The ongoing Covid-19 pandemic has proved to be a testing time for all sections of the economy, including the healthcare sector. The latter is at the epicenter of this unprecedented global crisis and the virus has highlighted the lack of readiness to fight against and overcome new viruses. The current state of this sector and the scope of improvements have been highlighted by domain experts periodically.
According to the 2019 data of the National Health Profile, there are only 7,13,986 government hospital beds for a population of approximately 137 crore people, which amount to 0.5 beds per 1,000 people. Even if beds from private, general, specialized hospitals and rehabilitation centres are considered, the number goes up to 0.7 beds per 1,000 people. India has one doctor for 1,457 people, which is far lower than the World Health Organization norm of 1:1000. This sector is facing an acute crisis in terms of a shortage of relevant healthcare infrastructure, especially in rural and sub-urban areas.
The Indian healthcare sector is one of the largest sectors in terms of revenue and employment generation. It includes hospitals, medical devices, health insurance, telemedicine, clinical trials, medical tourism, and medical equipment. Growing cases of lifestyle diseases, the demand for affordable healthcare, technological advancements, and penetration of health insurance are some of the key growth drivers for this sector.
Key insights from the government’s Invest India portal regarding the healthcare sector are:
- The healthcare market size is expected to reach $372Bn by 2022.
- The hospital industry is 80 per cent of the total healthcare market, growing at a CAGR of 16-17 per cent and is set to reach $132 Bn by 2023.
- The diagnostics industry is expected to grow at a CAGR of 20.4 per cent and is set to reach $32 Bn by 2022.
- There is a 370 per cent increase in health expenditure from 2000 to 2014.
- The government has allowed 100 per cent FDI for all greenfield projects under the automatic route.
- Emerging trends are telemedicine, artificial intelligence, mobile and wearable devices, and robotic surgeries.
According to the last budget of the government (FY 2020-21), $9.87 Bn has been allocated to the health sector which includes $915.72 Mn for the PMJAY health scheme. About 8,059 private and 7,980 public hospitals are covered under this scheme and they have been providing treatment to eligible patients under the Ayush programme. The Centre is also planning to increase its healthcare spending to 3 per cent of GDP by 2022. The healthcare sector is witnessing an expansion by existing hospitals in terms of new services through technology platforms, the use of next-generation tools for diagnosis, tie-ups with insurance companies, geographical expansion, and a focus on pharma.
The sector is also attracting fresh investment by domestic and international investors to fund expansions by existing large hospital chains as well as for greenfield projects. Foreign investors are taking a keen interest to participate in this investment opportunity to develop hospital chains, diagnostic labs, and medical equipment. According to the department of industrial policy and promotion (DIPP), the hospital and diagnostics sector has attracted FDI of $6.8 Bn from April 2000 to June 2020.
The following points highlight why the healthcare sector will continue to attract investment:
- Health insurance penetration – The past few years have witnessed an increased awareness of health insurance products and has seen the launch of affordable products in the market. The Indian government has also launched the world’s largest government-funded healthcare programme. These developments are likely to enhance the affordability of medical expenses.
- Hospitals and related infrastructure – The huge shortfall in terms of the number of required beds coupled with the availability of advanced diagnosis equipment is creating a tremendous demand for large hospital chains, speciality centres and other facilities to create the related infrastructure to cater to the growing demand.
- Online consultation to manage the shortfall of medical professionals – Online technology platforms facilitating consultation to remotely located patients is in high demand especially in the scenario where the availability of medical professionals is limited. The Indian Telemedicine market is expected to grow at a 20 per cent CAGR to reach $32 Mn by 2020.
- Medical Tourism – The Indian healthcare sector is also attracting a lot of foreign patients due to quality medical services available at urban centres at a lower cost compared to the developed world. The continuous flow of foreign patients will contribute to the development of the overall economy of this sector.
- Opportunities in tier-2 and 3 cities – Increase in per capita income over the last decade across geographies has increased the spending power for quality healthcare. Unlike Tier -1 cities, where availability and utilization of health infrastructure is high, Tier-2 and 3 cities are providing a huge opportunity to set up the entire infrastructure. Many large chains of hospitals have already started expanding in small cities by creating small centres and partnering with local reputed doctors.
With these latest developments and changes in the priority of the government, the healthcare sector as an investment opportunity is promising and getting bigger each day and is likely to benefit all the participants.
(Niraj Bora is the Founder of Surmount Business Advisors Private Limited)