As India prepares for the Union Budget 2026-27, leaders from the pharmaceutical and medical technology sectors have urged the government to introduce a structured funding framework, revive R&D tax incentives and address regulatory and tax bottlenecks to accelerate innovation-led growth.
The expectations come against the backdrop of increased public health spending in recent years. The Union Budget 2025-26 allocated ₹99,859 crore to the Ministry of Health and Family Welfare an increase of around 10-11 per cent supporting initiatives such as 200 Day Care Cancer Centres and expansion of the PM-ABHIM scheme. According to the Economic Survey 2025, India’s total health expenditure has doubled to ₹6.1 lakh crore.
However, industry stakeholders believe that sustained innovation, particularly in pharmaceuticals and MedTech, will require targeted policy interventions in Budget 2026-27.
Revival of R&D Tax Incentives and Compliance Simplification
Pharma leaders have called for the reinstatement of meaningful tax incentives to encourage long-term investment in research and development.
Saransh Chaudhary, President, Global Critical Care, Venus Remedies and CEO, Venus Medicine Research Centre (VMRC), said recent government initiatives such as the Research, Development and Innovation Scheme and the PRIP programme have laid a strong foundation for innovation-driven growth.
“To translate these initiatives into meaningful outcomes, there is a need to simplify the operating environment,” Chaudhary said, urging rationalisation of provisions such as Section 194R, particularly around the treatment of medical samples used for patient care and clinical evaluation. He also stressed the need to restore weighted tax deductions for in-house R&D expenditure to support complex research areas such as new antibiotics, rapid diagnostics and infection control technologies.
Reducing Import Dependence and Strengthening MedTech Manufacturing
With nearly 80 per cent of India’s MedTech requirements still import-dependent, industry leaders have sought expanded incentives to boost domestic manufacturing.
Dipu Bose, Head, Medical Technology, ZEISS India & Neighbouring Markets, called for expanding Production Linked Incentive (PLI 2.0) schemes for medical devices, along with phased manufacturing programmes (PMP). “Reducing tax burdens and expanding incentives for innovation are essential to building a more inclusive and robust healthcare system,” he said.
Echoing this, Poly Medicure Ltd Managing Director Himanshu Baid proposed the creation of a dedicated ₹1,000-crore MedTech R&D and clinical validation fund to support indigenous product development and global competitiveness.
He also flagged the inverted duty structure as a key concern, noting that while finished devices attract 5 per cent GST, most inputs and services are taxed at 18 per cent, leading to working-capital pressures for domestic manufacturers.
GST, Customs Duty and Affordability Concerns
Several industry voices highlighted the need to rationalise customs duties and GST to improve affordability and competitiveness.
Dr. G.S.K. Velu, Chairman and Managing Director, Trivitron Healthcare, urged the government to correct the inverted duty structure in the upcoming Budget, despite acknowledging the 2025 GST reform that reduced taxes on diagnostic kits and medical devices to 5 per cent.
He also reiterated the industry’s long-standing demand to raise public health expenditure to over 2.5 per cent of GDP, especially as non-communicable diseases account for nearly 65 per cent of India’s mortality burden.
From a patient-access perspective, Devashish Singh, Co-founder and CEO of MrMed, called for a reduction in customs duties and removal of GST on life-saving cancer and specialty medicines. He said this would significantly lower treatment costs and accelerate the availability of new-age therapies in India.
AI, Digital Health and Export-Led Growth
Technology-led healthcare delivery emerged as another key expectation from Budget 2026-27.
Dev Tripathy, Head of Finance, Philips Indian Subcontinent, emphasised the role of artificial intelligence in bridging healthcare access gaps. “AI enables early diagnosis and helps clinicians make accurate decisions,” he said, adding that incentives for AI innovation, job creation and high-end service exports through Global Capability Centres (GCCs) should be prioritised to position India as a global MedTech export hub.
Prevention-Focused Healthcare and Child Health
Beyond manufacturing and innovation, healthcare leaders also urged the government to prioritise preventive healthcare.
Apollo Hospitals Enterprise Ltd Promoter Director and Executive Chairperson of Apollo Healthco, Shobana Kamineni, advocated for a prevention-first healthcare model powered by mandatory check-ups, digitised health records and seamless data portability. “Preventive healthcare can be India’s next global export,” she said.
Rainbow Children’s Medicare Ltd Founding Chairman Ramesh Kancharla called for dedicated budgetary focus on children’s health, proposing tax deductions of up to ₹10,000 per child for essential diagnostics and annual health check-ups to encourage early intervention.
Towards a Structured Innovation Framework
Summing up industry expectations, Dr Reddy’s Laboratories Ltd Chairman Satish Reddy said the pharmaceutical sector is transitioning from volume-led expansion to value-driven growth.
“With the ambition of becoming a USD 500 billion industry by 2047, the Union Budget 2026 must focus on creating a structured funding framework to deepen innovation and R&D across the country,” he said, adding that sustained financing and closer alignment between science, policy and industry will be critical.
Industry leaders believe that the upcoming Union Budget presents a crucial opportunity to address long-standing challenges, strengthen domestic capabilities and position India’s pharma and MedTech sectors as global innovation leaders in line with the vision of Viksit Bharat.
