What Budget 2021 holds for medical devices sector

The Union budget for the financial year 2021-22 has been well received by most quarters, including people, businesses, markets and investors. Coming in the backdrop of what can be termed extremely exacting circumstances vis-à-vis the ongoing battle against a once-in-a-lifetime pandemic, coincident with the implications from the pre-pandemic broader economic downturn, the budget can be called reasonably balanced and one with a strong push for growth and reinvigoration. 

Given the overwhelming focus on healthcare and infrastructure, the twin building blocks for a high-growth trajectory economy and a high quality life for the wider population, the budget nearly ticks all the boxes. For any business, manufacturers and related players involved at different stages of the value chain in the healthcare segment, what does the budget mean to them? More particularly, how does budget 2021-22 play out for medical device manufacturers?

Ripple effects on medical devices sector

The often-cited cliché that health is wealth has been brought out in sharp relief thanks to Covid-19, and therefore, in unfortunate circumstances, no doubt. However, making virtue of this adversity, the government has sought to turn things around sharply, and rightly so, by raising the healthcare allocation by an unprecedented 137 per cent as compared to last year's budget. 

Besides the existing National Health Mission, the announcement of a new scheme known as PM Atmanirbhar Swasth Bharat Yojana with an outlay of over Rs 64,000 crore with an eye on expansion of health services and research infrastructure across the country is commendable. This would also serve to address the long-entrenched urban-rural gap in terms of availability and accessibility of health products and services. 

Across the length and breadth of the country, the vision to establish thousands of wellness centres, integrated public health labs in all districts even up to block levels, public health units at points-of-entry, emergency operation centres and biosafety level laboratories would naturally create an enormous surge in demand for medical devices. As a matter of fact, it is hoped that in the coming months and years, even the smallest of nursing homes to clinics would be well equipped with basic medical devices. 

Remember that these budgetary allocations are only from the Central government’s accounts. Since health is a state subject, it implies that the state governments would have their own healthcare allocations, thereby, adding to the all-round momentum around healthcare. As such, this all-round traction in healthcare would certainly have positive spillover effects on the medical devices sector, too.

PLIs to benefit medical devices sector, too 

Continuing with the vigorous push for a self-reliant Indian economy mounted even before the Covid-19 outbreak, the Budget 2021-22 has reinforced the government’s intent. The commitment to as much as Rs 1.97 lakh crore for the production linked incentive (PLI) scheme for 13 sectors for the next six years with the aim of creating global champions is laudable. Although the budget has not specified the names of these 13 sectors, in light of the prior announcements related to the PLI schemes and other self-reliance initiatives, it can be safely assumed that the medical devices sector, along with APIs and bulk drugs, is an integral part of the programme and thus, a beneficiary. It was reported during December last year that 28 applications from 23 medical device manufacturers had been sent in response to the government’s Production Linked Incentive (PLI) scheme for medical devices. 

However, the government could consider expanding the basket from the present four categories of medical devices, including cancer care/radiotherapy devices, radiology and imaging devices, nuclear imaging devices, anaesthetics and cardio-respiratory and renal care devices, and implants.

Preventive health and nutrition to spur activity and demand 

Through this budget, the government has endeavoured to conceptualise healthcare as a holistic idea, which must also embrace preventive health and well being, apart from curative health. This was evident when equally relevant, although not directly related in the strictest sense of the term, subjects such as nutrition, universal coverage of water supply, sanitation and clean air were also placed under the overarching heading of healthcare and well being in the budget. Access to improved nutrition, quality water supply, cleaner air and generally upgraded sanitation facilities would naturally create an increased consciousness and desire for self-health and other monitoring devices, which in turn, would give an impetus to the medical devices sector as a whole. 

With a target set to improve nutritional outcomes across 112 aspirational districts, the budget has expanded the horizons of possibilities for the medical devices sector even in the tier II and III cities. 

Big infrastructure spend 

Along with health, the other big-ticket item under the budget has been infrastructure. After all, the setting up of robust physical infrastructure is an essential foundation for any manufacturing industry, including the medical devices sector. 

The shrinking of physical distances and time by way of allocation of enormous resources for roads, highways, railways, ports and waterways would not only facilitate timely connection and accessibility between product makers and final consumers, but also ensure a more efficient logistics, storage and distribution network in the whole value chain, thereby, improving cost efficiencies benefitting one and all. 

This would certainly be an advantage to the domestic medical devices manufacturers, too. That the budget raises capital expenditure by an impressive 34 per cent at an aggregate of Rs 5.54 lakh crore testifies to the government taking a long-term view on this. 

The establishment of Development Financial Institution (DFI) with an initial capital of Rs 20,000 crore for financing of infrastructure is also noteworthy.  

Therefore, budget 2021-22 has been a watershed budget of sorts for the predominant attention that it accords to healthcare and by implication, the medical devices sector, too.   

(The author is the founder & CEO of Max Ventilator)