Medical devices industry fumes at Budget letdown

Hours after Union Finance Minister Nirmala Sitaraman presented the Union Budget for the financial year 2023-24 on Wednesday the enraged domestic medical devices industry has come down heavily against the Union government for not addressing the issues raised by them. It was hopeful of a slew of measures, including bringing down the Goods and Services Tax (GST) to a flat 12 per cent. The industry is of the view that instead of 18 per cent GST applicable on some medical devices that are not luxury goods, it needs to be at a flat 12 per cent for all medical devices. Also reducing GST to five per cent is making Indian products non-competitive to imports as the manufacturers are unable to keep reduced ex-factory prices based on lower input costs net of GST.

The industry wanted more support to domestic medical device manufacturing industry to reduce the import dependence, which is, at present, to the staggering levels of 80-85 per cent. Other demands include setting up a separate department for medical devices and collecting more granular import data. The industry wanted the government to consider shifting from an 8 Digit HS Code to a 10 Digit HS Code, as done in USA and Europe, so as to give more granular data for enabling better analysis and policy making.

They also sought protection to the medical devices manufacturing base in India by increasing basic custom duty on import of medical devices to at least 10 to 15 per cent from the current 0-7.5 per cent, although the WTO Bound rate is around 40 per cent. The industry's demand is understandable as given the low custom duty India is importing Rs. 63,200 crore of medical devices This 80 per cent dependence can be brought down to below 30 per cent with correct policies as is the case with mobile phones and consumer electronics.

But, the domestic medical devices industry is feeling let down by the central government. The Association of Indian Medical Device Industry (AiMeD), the umbrella association of Indian manufacturers of medical devices, has expressed deep disappointment and anguish over the Union Budget 2023. It is indeed disheartening that despite the industry's expectations and the assurances given by various government departments, the government has not announced any measures to help end the 80-85 per cent import dependence forced upon India and an ever-increasing import bill of over Rs. 63,200 crore. It is a fact that though Prime Minister Narendra Modi urges India to become Atmanirbhar in medical devices, the medical devices imports continued to grow by a 41 per cent in 2022. India imported medical devices worth Rs 63,200 crore in 2021-22, up 41 per cent from Rs 44,708 crore in 2020-21, as per data from the Union Ministry of Commerce and Industry.

Unfortunately, the government did not even implement the recommendations made by the Parliamentary Committee on Health. If 70 per cent of the recommendations are implemented per se, the country could witness a reversal on the import dependence and transformation of the domestic industry.

Rajiv Nath, forum coordinator of AiMeD, said that it was painful to see the plight of domestic industry players shutting shop as they cannot compete with cheaper Chinese imports.

Imports of medical devices from China went up by nearly 50 per cent last year from Rs 9000 crore to Rs 15000 crore on account of low duties and convenience to import. These are the same domestic manufacturers on whom the government banked when imports got disrupted during Covid-19 crisis. In fact, it made the Indian medical devices sector self-reliant. The industry was hopeful that this will be a 'Make in India' push budget for an Atmanirbhar Bharat. But, now the industry is disheartened not to hear any impactful announcements for encouraging 'Made in India' medical devices. The Indian medical devices industry has the potential to reach $50 billion by 2030. The Finance Minister should have announced some measures in this direction for encouraging domestic manufacturing to be sustainable in the long run and become Atmanirbhar. One can't forget how the government and entrepreneurs scrambled to produce Covid-19 critical medical devices as the import dependent supply chains got disrupted.

(The author is a freelance

journalist with varied experience

in different fields)