Budget blues hit the healthcare sector

On the face of it, the Union Budget 2025-26 has many positives for the healthcare sector. But a careful examination suggests that it could turn out to be a sugar coated bitter pill. 

Allocation for healthcare has increased by around 10.8 per cent, from the revised budget Rs 86,582.48 crore in FY2024-25 to Rs 95,957.87 crore in FY2025-26. The Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PM-JAY) received a 28.8 per cent increase in allocation, rising from Rs 7,299 crore last year to Rs 9,406 crore in FY2026. 

Union Finance Minister Nirmala Sitharaman’s announcement that almost 1.1 lakh UG and PG medical education seats would be added in 10 years, with 10,000 additional seats being added over the next year in medical colleges and hospitals, is also a positive. The aspirational target is to add 75,000 seats in the next five years. Hopefully this will take us closer to bridge India’s doctor-patient ratio of 1:834 to the World Health Organization’s (WHO) recommended 1:1000.

However, the increase in the number of medical seats is meaningless without the infrastructure and teachers to teach these 10,000 extra medical students, raising doubts on the quality of medical education. Questions are also being raised on the lack of infrastructure and incentives to prevent medical graduates from migrating abroad for better job prospects. 

The real task is incentivising medicos to practise where India needs doctors, like the rural areas etc. Another headline-grabbing announcement was the establishment of daycare cancer centres in all district hospitals within the next three years, with a target to add 200 in the first year itself. 

It’s a good move to decentralise cancer care, taking it to the grassroot level. One could also argue that these centres will be able to absorb the 10,000 extra medical students. 

However, most medical students would prefer not to be based in district towns. Secondly, private sector cancer care companies have pointed out that cancer care is more complex and quality of care could suffer at these daycare centres, as oncologists and specialised onco paramedical staff would also need to be based at such centres.

However, the increase in the number of medical seats is meaningless without the infrastructure and teachers to teach these 10,000 extra medical students, raising doubts on the quality of medical education. Questions are also being raised on the lack of infrastructure and incentives to prevent medical graduates from migrating abroad for better job prospects. The real task is incentivising medicos to practise where India needs doctors, like the rural areas etc. Another headline-grabbing announcement was the establishment of daycare cancer centers in all district hospitals within the next three years, with a target to add 200 in the first year itself. It’s a good move to decentralise cancer care, taking it to the grassroot level. One could also argue that these centres will be able to absorb the 10,000 extra medical students. However, most medical students would prefer not to be based in district towns. Secondly, private sector cancer care companies have pointed out that cancer care is more complex and quality of care could suffer at these daycare centres, as oncologists and specialised onco paramedical staff would also need to be based at such centres could potentially improve telemedicine services and attract diagnostics providers to expand their services to the hinterland. 

Diagnostics companies have mostly seen the budget as positive for them, but point out that GST rationalisation and increasing tax exemption for preventive health check-ups would result in a win-win proposition: encourage regular testing, leading to early diagnosis and better treatment outcomes for patients. For diagnostics players, this would mean stronger revenues.

Another win-win proposal is the proposal for basic custom duty exemption on 36 life-saving drugs, a 5 per cent customs duty reduction on six others, and the addition of 13 new patient assistance programmes that will reduce the burden on patients’ pockets. It will also help more patients take the full treatment regimen, rather than drop off due to financial reasons. As the full exemption and concessional duty will also apply to the bulk drugs required for making these drugs, this will incentivise pharma companies to focus on these therapies, as increased access translates to larger revenues in the long run. The budget pushes for the Heal in India initiative, encouraging medical tourism which could incentivise private healthcare providers to increase capacity and create more employment opportunities in the healthcare sector.

However, the indigenous medical devices and technology manufacturers feel left out of this budget, as there was little to no support for them in the form of increased customs duty on imported devices or rationalising GST rates. Diagnostics and imaging equipment makers and users would have also benefited from lower and simpler GST rates. 

Thus while the Union Budget 2025-26 seems like a bonanza for the healthcare sector, closer scrutiny reveals many gaps. A lot hinges on the implementation of these proposals in a timely manner, with optimum utilisation of allocated funds. 

After the euphoria of budget day, the private sector finds that there are no specific policy measures to incentivise their contributions to the larger public good via public-private- partnerships. Will it be back to a stalemate between government, policy makers and the private healthcare representatives once again?

Viveka Roychowdhury, Editor 

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