By Kiran Mazumdar-Shaw, Chairperson, Biocon Group
Pre-budget opinion published in a leading business publication. (Union Budget of India 2025)
Finance Minister Nirmala Sitharaman is all set to present the Budget for FY25-26 on February 1, 2025. The upcoming Union Budget presents a unique opportunity to accelerate the growth of India’s pharmaceutical and life sciences sector. By allocating substantial funds for healthcare, enhancing the accessibility and affordability of life-saving medicines, prioritizing cutting-edge research, and advancing infrastructure, the government can drive growth, foster innovation, and boost global competitiveness in this vital sector.
Focus of Healthcare Accessibility and Affordability
Given the Narendra Modi government’s commitment to universal healthcare, the Budget should focus on enhancing affordability and accessibility to healthcare for both the rich and the poor.
Over the past three years, India’s healthcare budget has fallen below 2% of GDP, despite the National Health Policy 2017 recommending an increase to 2.5% of GDP by 2025. With healthcare share of the total budget declining from 2.3% in FY2019-20 to 1.9% in FY2024-25, the government must make a substantial allocation in this Budget to bridge critical gaps in healthcare accessibility, quality, and affordability, ensuring better outcomes for all citizens.
The government should also exempt or reduce GST on life-saving drugs, rare disease treatments, and precision medicines like Cell & Gene Therapy (C>). While GST has been reduced or waived off for some life-saving medicines and therapies, some still attract GST above 5%. A GST waiver will alleviate the burden on families, given India’s high out-of-pocket healthcare costs of over 62%.
I also suggest that the GST rate be reduced or waived off for essential input material and equipment for manufacture of Cell &Gene Therapy products.
Cancer is among the top five causes of death in India, with many unable to afford treatment. While GST on some cancer drugs like Trastuzumab was reduced to 5% from October 8, 2024, all essential life- saving cancer drugs should also be exempted. Additionally, the government should consider waiving off GST for expensive diagnostic tests and other chronic therapies where the monthly cost of treatment exceeds Rs. 5000. These steps will ease the financial burden on patients and will improve access to therapy leading to better outcomes.
Boost Research and Development
Innovation is the cornerstone of the pharmaceutical and life sciences sector. High-value research can significantly contribute to enhancing India’s global reputation as a hub for knowledge-intensive industries.
For India to remain a global leader in generics and biosimilars while expanding its footprint in novel drug discovery and advanced therapies, increased investment in R&D is crucial. The government should consider reintroducing weighted tax deductions for R&D expenditure, which were reduced in recent years. A 150% weighted deduction would encourage companies to invest in cutting-edge research and take on high-risk, high-reward projects.
The government’s foresight in establishing the Anusandhan National Research Foundation (ANRF) last year to seed, grow and foster a culture of research and innovation throughout the country is commendable. ANRF should focus on critical areas such as biotechnology, renewable energy, quantum computing and AI among others to drive impactful innovation.
The Rs 5,000-crore Promotion of Research and Innovation in Pharma MedTech Sector (PRIP) scheme currently excludes Contract Research Organizations (CROs). The scheme should be extended to CROs by way of providing financial assistance as a percentage of capital expenditure incurred in setting up labs, facilities etc.
Strengthen Infrastructure and Manufacturing
India’s pharmaceutical sector has demonstrated its resilience and capability as a trusted supplier of vaccines and essential medicines worldwide. However, for sustained growth, significant investments in infrastructure are required. The government’s Production Linked Incentive (PLI) scheme for pharmaceuticals has been a game-changer. Next, the government should extend additional funds and provide for higher incentives under the PLI scheme to enable the transformation of the manufacturing capabilities with an eye on giving impetus to ‘Make in India’ and achieving self-sufficiency.
The government should also consider extending the 15% concessional corporate tax rate scheme under Section 115BAB to existing manufacturing companies and extend the 31 March 2024 sunset date for new companies.
Promote Exports and Global Competitiveness
India’s pharmaceutical exports grew from ~US$19 billion in FY19 to ~US$28 billion in FY24, with the country being a reliable supplier of generic and biosimilar medicines to more than 200 countries. To sustain this momentum and achieve the government’s US$50 billion export target by 2030, it is essential to promote exports of pharma product as well as research and manufacturing services.
Cash incentives or duty reimbursement schemes for services will boost exports and help reduce the cost incurred by sponsors on carrying out research services, making India more competitive in the contract research and manufacturing services space.
Conclusion
A robust and forward-looking budget will propel India’s pharmaceutical and life sciences industry to improve its leadership position and will make India a global hub for affordable and high-quality healthcare solutions. It is my hope that the government recognizes the sector’s potential and provides the necessary impetus to drive innovation, inclusivity, and impact.
Published on: Mint
