Healthcare’s fault lines, flash points and the search for balance

As India gears up for the upcoming Union Budget 2026-27, industry is lining up its laundry list of expectations.

For instance, Pavan Choudary, Chairman, Medical Technology Association of India (MTaI) hopes the upcoming budget will address the high cumulative tax burden (BCD, Health Cess, Surcharge, and GST) on essential medical devices which reaches up to 30 per cent in some segments, especially important for products where domestic manufacturing remains limited or absent. He also believes that current tax levels directly inflate the cost of critical care – specifically in surgery, management of NCDs, and diagnostics – pushing families into financial hardship. With rising input costs due to supply-chain disruptions, calibrated duty reductions are no longer a concession, but a public health imperative to ensure affordability. Aligning MedTech Customs and GST structures with other priority sectors will expand healthcare access, improve patient outcomes, and foster a more resilient, globally competitive ecosystem, in Choudary’s opinion. 

This will of course be opposed by the domestic medtech sector. Rajiv Nath, Forum Coordinator, AiMeD looks forward to decisive policy execution—raising tariffs to 10–15 per cent to support domestic manufacturing, adopting ICMED certification in procurement over foreign approvals, updating labelling to disclose domestic content, and incentivising suppliers with over 50 per cent local value addition. 

There are bound to be many more flash points between opposing factions.

For instance, the proposed plan to launch an integrated MBBS-BAMS course, with students graduating from modern/allopathic and Ayurvedic schools of medicine. On the face of it, both streams have their benefits but the integration will need to be phased. If done right, India can create a blueprint for merging the wisdom of ancient traditional medicine systems with modern evidence based protocols. But if done in a hurry, it will end up creating more chaos, and rather than giving India’s healthcare workforce and sector an edge, might result in a blunting of this competitive edge. Both systems need to complement without conflict. 

2026 will see the tug of war between the online and offline pharmacies played out in the diagnostics sector as well. An RTI activist-pathologist Rohit Jain’s contempt petition has alleged that the “illegal health services” of diagnostic services offered by online e-commerce aggregators like Amazon are operating in Delhi in violation of the Clinical Establishments (Registration and Regulation) Act, 2010, and other applicable laws. The Kerala’s diktat to fix minimum wages for private hospital workers has also split the sector. While employees are rejoicing that they are finally getting their dues, hospital managements are objecting. There are concerns that smaller healthcare facilities, especially in tier 2 and 3 cities, will not be able to foot the salary bill. The Kerala government’s aim is to create a retention strategy to prevent brain drain of healthcare workers overseas, which is understandable as Kerala is probably the state which loses the most of its healthcare workforce to long term international migration.

In spite of the policy friction and flash points ahead, India’s healthcare sector is predicted to show market resilience. Mythri Macherla, Vice President and Sector Head, Corporate Ratings, ICRA predicts that the performance of the Indian hospital industry is expected to remain strong in FY2026 on the back of healthy occupancy and ARPOB. ICRA expects occupancy of its sample set companies to remain robust at 62-64 per cent in FY2026 (63.5 per cent in FY2025), while the ARPOB is expected to expand by 6-8 per cent. Cost optimisation efforts along with an improving case and payor mix will support operating profit margin (OPM) of 22-24 per cent for the sample set companies in FY2026 (23.6 per cent in FY2025). Despite ongoing debt-funded capital expenditure, debt metrics for the sample set companies are expected to remain comfortable backed by healthy cash accruals. ICRA thus continues to have a positive outlook on the Indian hospital industry.

2026 will see the sector grappling with rising medical inflation, even as health insurance coverage widens. Hospitals will have to strive to improve operating profit margins, even as they ramp up infrastructure. The growth spots will be in Tier 2 and 3 cities, but will the metrics be the same, in a population that may not have the same spending power? Some TIer 2 and 3 cities could, in time, become medical tourism hubs. This could enable patients to get better medical care and infrastructure at hopefully reasonable prices, while hospitals improve operating margins thanks to overseas patients.

Kerala’s experimentation with health workforce wages could be the start of a movement to value this vital talent pool at all levels. The war for talent will need to be about integrating upskilling initiatives and monitoring productivity, while making the talent a part of the success story. Digital systems can integrate all these initiatives, in step with India’s changing demographics and shifting disease burdens. Provided they are rolled out with transparency and empathy.

VIVEKA ROYCHOWDHURY, Editor 

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