Even though the year 2017 witnessed significant developments in the medical devices sector but there is an urgent need for the government to accelerate further reforms and supportive measures in the year 2018 in order to boost medical device manufacturing within the country.
Predictable Tariff Strategy for Investors
To implement Make in India on ground and exploit potential effect on exports, and the 70 percent import dependent, over USD 10 billion Indian market of medical devices domestic manufacturers seek a long term and predictable tariff strategy for investors who will only invest if they find it viable and profitable to manufacture medical devices in India.
Basic custom duty (BCD) on medical devices having export turnover of more than:
- Rs. 100 crore (in any one of last three financial years), should be at least 15 percent, considering WTO bound rate for 40 percent
- Similarly, for Rs. 10 crore to Rs. 100 crore, BCD should be 10 percent and for Rs. 5–10 crore, BCD should be 7.5 percent, and
- For less than Rs. 5 crore, BCD could be at 5 percent or higher
The linkage of growing exports is to demonstrate growing capability and international competitiveness of these devices to silence critics or India will forever remain import dependent on unaffordable medical devices.
Increase in Basic Custom Duty Ranging from 0–7.5 Percent to 5–15 Percent
The availability of GST credit to importers has led to reduced cost of procurement and the only protection the domestic industry now has, is BCD. Against the range of 0–7.5 percent basic duty on nearly 90 percent medical devices, the WTO (World Trade Organization) bound rate is 40 percent, which means nations under WTO can increase duty up to a maximum of 40 percent, if they so wish. Other BRICS countries have duty rates as follows:
The point we at AiMeD have been trying to make for a long time is that nominal import duty on critical items, which can be made in India is not protectionism but sound Make in India economics to revive the floundering manufacturing sector and the preferred policy tool the world over to boost domestic industry and employment. And we have already seen the beneficial impact of such steps in sectors like telecom, automobile, and more recently in electronics. Whereas we have allowed even Indian manufacturers of medical devices to turn to cheaper imports.
The sectors where manufacturing is thriving in India are automobiles with 60–100 percent BCD, motorcycles with 60–75 percent BCD, and bicycles with 30 percent BCD. The government rightly revised custom duty on electronics up to 20 percent recently to maintain the investment climate.
But the year 2018, will be a year to watch out for which would clarify further course of action to make medical devices more affordable. Much more needs to be done as the relief of correcting inverted duty structure needs to be similarly extended to other medical devices many of which are not in Chapter 90.