India’s Union Budget 2025: Focus on Healthcare and Insurance
As India prepares for its Union Budget 2025, discussions are intensifying around potential reforms aimed at bolstering the nation’s financial growth. Key areas of focus include the insurance sector, taxation system, and healthcare landscape. A recent report from the State Bank of India (SBI) has sparked significant interest, suggesting that the government should increase healthcare spending and implement tax exemptions to enhance insurance penetration. These recommendations come at a crucial time, as the country seeks to improve its economic stability and social security framework.
Enhancing Healthcare Funding
The SBI report advocates for a substantial increase in the public healthcare budget, proposing that it should rise to 5% of the Gross Domestic Product (GDP). This recommendation surpasses the current target of 2.5% set by the National Health Policy of 2017. The report suggests that this increase could be funded through a proposed 35% Goods and Services Tax (GST) on tobacco and sugary products, as well as proceeds from a healthcare CESS.
By raising the healthcare budget, the government can address the growing healthcare needs of its citizens. The report emphasizes that a well-funded healthcare system is essential for nurturing social security and improving overall public health. Additionally, the report calls for rationalizing GST rates on medical devices, proposing a uniform rate of 5% to 12%. This change would simplify compliance for manufacturers and distributors, ultimately reducing costs for consumers. These measures are crucial for creating a robust healthcare infrastructure that can meet the demands of a rapidly growing population.
Reforming the Insurance Sector
The SBI report highlights the urgent need for reforms in India’s insurance sector. With insurance penetration dropping to 3.7% in FY24, down from 4% in FY23, the report stresses the importance of revitalizing this critical industry. Life insurance penetration has seen a significant decline, now at just 2.8%. The report urges the Insurance Regulatory and Development Authority of India (IRDAI) to work towards its mission of “Insurance for All by 2047.”
To encourage more individuals to invest in insurance, the report recommends exempting GST and taxes on term and health insurance premiums. Additionally, it proposes a separate tax deduction for life and health insurance premiums, ranging from Rs 25,000 to Rs 50,000, applicable under both the old and new tax regimes. These changes aim to make insurance more accessible and affordable, thereby increasing policy adoption among the populace.
Integrating Government Pension Schemes
In addition to healthcare and insurance reforms, the SBI report calls for the integration of various government-backed pension schemes. It suggests unifying programs like the Atal Pension Yojana (APY) and Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) under a single framework. This integration would enhance accessibility and effectiveness, ensuring that more citizens can benefit from these essential programs.
Furthermore, the report advocates for special insurance schemes tailored for employees of Micro, Small, and Medium Enterprises (MSMEs) and their promoters. These schemes would provide crucial protection against unforeseen losses, safeguarding both families and businesses. By focusing on these areas, the government can create a more inclusive financial ecosystem that supports the needs of all citizens, particularly those in vulnerable sectors.
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