Royal Danish Embassy, New Delhi,

Trade Commission of Denmark, Bangalore,

Trade Council of denmark

The Indian Healthcare Sector

Table of contents

1 Introduction................................................................................................. 3
1.1 Market size ............................................................................................................ 4
1.2 Market Trend ........................................................................................................ 4
1.3 Market Opportunities .......................................................................................... 5
1.3.1 Medical Tourism ..................................................................................... 5
1.3.2 Ample opportunities in Pharmaceuticals & Drugs Segment............ 5
1.3.3 Immense Potential in Medical Devices & Equipment...................... 5

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1 Introduction
The economic outlook for India is positive. A growth rate of above 8% was achieved
by the Indian economy during the year 2003-04 and it reached 6,9% in 2004-05.
Growth in the Indian economy has steadily increased since 1979. In fact, the Indian
economy has posted an excellent average GDP growth of 6.8% since 1994. Many
factors are behind this robust performance of the Indian economy in 2004-05. High
growth rates in industry & service sector and a benign world economic environment
provided a backdrop conducive to growth of the Indian economy. Another positive
feature is that prices have been relatively stable.

The healthcare industry in India has come a long way from the days when those who
could afford it had to travel abroad. Today patients from neighboring countries,
Middle East, UK are flocking to India for specialized treatment.

In India healthcare is delivered through both the public sector and private sector.
The public healthcare system consists of healthcare facilities run by central and state
government which provide services free of cost or at a subsidized rates to low
income group in rural and urban areas. With the Indian economy enjoying a steady
growth, the industry is heading towards growth phase. The prevailing mood of
economic confidence is likely to be reflected in the Indian healthcare industry. The
introduction of product patents in India is expected to boost the industry by
encouraging multinational companies to launch specialized life-saving drugs.
Attracted by the advantages such as lower costs of production and skilled workforce
that India offers, these companies are looking to set up research and development as
well as production centers there.

Initially the government imposed high custom duty on imported medical equipment
making it difficult for private entrepreneurs to set up hospitals. But in post
liberalization the duties have come down and some life saving medicines and
equipments can be imported duty free.

Post liberalization, the healthcare industry emerges with greater opportunities and
quality changes.

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1.1 Market size

India’s healthcare industry is worth $23 billion today or roughly 4% of GDP. The
industry is expected to grow by around 13% per year for the next four years. In
India more than 50% of the total health expenditure comes from individuals as
against a state level contribution of below 30%. The government funds allocated to
healthcare sector have always been low in relation to the population of the country.
In the private sector healthcare industry, healthcare facilities are run for profit by
companies. Healthcare facilities run by charitable organizations also provide services
totally free or at very low costs depending on the income of the patient or patient’s
family. The pharma market turnover was over $ 8 billion for year 2003-2004 and the
exports were $ 3.5 billion. The pharma sector is growing at an annual rate of 9%.

Looking at Indian healthcare market in a Pan India perspective more than half
million doctors are employed in 15097 hospitals. Additionally there are 0.75 million
nurses who look after more than 870,000 hospital beds.

1.2 Market Trend

Over the last five decades India has built up a vast health infrastructure and
manpower at primary, secondary and tertiary care in government, voluntary and
private sectors. Currently private sector health services range from those provided
by large corporate hospitals, smaller hospitals and nursing homes and clinics run by
qualified personnel.

A majority of the private sector hospitals are small establishments with 85% of them
having less than 25 beds. Private tertiary care institutions providing speciality and
super speciality care account for only 1 to 2% of the total number of institutions
while corporate hospitals constitute less than 1%. The private sector accounts for
82% of all out patient visits and 52% of hospitalization at all India level.

Of late India is becoming a preferred healthcare destination for neighboring

countries and the West due to low cost and high quality of treatment available giving
rise to the term medical tourism. This has had a cascading effect with more and
more hospitals in the private sector upgrading their facilities to land a slice of this
business.

Medical insurance which was non existent earlier has now opened up. More and
more of the Indian population is taking up insurance which results in increased
spending on healthcare.

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1.3 Market Opportunities

Government of India has accorded a high priority to the healthcare sector by an

increased budgetary outlay and heavily slashed customs duty on imports of medical
equipments. Also there are special incentives being provided for setting up new
hospitals. These initiatives are giving fillip to various market opportunities in the
segments detailed below.

1.3.1 Medical Tourism

As cost of medical procedures seems out of control in the West, patients are
becoming medical tourist in India. Given the availability of top of the line hospital
facilities, diagnostic facilities and medical practitioners, this has become a virtual
growth sector. According to Confederation of Indian Industries, India has a
potential to attract 1 million health tourists per annum, which could contribute $ 5
billion to the economy. The fall out of this would be up gradation of medical
facilities, in terms of new equipments, diagnostic lab reports, equipments etc.

1.3.2 Ample opportunities in Pharmaceuticals & Drugs Segment

India is all set to be a major destination for contract research and contract
manufacturing over the next five years, the report says. “Huge opportunities for
pharmaceutical manufacturers in India exist in the export of generic and over-the-
counter (OTC) drugs. Many mergers and acquisitions among pharmaceutical
companies have already taken place, with many more expected during the forecast
period (2001-2005). Exports and imports in this segment are expected to increase
during the same period”, states the reports.

1.3.3 Immense Potential in Medical Devices & Equipment

The Government of India plans to improve health infrastructure by upgrading and

increasing the total number of hospitals, clinics and clinical laboratories in urban and
rural areas. This is expected to drive growth in this sector. According to the analyst,
“The medical devices and equipment segment is expected to witness considerable
imports of medical imaging equipment, cardiac care equipment, and medical
laboratory equipment during the forecast period. Telemedicine services in India are
also expected to grow, which, in turn, should create demand for diagnostic medical
equipment such as X-rays, CT-scanners, dopplers, ultrasound, electrocardiographs,
and so on.

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 Royal Danish Embassy, India

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110 011 New Delhi, India
Tel +91 11 42090700
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www.ambnewdelhi.um.dk

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Bangalore

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Bangalore-560 001 India
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Fax +91 80 2227 7176
E-mail info@dtcbangalore.com
www.dtcbangalore.com

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