Budget Expectations
The industry’s expectations are manifold, with a primary focus on the government’s vision of ‘Atmanirbhar Bharat’ and propelling the sector towards an estimated value of USD 130 billion by 2030. A key ask for the sector is the introduction of incentives to promote investments in R&D and to promote domestic manufacturing of pharmaceutical products in India.
For R&D, the ask of the industry is for reintroduction of 200% tax deduction for R&D spend – atleast related to novel drugs.
Budget plan for better infra
To enhance Active Pharmaceutical Ingredient (API) manufacturing and reduce import dependency, it is essential to develop adequate infrastructure and introduce incentives to attract investors. The government should provide incentives for bulk materials used in API production to optimize the entire manufacturing supply chain within India.
While the PLI scheme aims to boost domestic manufacturing of bulk drugs, research-linked incentive schemes would further promote innovation in the API sector. Further, the sector also seeks to encourage innovation and investment in the manufacturing of medical devices through the introduction of a PLI for medical device manufacturing.
Budget should encourage AI investments
Additionally, the government should encourage investment in AI development for API discovery, which is still in its nascent stages in India. The potential for AI to revolutionize drug discovery and development is immense, and India must seize this opportunity to become a leader in this field.The sector advocates for the reintroduction of a concessional tax rate of 15% for new manufacturing entities, which would provide a significant boost to the industry. While certain exemptions on custom duty were announced for the import of specified cancer drugs in the last budget, the government should consider the exemption of Basic Customs Duty on the import of life-saving medicines. This would reduce the financial burden on the healthcare system and patients, ensuring that critical medications are more accessible.Moreover, as per India’s National Health Policy (2017), the aim was to increase government spending on health to 2.5% of GDP by 2025. However, the actual expenditure has hovered around 1.7% to 1.8% of GDP between 2022 and 2024, which is still below the target. The government must focus on strategies to achieve this spend in 2025, ensuring that the healthcare infrastructure and services are adequately funded.
Universal Health Cover in Budget
Also the Government should consider outlining the timeline and process for implementing the Universal Health cover for every Indian. Also for creating the healthcare infrastructure it would be good for the Government to consider either a tax incentive or a scheme similar to PLI for the healthcare sector.
In 2024, the sector saw significant advancements in biotechnology, precision medicine, and AI-supported research. The sector is poised for even greater expansion in 2025, with 68% of global life sciences executives anticipating revenue increases and 57% predicting margin expansions.
The life sciences sector harbours a strong hope that the forthcoming budget will align with these outlined considerations, furthering India’s evolution as a centre for research and innovation. As we stand on the cusp of FY 2025, the life sciences sector in India is poised for a transformative leap. With the government’s continued support and strategic initiatives, the sector’s journey towards innovation, affordability, and global leadership is set to accelerate, promising a healthier future for all.
(The author Hitesh Sharma is a Partner and Life Sciences Leader – Tax at EY India)
