said.