Over the past few decades, the Indian Life Sciences sector has witnessed high growth and contributed significantly to the global generics market. However, the sector is currently going through many fluctuations with declining growth rates for both exports as well as domestic businesses.
While the move to provide health coverage to 50 crore people under the National Health Protection Scheme, the proposal to set up 1.5 lakh health and wellness centres, 24 new medical colleges, nutritional support to TB patients are positive, the Union Budget 2018-19 however has not specifically addressed the sector’s imminent challenges.
Against this backdrop, we present to you our analysis of the key proposals announced in Union Budget 2018-19 that impact the Life Sciences sector; we hope you find this useful and look forward to connecting with you on your sector specific requirements.
The Union Budget exercise involved a tight rope walk – on one hand to ensure that economic growth is sustained and encouraged, and on the other to respond to the current socio-economic environment and the need for rural and agricultural spending.
At a macro level, this year’s Budget chose to significantly appeal to the latter, unveiling healthcare benefits up to INR500,000 per family per annum for the economically backward strata, calling for increased rural outlays and a slew of measures on the agricultural side and increased focus on the MSME and self-help sectors. This increased expenditure naturally meant that the tax benefits that corporates expected as a response to global developments in the U.S. and the U.K. could not come through and the much speculated LTCG on listed stocks made a comeback. This ensured that the fiscal slippage was more or less contained. From a PE stand point, the increased rural and healthcare focus may perhaps improve the economics of companies engaged in consumption led and healthcare sectors.
On the policy side, so far as the PE/ VC/ investing community is concerned, the FM clearly recognised the stellar contribution of this community and made two significant statements:
The Union Budget 2018–19 has many proposals for the Healthcare sector, including massive government support towards Universal Health Coverage. This provides a big opportunity to the Healthcare industry and allied services to address the healthcare needs of the country. The Budget has focused on healthcare development for the under-privileged and the bottom-of-pyramid section of the society. This year, the Budget has envisioned a plan for comprehensive social security through its flagship National Health Protection Scheme benefiting 50 crore people. The government has committed 1200 crore for creation of 1.5 lakh Health and Wellness Centres, 24 new government medical colleges and hospital are also envisioned through upgradation of existing district hospitals. These measures will provide an impetus to Healthcare sector including hospitals, pharmaceutical and medical devices with expected increase in patient inflow due to increase in coverage and access to healthcare services. Against this backdrop, we present to you our analysis of the key proposals announced in Union Budget 2018-19 that impact the Healthcare sector; we hope you find this useful and look forward to connecting with you on your sector specific requirements.
Transport & Logistics
Continuing with the focus on infrastructure development, the FY19 Budget is built on forward-looking measures for holistic multi-modal growth in the transport and logistics sector. The Finance Minister has emphasised on the development of infrastructure by stressing the need for over INR50 lakh crore in investment to connect and integrate the country with a comprehensive network of roads, railways, airports, ports and inland waterways. Policies and initiatives announced in the Union Budget 2018-19, along with various other continuing investments and reforms are critical to India’s competitiveness. India jumped nearly 20 places in the World Bank Logistics Performance Index in 2016; an effective implementation of infrastructure initiatives could potentially catapult us much higher rank in the global marketplace.
Union Budget 2018-19 clearly aims at providing holistic impetus to real economy through continued structural reforms and budgetary provisions; which would result into higher financial intermediation and better allocation of resources. For India to reach a sustainable double digit growth in the medium to long term and to achieve an enhanced quality of life, it is critical that economic activity in the rural areas and in the Medium, Small and Micro Enterprises (MSME) segment has to increase substantially. From the standpoint of Financial Services sector, some of the key take away from the Budget include increased opportunities for priority sector lending, increased insurance coverage, deepening and widening Indian bond market, etc.
Energy and Natural Resources
Amidst a slightly slowing economic growth scenario, the Finance Minister presented a Budget which needed to balance the push required for long-term growth with the imminent imperative of meeting the aspiration of the masses to reap fruits of economic growth. The Budget focusses on revitalising the rural economy and reaching the last man in the queue. Energy security plays a crucial rule in economic independence of the rural economy and the Budget plays this card efficiently to spur consumption at the deepest roots of the pyramid. The Budget attempts to facilitate opening up of financial markets for a larger set of issuers and thus aids faster clean energy adoption.
Technology Media and Telecom
The progressive vision of the Government to make India a true digital and connected nation has manifested itself in digital and cyber taking the centre stage for the Budget announcements for Technology, Media and Telecom (TMT) sectors. Significant allocations have been made towards telecom and technology infrastructure development for adoption of some of the next generation technologies such as 5G, Internet of Things and Artificial Intelligence. However, the Budget remained muted towards some of the financial reliefs sought by the sectors , especially the telecom sector which has been under a great financial stress.
Finance Minister, Arun Jaitley presented a Union Budget 2018-19 focused on strengthening rural economy, infrastructure creation, good health to economically less privileged and more resources for improving quality of education. This aligns with the Indian Government’s goal to assist and provide opportunity to every Indian to realise their potential of achieving their economic and social dreams. Several key proposals that were announced are aimed at improving learning outcomes in school, use of digital technology for improving quality in education, focus on teacher development, revitalising infrastructure and systems in education, focus on research, set-up of Institutes of eminence to be on par with global standards, creation of specialised university for Railways, Schools for Planning and Architecture and upgradation of District hospital to medical colleges. A National Apprentice Scheme, EPF contribution from government for new employees to boost formal employment, was also launched for skilling and employability of youth to reap the benefits of this growth.
With the Goods and Services Tax becoming effective on 1 July, 2017 and timely announcement of other policies, the Manufacturing sector did not expect any big bang reforms to be announced in the Union Budget 2018-19. However, there was a definite expectation for changes in direct taxes to push the ‘Make in India’ initiative thereby attracting investments from private players. The Union Budget 2018-19 was focused on strengthening the other key pillars of the economy namely, agriculture, healthcare and infrastructure. While the Budget may not hugely impact the Manufacturing sector, government’s increased spending on the mentioned sectors is expected to stimulate the domestic Manufacturing sector. Several key proposals that were announced are aimed at developing the rural and agricultural sector thereby giving a positive push to the sector in the long run.