How medical devices industry left high and dry in the Budget

The $15 billion medical devices industry in the country is upset over the fact that the sector has been given a cold shoulder by the Union Finance Minister Nirmala Sitharaman in the Union Budget for the financial year 2022-23 presented in Parliament on February 1.

The medical devices industry feels that though there were several measures that could have brought in to support the sector, the Union Budget 2022 did not address any of the major concerns of the industry, both the research-based medical technology industry and the domestic manufacturers. The industry's major expectations from the Budget included a predictable tariff policy, graded increase of custom duty to 10-15 per cent from the current zero to 7.5 per cent, and reduced GST on medical devices, etc.

From the current estimated market size of nearly $15 billion, the medical device sector is projected to register a CAGR of almost 15 per cent and is poised for significant growth in the next five years with the market size expected to reach $50 billion by 2025. Experts are of the view that the Indian medical device manufacturing industry is at the cusp of a great opportunity. Manufacturing growth in China has been challenged by many countries resistance to buy Chinese medical devices. Another opportunity is the current Indian Public Procurement Policy.

Due to geopolitical reasons global investors have begun to show renewed interest in India. So, the medical devices industry has been looking towards various policy initiatives from the government to support the growth in future. It was expecting the government to move forward on promised reforms and anticipated conducive measures to boost domestic manufacturing of the medical devices. But, when the Finance Minister announced the budget proposals for 2022-23, the medical devices industry was left high and dry as there was no booster dose in the budget for this emerging sector in India. Naturally, there was pall of gloom in the sector.

Mincing no words to express his anguish, Rajiv Nath, forum coordinator, the Association of Indian Medical Device Industry (AiMeD), said that it is frustrating that against the industry's expectations, the government has not included any measures to help end the 80-85 per cent import dependence forced upon India and an ever increasing import bill of over Rs 46000 crore and promoting growth of Indian medical device industry other than repeating last year's assurance to end custom exemptions of products that can be made in India.

However, the only positive news was on Public Procurement by allowing 75 per cent prompt payments and bringing in a weighted price preference on account of Quality which is especially critical in healthcare related medical devices.

Earlier in its budget recommendations to the Union Finance Ministry, AiMeD had urged the government to protect the medical devices manufacturing base in India by increasing basic custom duty on import of medical devices to at least 15 per cent from current 0-7.5 per cent duty though WTO Bound rate is mostly 40 per cent. Due to such low custom duty, India is importing Rs. 46,000 crore of medical devices and is over 80 per cent import dependent. This 80 per cent can be reduced to below 30 per cent with correct policies as done for mobile phones and consumer electronics. Expressing deep disappointment and anguish over the Union Budget 2022 giving cold shoulder again to the Indian medical device industry, Nath expressed his regret that the Union Budget 2022 speech has no strategic stated measures to boost the domestic manufacturing of medical devices.

Indian imports of Rs 45,000 crore that account for 85 per cent of the medical device market are a healthcare security risk that needs to be addressed. It is also an opportunity for Make in India and innovation in India, Nath said, adding that it is not clear if Health Cess applied on some medical devices will also be applied on other medical devices. Besides, there were no announcements on R&D related tax breaks to motivate indigenous development.

The Indian medical devices has been a neglected sector with import friendly policies in the past with negligible duties. But, the industry has seen a significant growth during the Covid-19 period. Many businessmen in the auto sector, garments, hospitality, tourism industry diversified into medical devices considering depressing times for their own businesses and saw opportunity and growth in medical devices.

(The author is freelance journalist with varied experience in different fields)