India boosts healthcare spending 135%, opens up insurance market

Inayat-ur-Rahman, Gulf Today

India boosted healthcare spending by 135% and lifted caps on foreign investment in its vast insurance market on Monday to help revive an economy that suffered its deepest recorded slump as a result of the pandemic.

Finance Minister Nirmala Sitharaman projected a fiscal deficit of 6.8% of gross domestic product for 2021/22.

The current year was expected to end with a deficit of 9.5%, she said.

Sitharaman proposed increasing healthcare spending to 2.2 trillion Indian rupees ($30.2 billion) to help improve public health systems and fund a huge vaccination drive to immunise 1.3 billion people.

The planned expenditure of $30.6 billion on health and well-being schemes was more than double the equivalent outlay in the previous budget, although it included $4.8 billion for the country’s ambitious COVID-19 immunisation drive, with plans to vaccinate 300 million by July.

The nation of 1.3 billion was badly hit by one of the world’s strictest virus lockdowns, with growth slumping by a historic 23.9 percent in April-June, and the economy expected to contract 7.7 percent in 2020-21.

“This budget provides every opportunity for our economy to raise and capture the pace that it needs for a sustainable growth,” Finance Minister Nirmala Sitharaman told parliament as she unveiled the annual budget.

The health sector has long suffered from chronic underinvestment. As of 2017, the country had 0.8 doctors per 1,000 people, around the same level as Iraq, according to the World Bank.

Asia’s third-largest economy was in the throes of a slowdown even before the pandemic, during which it has recorded the second-highest number of coronavirus cases at 10.7 million.

Infrastructure was another big-ticket item, with some US$76 billion — 34.5 per cent more than in the previous budget — to be sunk into major projects, including roads and railways.

Divestments — including of national carrier Air India and part of the government’s stake in the country’s largest insurer, Life Insurance Corporation — would help to raise US$24 billion, Sitharaman said. But the sales of both state-run firms have been on the cards for some time, with the mooted IPO of the insurer sparking a walk-out by nearly 100,000 staff last year.

With lenders also struggling with a mountain of bad debt, Sitharaman said $2.74 billion would be put aside for the next financial year to recapitalise state banks.

The raft of spending measures will blow out the fiscal deficit to 9.5 percent of GDP for the financial year ending March, Sitharaman said, from a forecast 3.5 percent.

The government plans to borrow an additional US$1.1. billion to fund the deficit, she added.

In its annual economic survey, the government said there would be a “V-shaped” recovery after the severe contraction, forecasting growth to hit 11 per cent in the 2021-22 financial year.

India slashed import duties on gold and silver on Monday in a surprise move that industry officials say could boost retail demand and curtail smuggling in the world’s second-biggest bullion consumer.

India has imposed an additional tax on crude palm oil imports as the world’s biggest importer of vegetable oils tries to build domestic agriculture infrastructure by taxing imports, Finance Minister Nirmala Sitharaman said on Monday.

India cut the basic import tax on crude palm oil to 15% from 27.5%, but imposed a 17.5% “cess” - a separate tax - on the imports, Sitharaman said in her federal budget speech. The cess would provide resources for “an immediate need to improve agricultural infrastructure,” Sitharaman said.

India also imposed 20% cess on crude soybean and soyoil imports but cut basic customs duty on both the commodities to 15% from 35%, effectively keeping the import tax unchanged, Sitharaman said.

India’s palm oil imports have been rising since December 2020 after the country had cut its import tax on the oil to 27.5% in late November.

India buys palm oil from Indonesia and Malaysia, while other oils including soyoil and sunflower oil come from Argentina, Brazil, Ukraine and Russia.

Palm oil was earlier attracting 8.25% less import duty than sunflower and soyoil, said Sudhakar Desai, president of the Indian Vegetable Oil Producers’ Association, adding “Now that difference has reduced to just 2.75%.”

Dr Azad Moopen, Founder Chairman & Managing Director, Aster DM Healthcare told Gulf Today that the Indian budget has seen phenomenal increase in outlay for the healthcare sector with focus on addressing the key issues facing India today. We are glad that the total budget outlay for health and well-being has increased by 137%, standing at Rs2,23,846 crore. It is encouraging to see the shift in focus to prioritise preventive care and well-being, over just sick-care. As FM highlights health and wellbeing of the population is one of the core pillars to strengthen the Sankalp of the Nation-first- Atmanirbhar Bharat.

“Two very positive moves for NRIs: provision to set-up one Person Company in India and elimination of double taxation for NRIs on foreign retirement funds. The provision for one-person company will allow many NRIs who want to relocate to India, to start fresh venture and earn a living, while adding to India’s growth.” Moopen added.