It was music to the ears for those concerned with healthcare industry, hearing the Finance Minister's speech during the union Budget 2008. "Healthcare was one of the pillars of social sector reforms in India", he had stated. He substantiated his announcement with an increase of public spending by nearly 15 per cent taking the same to Rs 16,543 crore. Moreover, the reforms also saw a five years tax holiday for hospitals in non tier 1 cities, Rs 12,050 crore for the National Rural Health Mission and Rs 993 crore for HIV/AIDS prevention. The key question whilst we approach this year's budget will be if the government continues with the reforms or will it leave the sector neglected.

Accessibility and affordability should be the main themes around which budget expectations for this year's healthcare budget revolve around. Government should focus on quality healthcare delivery through effective public and private participation. On one hand where the government spending should increase substantially, on the other hand healthcare policies should create a congenial business environment for the private players to invest in the space.

Infrastructure status
Healthcare industry has long been requesting the government to provide infrastructure status. To induce the private sector to invest, and keeping in mind the long gestation period for break-even of hospital projects, the industry is hopeful that the government will grant "Infrastructure Status" to this sector. This will help in raising investments to create a modern healthcare delivery system.

Apart from that there should be special incentives and concessional interest rate should be given for hospitals and diagnostic centres being established in smaller towns and rural areas. Last year's budget saw the government granting tax holidays to healthcare establishments starting in tier 2 & 3 cities. Similar initiatives need to be carried out this year as well. Also the government should also provide special tax concessions for encouraging Public-Private Partnership initiatives in the health care industry. Also, excise duty and value added tax being charged on medical equipments and speciality medical consumables should be completely removed to reduce cost of diagnosis and treatment thereby making it accessible to the larger section of the society.

While the National Rural Health Mission continues to reap good results, the time has arrived to initiate and announce a similar policy for the economically weaker sections of urban society.

Today 80 per cent of health care in India is out of pocket which is pretty significant in terms of cost for an individual at an episode if something is going to happen to a member of his family, but if there is an insurance, obviously the bite is going to be taken away and therefore the sting is not there for payment at that point of time, the procedure gets to be done or an operation needs to be done. Not only should the government put in the requisite insurance premium for those who can't afford quality medical care, but it should also introduce separate licenses for health insurance and relax capital adequacy norms to encourage more private sector participation

The health care sector for the coming budget also looks forward to the annual budget for incentivising research and annual development in the country. To promote clinical research, research and development, government would take steps to reduce import duty to nil on inputs for research and development activities. Also government should introduce tax exemptions on the foreign currency payments to overseas consultants for research and development units. Moreover, the 'free treatment' conditions imposed on import of equipment by hospitals to avail customs duty exemption should be limited to a particular period.

Promoting public-private partnerships is another area where the healthcare industry is lining the expectation to help bring down costs. Moreover, in terms of manpower mobilization, the industry looks forward to the government for facilitate visa procedures for healthcare professionals to work overseas.

These last few years has seen consistent growth in the Indian healthcare sector which has a very promising future ahead, and it is expected that the above mentioned reforms in the budget would help in accelerating and sustaining the growth path in the industry on the whole. The healthcare sector had been earmarked as one of the special sectors that would help India became a global giant over the last decade.


(The author is Head of Markets, KPMG in India)