Budget 2025: Key Expectations for Life Sciences & Healthcare Growth

As per Deloitte’s Budget Expectations 2025 analysis report, India’s pharmaceutical sector has transformed into a global leader in drug and vaccine manufacturing, supplying medicines to over 200 countries. The government’s focus on innovation, particularly through initiatives like the PRIP scheme, has fueled growth, but challenges such as insufficient R&D funding and a fragmented regulatory system remain. As the industry grows, there are key expectations from the 2025 budget to boost its trajectory.

Current Landscape of India’s Healthcare Sector

The Indian healthcare industry continued to grow steadily in 2023, reaching a value of $372 billion. Both private and government efforts contributed to this progress. By 2024, the sector became one of India’s biggest employers, providing jobs for 7.5 million people. The rise of telemedicine, virtual healthcare assistants, and data analytics is expected to create an additional 2.7 to 3.5 million tech jobs in the coming years.

Public healthcare spending increased to 1.9% of GDP in FY24 from 1.6% in FY23, reflecting a steady rise compared to 1.6% in FY21. Hospitals alone accounted for a market value of $98.98 billion in 2023 and are expected to grow at 8% annually, potentially doubling to $193.59 billion by 2032.

Telemedicine is booming, with the market projected to hit $5.4 billion by 2025 due to the growing demand for remote healthcare and advanced technology. Similarly, the e-health market is anticipated to grow to $10.6 billion by 2025.

Government initiatives also expanded medical education in 2024, adding 60 new medical colleges and increasing MBBS seats to 1,15,812—a 6.3% growth compared to the previous year. Postgraduate medical seats also grew by nearly 6% to 73,111.

Budget 2025 Expectations For the Life Sciences And Healthcare Sector

As we approach Budget 2025, there are several key expectations from the life sciences and healthcare (LSHC) sector, particularly to address ongoing challenges and capitalise on growth opportunities. 

Here are some of the anticipated measures:

1. Streamline Regulatory Framework

Establish a “one regulator” approach for the pharma and medical device sectors to reduce operational complexity and promote business growth.

2. Policy for Refurbished Medical Devices

Create clear guidelines for the import and sale of refurbished medical devices, ensuring their safety and effectiveness for underserved communities.

3. Incentives for R&D and Domestic Manufacturing

Provide financial incentives for private Contract Research Organisations (CROs) and increase support for local drug manufacturing under schemes like PLI.

4. Reform Intellectual Property (IP) Regulations

Reduce patent approval timelines and introduce provisions for Patent Term Extension (PTE) and Data Exclusivity to encourage innovation.

Direct Tax Expectations

1. Extension of Tax Concessions for New Manufacturing Companies

Extend the deadline for companies to start production under the 15% concessional tax rate to 31 March 2026, further boosting the “Make in India” initiative.

2. Inclusion of Research Companies for Tax Concessions

Modify tax regulations to include companies focusing on research activities, not just manufacturing.

3. Clarifications on Product Samples and Deductions

Allow deductions for free samples used for marketing within the permissible threshold and address the application of section 194R on product samples.

Indirect Tax Expectations

1. Input Tax Credit (ITC) Eligibility on Payments to Medical Practitioners

Provide clarity on the eligibility of ITC for expenses incurred on medical practitioners, despite restrictions under the MCI regulations.

2. GST Rate Alignment for APIs and Formulations

Reduce the GST rate for Active Pharmaceutical Ingredients (APIs) to match the lower rate for formulations to address working capital issues and credit accumulation.

3. ITC Reversal for Physician Samples and Expired Goods

Exempt physician samples and mandatory destruction of expired goods from GST ITC reversal requirements to alleviate industry burdens.

Conclusion

The pharmaceutical industry, while on a growth path, requires strategic regulatory and fiscal interventions in the upcoming budget to strengthen its position as a global healthcare leader. Addressing these key areas will enhance innovation, ease of doing business, and research capabilities, aligning with the government’s broader vision of promoting indigenous manufacturing and innovation.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.