Union Budget – A neutral stance at best

As we decoded the Union Budget 2024-05, presented by the Finance Minister, Nirmala Sitharaman, on July 23 with the business leaders, there was an air of disappointment, of cautious optimism intermingled with unmet expectations. The ₹90,000-crore Indian MedTech industry, moving toward ₹250,000-crore by 2030, had expected substantial measures to support affordable healthcare.

The central government has allocated ₹89,287 crore to developing, maintaining, and improving the country’s healthcare system, marginally higher than ₹88,956 crore allocated in FY24. There is no mention of increasing the GDP spent on healthcare, promoting medical value travel in India, rationalizing GST with a uniform rate, or full input tax credit eligibility.

Issues, such as consistently high imports of medical devices, which have increased by 13 percent from ₹61,000 crore in the last three years to ₹69,000 crore this year, impetus required to the Make in India initiative by abolishing nil duty exemptions on specific medical devices, facilitating appropriate funding for healthcare expenditures, and incentivizing R&D, remain. It may have been prudent to declare Health as the fifth pillar of Viksit Bharat.

The exemption of basic customs duty on three cancer treatment medicines, and the detailed changes in basic customs duties on equipment like x-rays and flat-panel detectors under the government’s phased manufacturing program announced in the Union Budget, received unanimous appreciation.

Shifting gears, the AMJ 2024 quarter saw an uptick in investor interest. The Indian medical devices segment saw an exceptional 87-times increase in deal values from the previous quarter. Single specialty hospitals continued to attract significant investments. In contrast, the diagnostics and wellness segments experienced a slight dip in activity this quarter.

Driven by a 15-percent increase in hospital revenue and a 12-percent increase in diagnostic revenue, the healthcare sector is also expected to report a year-on-year revenue growth of 12.6 percent in the quarter. BNP Paribas predicts a 150-basis point improvement in EBITDA margin, mainly due to hospitals.

Data supports PE firms’ continuing interest in large hospital deals in India in the last four years to build platforms after exhausting the US market. They are keen to inject cash into India’s healthcare sector, particularly since the pandemic. Buying up EBITDA business for multiple arbitrage is in full swing.

The industry is poised for a transformative era. To fully capitalize on these opportunities, robust strategic planning, flexible business models, and the availability of affordable, high-quality diagnostic tools are imperative.