What the Budget does

• Increase in allocation to the health sector by 15% over 2007-08.
• Allocation to the National Rural Health Mission (NRHM) increased to Rs 12,050 crore.
• Provision of Rs 993 crore to the National Aids Control Programme and allocation of Rs 1,042 crore for the eradication of polio with focus on high risk districts in Uttar Pradesh and Bihar.
• Customs duty to be reduced from 10% to 5% on certain specified life saving drugs and on bulk drugs used for their manufacture. These drugs are also exempted from excise duty or countervailing duty.
• Excise duty on all goods produced in the pharmaceutical sector reduced from 16% to 8%.
• Anti-AIDS drug, 'Atazanavir', as well as bulk drugs for its manufacture to be exempted from excise duty.
• In order to promote outsourcing of research, weighted deduction of 125% on any payment made to companies engaged in R&D.

Also read: How Budget affects your stocks

Impact on sector

• Increase in allocation to the healthcare sector is a positive given the need to ramp up the healthcare infrastructure in the country and improve the accessibility of quality healthcare to a larger section of the population.
• Reduction of excise duty from 16% to 8% is a positive for all pharma companies enabling them to boost profitability going forward given that the excise duty is being paid on MRP.
• Increased allocation of funds for eradication of HIV/AIDS and polio and reduction in customs duty on certain life saving drugs from 10% to 5% is a positive for companies having product pipeline catering to these segments.
• Weighted deduction of 125% on payments made for outsourcing research services is a positive for the sector as a whole given that the emphasis on R&D has increased.

Impact on companies

• Reduction of excise duty from 16% to 8% is a positive for all pharma companies namely domestic companies such as Cipla, Ranbaxy [Get Quote] and the likes and MNC pharma companies such as GSK [Get Quote] Pharma, Pfizer [Get Quote] and Aventis [Get Quote].
• Emphasis on allocating funds for the eradication of HIV/AIDS and polio is a positive for Cipla (which has a strong presence in the manufacture of anti-AIDS drugs) and Panacea Biotec [Get Quote] (which largely manufactures oral polio vaccines).
• Weighted deduction of 125% on payments made for outsourcing research services is a positive for R&D focused companies such as Ranbaxy and Nicholas Piramal [Get Quote].

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