Budget 2021: Encourage investment in private healthcare infra to ensure a healthy India

Updated: Jan 30, 2021 10:26 AM

Union Budget 2021 India: It is also crucial that the government provides appropriate fiscal incentives and creates sustainable public policy to encourage investment in private healthcare infrastructure.

Budget 2021-22, Union Budget 2021Budget 2021-22: Healthcare should be accorded ‘National Priority’ status, as was done for the IT sector, to bring in requisite attention and investment.

By Alok Roy

Indian Union Budget 2021-22: While healthcare is one of the most important pillars of nation-building, traditionally India has not invested sufficient resources on health of its citizens. Despite the significant TB burden and sporadic outbreaks of other infectious diseases including chickenpox, our public health infrastructure has been largely deficient, and COVID-19 pandemic had ascertained this further. 

Although, there have been tremendous efforts by the central and state governments over the past few months to strengthen the resources- healthcare facilities and workforce, what is required is a new development paradigm with heightened investment towards healthcare infrastructure. The requisite focus for a stronger public health system, along with appropriate support for sustenance as well as expansion of private healthcare infrastructure is fundamental for creating a comprehensive healthcare ecosystem envisioned in the National Health Policy 2017.

In order to achieve these and to overcome the twin challenge of surging non-communicable and infectious diseases, it is imperative that the public spending on healthcare is increased to 4.5% of GDP over next 5-7 years. 

It is also crucial that the government provides appropriate fiscal incentives and creates sustainable public policy to encourage investment in private healthcare infrastructure, given that private sector caters to 70% of healthcare demand. Hospitals should be included under the definition of ‘industrial undertaking’ u/s 72A of IT Act. This has been a long-standing demand, critical to expedite private investment in healthcare capacity building and to ensure that healthcare is treated at par with other sectors.

Currently, the benefits of deduction for CAPEX are extended only to hospitals having a minimum capacity of 100 beds. No benefits are provided to encourage the setup of smaller hospitals/nursing homes in rural areas posing as an impediment for organizations to start chains of smaller hospitals. Given that there is an urgent need for expansion of healthcare facilities in smaller cities and rural areas, the benefits u/s 35AD of IT Act should be extended to hospitals having:

  1. min of 50 beds in tier II, III and IV cities and 
  2. min of 25 beds in rural areas 

Further, while grappling with COVID-19, hospitals have had to make substantial capital expenditure towards structural changes in the building layout, air-flows etc. and significant fresh investment in medical equipment, bringing in immense strain on hospital cash flow and operational sustenance. FICCI has recommended that some relief through weighted deduction on CAPEX u/s 35AD be provided to all hospitals who have made any capital expenditure for prevention and/ or treatment of COVID patients.

The Finance Ministry has devised an inspiring INR 111 lakh crore National Infrastructure Pipeline (NIP) for 2020-25, which includes INR 1.69 lakh crores for infrastructure development projects for healthcare. Yet, given the infrastructure gaps and rising demand owing to increasing disease burden in the country, there is a need for bolder investment for health sector.

Healthcare should be accorded ‘National Priority’ status, as was done for the IT sector, to bring in requisite attention and investment. Innovative long-term financing structures, special healthcare zones, subsidized cost for land and electricity, higher FSI for hospital buildings are some of the measures needed for enhancing infrastructure creation in healthcare. 

The pandemic has also proved that we cannot be over-dependent on only testing and treatment of diseases. Primary and preventive care is vital for a strong healthcare system. It is recommended that tax exemption on Preventive Health check-up be raised from the current Rs 5,000 per person (Rs 7,000 for senior citizens) to Rs 20,000 u/s 80-D of IT Act to encourage preventive care. This is an opportunity incentivizing health-oriented consumer behaviour for insulating individuals from effects of unanticipated healthcare spending and for institutionalising a Healthcare Savings Fund. 

There is also a need to increase proportion of Health Research allocation in overall Health Expenditure to at least 6% of the funds allocated to MoHFW. The pandemic has ascertained that Health Research is a critical component for forging an effective healthcare response and it is also important for attaining SDG-3 goals.

(Alok Roy is the Co-Chair at FICCI Health Services Committee and Chairman of Medica Group of Hospitals. The views expressed are the author’s own.)

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