PRESCRIPTION FOR PROSPERITY: WHY THE HEALTHCARE SECTOR IS SET TO THRIVE IN THE FUTURE!

Healthcare has become one of the largest sectors of the Indian economy, in terms of both revenue and employment. It has experienced rapid change in recent years and has become significantly more visible over the last decade, with a renewed focus from the government and growing market demand for healthcare services and products. The Indian population is growing at a rate of 1.6 per cent per year and has an elderly population of over 100 million. Rapid economic growth, rising middle class income, and increased market penetration of health insurance providers are fueling growth in the industry. In addition, changing demographics and a shift from chronic to lifestyle diseases has led to a boom in government healthcare spending across the country. The industry has been growing at a compound annual growth rate of around 22 per cent since 2016, reaching over $370 billion in 2022 and is expected to reach over $670 billion by 2026. This increase in market size is due to growing demand for specialized and higher quality healthcare facilities. The products and services driving this growth include hospitals, medical devices, clinical trials, telemedicine, medical tourism, health insurance, and medical and diagnostic equipment. The digital transformation of India's healthcare industry has the potential to accelerate from $2.7 billion in 2022 to around $37 billion by 2030. The COVID-19 pandemic awakened the Indian government and private sector around the importance of investing in healthcare. The Indian government has proposed increasing healthcare expenditure from 1.90 per cent of Gross Domestic Product (GDP) in fiscal year 2023-24 (FY24) to 2.5 per cent of GDP by FY25, with a special focus on underprivileged populations.

The healthcare sector encompasses a broad range of businesses and services dedicated to providing medical care, preventive care, and wellness services. It includes hospitals, clinics, and medical practices that offer patient care, as well as public health organisations and entities focused on health promotion and disease prevention. The sector includes various subsectors such as Pharma/Biotech, Health Tech, Medical Device, Provider, Payer, Health Consulting, Health Finance and Health Care Innovation & Entrepreneurship.

?? Pharmaceutical industry is the third largest pharmaceutical industry in the world by volume with a current market size of over $50 billion in 2023-24. The country exports pharmaceuticals to around 200 countries and territories in the world, including highly regulated markets such as USA, UK, European Union, Canada etc. The Indian pharmaceutical industry has been witnessing decent growth over the past few years and is expected to grow to $130 billion in value by the end of 2030. The total annual turnover of pharmaceuticals in 2023-24 was Rs 4,17,345 crore, registering a growth of around 10 per cent over Rs 379,450 crore in 2022-23.

?? Biotechnology sector has increased 13-fold over the past decade, from $10 billion in 2014 to over $130 billion in 2024. It is projected to reach $300 billion by 2030. Biotechnological methods, a relatively new and growing field, have become an important tool in pharmaceutical drug research and development, which indirectly improving healthcare system in the country. A majority of therapeutic drugs in the current market are bioformulations, such as antibodies, nucleic acid products and vaccines. Such bioformulations are developed through several stages.??

?? Medical devices segment has been identified as the sunrise sector by the Government of India and it is projected to reach $50 billion by 2030. It is a multi-disciplinary sector, with the following broad classification: (a) Electronic equipment (b) Implants; (c) Consumables and Disposables (d) Surgical instruments and (e) In-Vitro Diagnostic (IVD) Reagents. Several segments in the medical device sector are highly capital intensive, with long gestation period, require continuous induction of new technologies, continuous training of healthcare professionals to adapt to new technologies, and involve rapid innovation.?

GROWTH DRIVERS

?? Boom in medical tourism: Medical Tourism (also called medical travel, health tourism or global healthcare) is a term used to describe the rapidly-growing practice of travelling across international borders to obtain healthcare services which include elective procedures as well as complex specialized surgeries such as joint replacement (knee/ hip), cardiac surgery, dental surgery, and cosmetic surgeries. Medical tourism in India is set to get a boost with projections indicating that the number of medical tourists will exceed pre-pandemic levels. There are expectations that the number of medical tourists visiting India is likely to be around 7.3 million in calendar year (CY) 2024, up from 6.1 million estimated in CY 2023. India has established itself as an attractive medical tourism destination, owing to provision of high-quality healthcare, facilitated by advanced technology, skilled medical professionals and significantly lower costs as compared to Western countries.?

?? Technology and digitalization: The integration of advanced technologies is revolutionizing healthcare delivery in India with Hospital Information Systems (HIS) and Electronic Medical Records (EMR) improving operational efficiency and patient care. Artificial Intelligence (AI) and Machine Learning (ML) applications in healthcare have enhanced diagnostics, improved treatment planning and optimized clinical efficiency. In addition to this, Robotics and AI-driven surgical systems are also improving precision in complex procedures while Electronic Intensive Care Units (eICUs) are enabling remote monitoring of critical patients, expanding access to specialist care. These technological advancements are transforming the Indian healthcare landscape, promising improved access, quality and affordability of healthcare services across the country.

?? Rise in health insurance: Health insurance pools the risks and resources of a large group of people so that each is protected from financially disruptive medical expenses resulting from an illness, accident, or disability. In the fiscal year 2023-24, India’s non-life insurance sector (comprising general insurers, standalone health insurers and specialized insurers) saw notable growth, driven mainly by the health and motor insurance segments. Health insurance premiums exceeded Rs 1 trillion. At present, there is a rise in the demand for healthcare insurance among the masses due to increasing medical costs. This, coupled with the growing geriatric population, represents one of the key factors offering a favorable market outlook in India. Besides this, the Government of India is launching various schemes to provide health insurance to the economically weaker section of the country.?

