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Budget 2025: Diagnosing the Needs of the Diagnostics & Medical Device Industry

Written by : Jayati Dubey

January 26, 2025

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As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2025-26 on February 1, the healthcare sector eagerly anticipates policies that could transform accessibility, affordability, and innovation in diagnostics and medical devices. Industry leaders urge the government to address critical gaps in healthcare spending, taxation, and domestic manufacturing to strengthen India's healthcare ecosystem.

Here are key insights from experts in the field, highlighting their expectations for the upcoming budget.

The Diagnostics Sector: Bridging the Gap Between Urban & Rural Access

Dr. Sameer Bhati, Director of Star Imaging and Path Lab Pvt. Ltd., underscores the pivotal role of diagnostics in early disease detection and management, a lesson reinforced by the COVID-19 pandemic. However, he points out a glaring disparity: two-thirds of diagnostic facilities in India are concentrated in urban areas, leaving rural communities underserved.

Dr. Bhati emphasizes the need for increased government investments in research and development (R&D) to foster transformative technologies like AI-driven diagnostics and gene-based testing. Despite India's remarkable strides in diagnostics, the country spends only 0.7% of its GDP on R&D, significantly lower than the global average of 2.2%.

“Tax breaks and subsidies on diagnostic services can make preventive healthcare affordable,” says Dr. Bhati, noting that nearly 48% of healthcare spending in India is out-of-pocket. He also highlights the role of digital health innovations such as telepathology and AI, which have demonstrated up to 95% accuracy in diagnosing specific conditions.

Dr. Bhati suggests that the government should prioritize:

1. Subsidized Diagnostic Services: Tax exemptions to make preventive healthcare accessible.

2. Rural Outreach: Incentivizing diagnostic centers to expand operations in underserved regions.

3. AI Integration: Supporting AI-driven diagnostic tools that improve accuracy and reduce costs.

Medical Devices Industry: A Call for Fair Tariff Policies

The medical devices sector, which is heavily reliant on imports, is seeking policy reforms to encourage domestic manufacturing and reduce dependency on foreign imports. The Association of Indian Medical Device Industry (AiMeD) has submitted a pre-budget memorandum urging the government to address the challenges plaguing the sector.

Rajiv Nath, Forum Coordinator of AiMeD, highlights the inefficacy of the current import duty structure, which imposes minimal tariffs (0-7.5%) on medical devices. While this was intended to make healthcare affordable, consumers continue to pay inflated prices, as the maximum retail price (MRP) of imported devices is often 10-30 times higher than their landed cost.

Nath emphasizes that the current duty structure is incongruent with the government’s “Make in India” initiative. He argues that nominal tariff protection is essential to promote domestic manufacturing, enable exports, and reduce India’s heavy reliance on imports. The industry has made the following key demands:

1. Withdrawal of Concessional Duty Notifications: Replace the current duty structure with a 5-15% tariff on medical devices and components to encourage local production.

2. Retention of Concessional Duty on Raw Materials: Maintain a 2.5% duty on raw materials for sterile disposables and other devices for three years.

3. Protection for Domestic Manufacturers: Implement policies similar to those that propelled the mobile phone industry to success, providing a predictable tariff environment to attract investments.

4. Monitoring of MRP: Establish a mechanism to regulate MRPs of imported devices, ensuring that consumers benefit from reduced costs.

Nath adds, “Indian manufacturers face a 12-15% disability due to inadequate infrastructure, high finance costs, and limited R&D capabilities. Without adequate support, domestic manufacturers are forced to become importers, which undermines the industry’s growth.”

Balancing Accessibility & Affordability

The diagnostics and medical device industries share common goals of improving healthcare accessibility and affordability. Both sectors are pushing for a balanced approach in the budget to ensure:

Affordable Healthcare: Tax breaks, subsidies, and tariff adjustments to reduce costs for consumers and patients.

Incentives for R&D: Government grants and funding for research in AI, precision medicine, and advanced diagnostics.

Support for Startups and MSMEs: Addressing challenges faced by startups transitioning to MSMEs, such as high operating costs and limited market access.

Infrastructure Development: Strengthening healthcare infrastructure in rural areas to expand access to diagnostic and medical device services.

The Way Forward

India's healthcare industry has immense potential to cater to its 1.4 billion population and reduce import dependency. However, achieving this requires a supportive policy framework. Both Dr. Bhati and AiMeD stress the importance of aligning budgetary allocations with the government’s broader goals of self-reliance and universal healthcare.

The diagnostics sector needs targeted investments to integrate AI and gene-based technologies into routine healthcare practices. Meanwhile, the medical devices industry calls for a shift from an import-dependent model to a robust domestic manufacturing ecosystem.

As Budget 2025-26 approaches, all eyes are on the Finance Minister to deliver reforms that address these critical challenges. With the right policy interventions, India can move closer to achieving its healthcare goals, ensuring affordable, accessible, and high-quality care for all its citizens.

Stay tuned for more such updates on Digital Health News.


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