Healthcare and Medical Businesses

Health is a primary human right and has been accorded due importance by the Constitution through Article 21.Though Article 21 stresses upon state governments to safeguard the health and nutritional well being of the people, the central government also plays an active role in the sector. Recognizing the critical role played by the Health Industry, the industry has been conferred with the infrastructure status under section 10(23G) of the Income Act.

The healthcare sector is one of the most challenging and fastest growing sectors in India. Revenues from the healthcare sector account for 5.2 per cent of the GDP, making it the third largest growth segment in India.

The Indian Health sector consists of

-Medical care providers like physicians, specialist clinics, nursing homes, hospitals.

-Diagnostic service centers and pathology laboratories.

-Medical equipment manufacturers.

-Contract research organizations (CRO's), pharmaceutical manufacturers

-Third party support service providers (catering, laundry)

The healthcare industry in the country, which comprises hospital and allied sectors, is projected to grow 23 per cent per annum. According to McKinsey & Co. a leading industrial and management consulting organization, the Indian healthcare sector, including pharmaceutical, diagnostics and hospital services, is expected to more than double its revenues to Rs 2000 billion by 2010. Expenditure on healthcare services, including diagnostics, hospital occupancy and outpatient consulting, the largest component of this spend is expected to grow more than 125% to Rs 1560 billion by 2012 from Rs 690 billion now.

The sector has registered a growth of 9.3 per cent between 2000-2009, comparable to the sectoral growth rate of other emerging economies such as China, Brazil and Mexico. According to the report, the growth in the sector would be driven by healthcare facilities, private and public sector, medical diagnostic and pathology labs and the medical insurance sector.

Healthcare facilities, inclusive of public and private hospitals, the core sector, around which the healthcare sector is centered, would continue to contribute over 70 per cent of the total sector and touch a figure of US$ 54.7 billion by 2012. Adds a FICCI-Ernst and Young report, India needs an investment of US$ 14.4 billion in the healthcare sector by 2025, to increase its bed density to at least two per thousand populations.

Technological advances achieved by medicare globally in the recent years have been phenomenal. The Indian scenario has not remained immune to these changes. While IT (information technology) has come to the aid of the breakthroughs, the progress recorded in the medicare area is as impressive as it is in the IT sector itself. The changes are in concepts, forms and content, as well as applications. These are both, quantitative and qualitative. The transformation is pervasive and has penetrated almost all specialities, from diagnostics to physiotherapy, from cardiology to oncology, from non-invasive surgery to transplants. In India, the emergence of private medicare services, especially through commercialization and corporatization, has contributed to the transformation. The rapid commercialization of the medical practices with the establishment of multi-million rupee hospitals, nursing homes and diagnostic centres, specialized and general, the demand has registered a very high growth rate in the recent years.

Medical sector in India got tax exemptions in the manufacturing of its devices from Union Budget 2010-11 along with the introduction of excellent initiatives towards the development of the sector. The FM has proposed to extend the tax exemption on medical apparatus and devices and concessional tariff available to certified government hospitals. Moreover, the producers of orthopaedic implants have been relieved from import tax.

The incentives proposed by the FM are expected to trigger the expansion of already fast developing medical apparatus and machinery sector in India. By 2010 the medical apparatus and machinery industry is estimated to reach USD 1.8 billion and is projected to expand at a rate of 23% on annual basis as per the NIPER report.

This time the focus of the budget was on rural healthcare, with the fund allocations rising to a whopping 22,300 crores (Rs 223 billion/$4.82 billion) from 19,534 crores during the previous fiscal year. This escalation is in keeping with the evolving needs of the growing healthcare industry of the country. Relaxation of FDI norms may see more international players coming in to India in the healthcare sector. Added to it, rationalization of duties on medical equipment can make imports cheaper and can significantly lower healthcare costs in the country in the coming years.

The government, along with participation from the private sector, is planning to invest US$ 1 billion to US$ 2 billion in an effort to make India one of the top five global pharmaceutical innovation hubs by 2020. The sector has been attracting huge investments from domestic players as well as financial investors and private equity (PE) firms. The Indian market is expanding in all directions as a result of better affordability, greater health consciousness and expanding medical service institutions.