?? Sharp rise in FDI in hospital & diagnostic centres: The Foreign Direct Investment (FDI) equity inflow into the hospital and diagnostic centres sector in the country has witnessed a growth of around 89 per cent during the fiscal year 2023-24, while the foreign equity infusion into the medical and surgical appliances sector grew 21.6 per cent during the financial year compared to the previous year. The hospital and diagnostic centres in the country have attracted a foreign equity fund infusion of $1,530.06 million during fiscal year 2024, as compared to $809.60 million during the previous fiscal year. The growth during the fiscal year was the highest at least in the last five fiscal years, and crossed the $1 billion mark after fiscal year 2018-19 when the FDI inflow was reported at $1.04 billion.

CHALLENGES FOR HEALTHCARE

?? Healthcare Infrastructure: India is at a crucial juncture, possessing substantial disposable income yet limited access to essential and quality healthcare services. Despite being the fifth largest economy in the world, India has a modest bed density of only 15 beds per 10,000 people. This is significantly lower than the global median of 29 beds. On the other hand, bed densities of other emerging nations such as Brazil (25), Malaysia (20) and Vietnam (26) are higher as compared to India. A substantial disparity exists between the supply and demand of healthcare services in India, underscoring the urgent need to enhance the availability of basic healthcare services across the country.

?? Shortfall in healthcare professionals: India falls short of the World Health Organization's (WHO) recommended standards for healthcare professionals and infrastructure. This deficiency is especially pronounced in rural areas where access to healthcare services is already limited. There are 10 doctors and 17 nurses and midwives per 10,000 individuals in India. In comparison, middle-income countries like China and Brazil have 17 doctors and 40 nurses and midwives per 10,000 persons.

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GOVERNMENT INITIATIVES AND RECENT DEVELOPMENTS

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?? Govt approves health coverage to all senior citizens of age 70 years & above under AB PM-JAY

The government approved the health coverage to all the senior citizens aged 70 years and above irrespective of income under the flagship scheme Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY). This aims to benefit around 4.5 crore families with six crore senior citizens with Rs 5 lakh free health insurance cover on a family basis. With this approval, all senior citizens of the age 70 years and above irrespective of their socio- economic status would be eligible to avail the benefits of AB PM-JAY. The eligible senior citizens would be issued a new distinct card under AB PM-JAY. The senior citizens of the age 70 years and above belonging to families already covered under AB PM-JAY will get an additional top-up cover upto Rs 5 lakh per year for themselves (which they do not have to share with the other members of the family who are below the age of 70 years).?

?? Govt releases myCGHS iOS app to 'enhance' access to healthcare services

The government launched the 'myCGHS' app for iOS to provide Central Government Health Scheme beneficiaries access to electronic health records, information, and resources. The app facilitates a wide range of services, including booking and cancellation of online appointments, accessing reports from Central Government Health Scheme (CGHS) labs, checking medical reimbursement claim status, and locating nearby wellness centres and empanelled hospitals, labs, and dental units among others. The app features security features like 2-factor authentication and functionality of mPIN ensuring the confidentiality and integrity of users' data.

?? Govt announces establishment of 3 AI CoE focused on healthcare, agriculture and sustainable cities

The government announced the establishment of three Artificial Intelligence (AI) Centres of Excellence (CoE) focused on healthcare, agriculture, and sustainable cities in New Delhi. These Centres will conduct interdisciplinary research, develop cutting-edge applications, and create scalable solutions. This initiative aims to galvanize an effective AI ecosystem and nurture quality human resources in these critical fields. The CoEs will be led by top educational institutions in consortium with industry partners and startups. The CoE in healthcare will be led by Indian Institute of Technology-Delhi (IIT-Delhi) and All India Institute of Medical Sciences (AIIMS), the CoE in agriculture will be led by IIT Ropar and the CoE for sustainable cities will be led by IIT Kanpur.

?? Govt increases Budget 2024-25 allocation for healthcare sector?

The 2024-2025 Budget, announced on July 23 by Finance Minister Nirmala Sitharaman, allocated Rs 90,958.63 crore to the Union Health Ministry, a 12.9 per cent increase from Rs 80,517.62 crore in the revised estimates for the Health Ministry in 2023-24. Of this, Rs 87,656.90 crore has been allocated to the health and family welfare department and Rs 3,301.73 to the health research department. The allocation for the All India Institute of Medical Sciences, Delhi, has been increased from Rs 4,278 crore to Rs 4,523 crore. The government also announced customs duty exemptions on three cancer treatment drugs: Trastuzumab Deruxtecan, Osimertinib, and Durvalumab. The government also reduced the custom duty rates on X-ray tubes and flat panel detectors.

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Outlook

The healthcare sector is a vital and dynamic component of the global economy, encompassing a wide range of services, technologies, and industries dedicated to improving health outcomes and quality of life. From providing essential medical services and developing innovative treatments to offering investment opportunities, the healthcare sector plays a crucial role in society. Its continuous growth and evolution are driven by technological advancements, demographic changes, and the ongoing need for healthcare solutions. The healthcare industry is likely to perform well in coming time as outlook looks optimistic with growth in its sub-sectors. Pharma, biotechnology and medical devices are performing good and in the coming time the prospects of these industries are very positive, which could help the healthcare industry to perform well. Moreover, rise in medical tourism activities, digitization & technological advancement, growth in health insurance will provide much needed support to the healthcare industry. Also, the government is looking forward for the growth of the healthcare industry with more capital outlay and various schemes. Growing incidence of lifestyle diseases, rising demand for affordable healthcare delivery systems due to the increasing healthcare costs, technological advancements, the emergence of telemedicine and government initiatives like e-health together with tax benefits and incentives likely to drive the healthcare market in India.

Source: Sukhanidhi Research