Budget 2026: Diagnostic Chains Miss Equipment Duty Cuts, Gain New Growth Hubs

Introduction: A Budget of Strategic Bets Over Direct Relief

The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, introduced several high-impact healthcare initiatives, with a strong focus on biopharmaceutical manufacturing and patient affordability. The headline announcement was the exemption of basic customs duty on 17 critical cancer drugs, a significant move to lower treatment costs. However, for India's diagnostic chains, the budget presented a mixed picture. While the industry's expectation for direct customs duty relief on imported medical and cancer diagnostic equipment was not met, the budget laid the groundwork for long-term growth through strategic infrastructure and research ecosystem development.

The Headline Exemption: Drugs, Not Diagnostic Equipment

A key patient-centric measure in Budget 2026 was the complete removal of basic customs duty on 17 imported cancer medicines. This directly addresses the high out-of-pocket expenditure faced by patients undergoing oncology treatment. While this is a major relief for patients, it does not directly impact the capital expenditure of diagnostic chains and hospitals, which rely heavily on imported high-end equipment like PET-CT scanners, MRI machines, and advanced digital pathology systems for cancer detection and monitoring. The industry had been advocating for duty rationalisation on such devices to lower operational costs and make advanced diagnostics more affordable, a demand that remains unaddressed in this budget.

New Growth Avenues: Medical Hubs and Clinical Research

Despite the absence of direct duty cuts, the budget opens up significant new avenues for growth for the diagnostics sector. The proposal to develop five regional medical tourism hubs in partnership with the private sector is a major positive. These integrated hubs are mandated to include modern diagnostic infrastructure, creating a clear opportunity for established diagnostic chains to expand their footprint and cater to a growing medical tourism market. This initiative signals a shift from standalone facilities to integrated healthcare complexes, where diagnostics will play a central role.

Furthermore, the launch of the 'BioPharma Shakti' initiative with a Rs 10,000 crore outlay and the creation of a national network of 1,000 accredited clinical trial sites will indirectly boost the diagnostics industry. Advanced clinical trials for biologics and biosimilars, especially in oncology and autoimmune disorders, require sophisticated and frequent diagnostic testing. This creates a new, high-value revenue stream for diagnostic companies with advanced capabilities, positioning them as critical partners in the nation's research and development ecosystem.

Unmet Expectations and Lingering Concerns

Industry leaders expressed disappointment over the lack of direct support for medical device manufacturing. Dr. Ravi Wankhedkar, former National President of the Indian Medical Association, termed it a "bland budget" in this regard, noting that "there is little support for domestic medical device manufacturing." This sentiment is echoed by concerns over the unresolved issue of the inverted duty structure, where import duties on raw materials and components are higher than on finished medical devices. This anomaly makes domestic manufacturing less competitive compared to importing fully assembled equipment, a structural challenge the industry hoped the budget would correct.

Dr. Anand K., CEO of Agilus Diagnostics, highlighted this structural issue pre-budget, emphasizing that a balanced tax structure is essential to ease import dependence and make diagnostics more affordable. The budget's silence on this front means that cost pressures for domestic manufacturers and diagnostic service providers who procure locally may persist.

Summary of Budget 2026 Provisions for Healthcare & Diagnostics

Budget Provision	Direct Impact on Diagnostic Chains
Customs Duty Exemption on 17 Cancer Drugs	No direct impact. Does not lower capital expenditure on diagnostic equipment.
Five Regional Medical Tourism Hubs	Significant positive. Creates major expansion opportunities in integrated diagnostic infrastructure.
'BioPharma Shakti' & Clinical Trial Network	Strong indirect positive. Drives new demand for advanced and specialized diagnostic services.
Training for Allied Health Professionals	Positive. Helps address the skilled manpower gap in areas like radiology and lab technology.
No Change in Medical Device Duty Structure	Neutral to negative. Fails to address the industry's call for duty rationalisation and correction of the inverted duty structure.

Market and Investor Outlook

For investors tracking the diagnostics sector, the Union Budget 2026 presents a long-term strategic positive rather than a short-term operational one. The lack of capex relief on imported equipment may temper immediate margin expansion expectations. However, the government's commitment to building large-scale healthcare infrastructure and a robust clinical trial ecosystem provides strong visibility for future volume growth.

Companies with a strong brand, wide network, and advanced testing capabilities are well-positioned to capitalize on the opportunities presented by the new medical hubs and the biopharma research push. The focus now shifts from cost-side relief to capitalizing on the new demand drivers created by the budget's strategic healthcare investments.

Conclusion: A Strategic Pivot Towards Demand Creation

In summary, Union Budget 2026 did not deliver the direct customs duty relief on cancer equipment that diagnostic chains were anticipating. However, it has strategically pivoted towards creating new, sustainable demand channels. The establishment of regional medical hubs and the significant investment in a national clinical trial network are foundational policy moves that will fuel the growth of the diagnostics industry for years to come. While immediate cost pressures remain, the budget has laid a clear and promising roadmap for the sector's long-term expansion and integration into India's broader healthcare and research ambitions.