INVESTMENT OPPORTUNITIES IN INDIAN HEALTHCARE
As India is slowly recovering from the menaces of the Pandemic, are you keen on knowing how the Indian Healthcare Market is striving in the present? Are you interested to know about the current investments needed for the Healthcare Systems? Moreover, would you not want to know about the possible outcomes from making investments in these current times?
In this Article, Hospacxx Healthcare Consultancy, presents to you the current market scenario of the Indian Healthcare sector. We further explain about all the whys and wherefores to make investments into the Indian Healthcare sector.
HEALTHCARE MARKET SINCE THE EMERGENCE OF COVID-19
Over the years, the Indian Healthcare sector has been one of the largest economies. The COVID-19 pandemic has not only presented challenges but also put forward several opportunities for India to grow. Several factors are instigating the growth of the Indian healthcare sector including an aging population, a growing middle class, the rising proportion of lifestyle diseases, an increased importance for public-private partnerships as well as accelerated adoption of digital technologies, including telemedicine, besides heightened interest from investors and increased FDI inflows over the last two decades. It has also paved a way for the growth of Indian start-ups, many of whom have taken advantage of the circumstances and accelerated the development of low-cost, scalable, and quick solutions.
The Healthcare industry has been rising steadily since 2016, with a Compound Annual Growth Rate (CAGR) of 22%. At this rate, it is expected to reach USD 372 Billion in 2022. The Indian Hospital Industry accounts for 80% of the total Healthcare Market is expected to touch USD 132 billion by 2023.
According to a study done on the daily closing prices of stock indexes of different sectors and the Bombay Stock Exchange SENSEX (BSE SENSEX) starting from 15 May 2019 till 24 April 2020, results showed that only two sectors have provided positive returns. One being BSE FMCG index, which had increased by 2.91 per cent and BSE Healthcare, which had given a 14.19 per cent return, much higher than any other sector.
All other sectors gave negative returns – for example, Consumer Discretionary lost almost 19 per cent in a month, Banks fell by 26 per cent and Realty sector lost a huge 30.7 per cent in a month. Thereby, concluding that the Healthcare and pharmaceutical companies would be operating in an effective manner to fulfil the demand for their products and services, which would in turn increase their operating ability and turnover, making them the most lucrative option for investors.
DRIVING FACTORS TO INVEST INTO THE INDIAN HEALTHCARE INDUSTRY
India’s healthcare industry has become one of the largest sectors, which comprises of hospitals, medical devices and equipment, health insurance, clinical trials, telemedicine and medical tourism. These market segments are expected to diversify as an ageing population with a growing middle class that increasingly favors preventative healthcare. Moreover, the rising proportion of lifestyle diseases caused by high cholesterol, high blood pressure, obesity, poor diet and alcohol consumption in urban areas is boosting demand for specialized care services. espite initial setbacks, the healthcare system in India has managed to withstand the pandemic. The various efforts in manufacturing of medical equipment, disposables, drugs and the most recent vaccine efforts made by India have placed the country as one of the global leaders. India not only fulfilled the domestic requirements, but also rose to the occasion and supported other countries. The healthcare sector, therefore, as an investment opportunity looks promising. A few factors encouraging future investments in the sector are:
- Medical infrastructure in Tier II and III cities: The shortfalls such as the required number of beds, adequate number of efficient healthcare providers and the accessibility of advanced equipment, that were highlighted during the worst-hit times of the pandemic, are emphasizing the need for a healthcare system that is ever-ready to handle such situations in the future. Numerous hospital chains have started expanding in tier 2 & tier 3 cities by setting up small clinics and associating with reputed local doctors. This is also aligned with government efforts to increase the number of beds per thousand population and close the accessibility gap mainly in sub-urban and rural parts of the country.
According to a report by NITI Aayog, around 65% of hospital beds in India cater to almost 50% of the population concentrated in Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Telangana, West Bengal and Kerala. The other 50% of the country’s population living in the remaining 21 States and 8 Union Territories has access to only 35% of hospital beds. This indicates that there is tremendous potential to grow hospitals beds, by at least 30%, for ensuring equitable access to healthcare for citizens in all parts of the country.
According to a report by IBEF, in 2021, the government announced Rs. 64,180 crore (US$ 8.80 billion) expenditure for the healthcare sector over six years in the Union Budget 2021-22 to strengthen the existing ‘National Health Mission’ by developing capacities of primary, secondary and tertiary care, healthcare systems and institutions for detection and cure of new & emerging diseases. By FY22, Indian healthcare infrastructure is expected to reach US$ 349.1 billion.
Further, the Indian government is planning to introduce a credit incentive programme worth Rs. 500 billion (US$ 6.8 billion), that will allow firms to leverage the fund to expand hospital capacity or medical supplies with the government acting as a guarantor and strengthen COVID-19-related health infrastructure in smaller towns. This will help to boost the country’s healthcare infrastructure.
- Health insurance awareness: Health insurance sector is gaining momentum in India. According to a report by IBEF, in FY21, the gross direct premium income underwritten by health insurance companies grew 13.3% Year-over-Year to Rs. 58,572.46 crore (US$ 7.9 billion). The health segment has a 29.5% share in the total gross written premiums earned in the country. In June 2021, gross written premiums of health insurance companies in the non-life insurance sector increased by 40% Year-over-Year (for the FY period up to June 2021) to Rs. 17,497.4 crore (US$ 2.36 billion), driven by rising demand for health insurance products amid the COVID-19 surge.
The market share of private sector companies in the general and health insurance market increased from 47.97% in FY19 to 48.03% in FY20. In March 2021, health insurance companies in the non-life insurance sector increased by 41%, driven by rising demand for health insurance products amid COVID-19 surge.
In recent times, the Indian citizens have an increased awareness of health insurance products. With the availability of better Health coverage schemes (Government, Social and Private Schemes) for all the economic classes of the Indian Population, more people are investing in health insurance with each passing year. This helps in providing financial security against unavoidable Out-Of-Pocket Expenditures, thereby improving the accessibility to advanced patient care services, efficiency in service delivery and overall enhancement in the healthcare outcomes.
- Government policies: Government have been putting efforts in achieving a universal health cover under ‘Health for All’ and schemes, such as Ayushman Bharat and National Digital Health Mission before the time of the pandemic, which have been growing exponentially. These efforts to make healthcare affordable and accessible for the entire population also offer scope for private players to widen their reach and presence.
The Indian Government has laid down favorable policies for encouraging Foreign Direct Investment (FDI). In fact, India’s FDI regime has been liberalized extensively. Currently, FDI is permitted up to 100% under the automatic route (i.e., the non-resident investor or Indian company does not require approval from the Government of India for the investment) in the hospital sector and in the manufacture of medical devices. In the pharmaceutical sector, FDI is permitted up to 100% in greenfield projects and 74% in brownfield projects under the automatic route.
- Medical tourism: The healthcare sector in India is attractive to foreign patients because of the availability of quality services at relatively lower costs compared to countries in Western Europe or the U.S. Medical Value Travel, especially wellness tourism, also has bright prospects, given India’s inherent strengths in alternative systems of medicine. Indian medical tourism market was valued at US$ 2.89 billion in 2020 and is expected to reach US$ 13.42 billion by 2026.
- Pharmaceuticals, Diagnostics & Medical Equipment: With respect to pharmaceuticals, India has the opportunity to boost domestic manufacturing, supported by recent Government schemes with performance-linked incentives, as part of the Aatmanirbhar Bharat (Self-Reliant India) initiative. Further, between 2018 and 2024, patents worth USD 251 Billion are expected to expire globally, presenting a worthwhile opportunity for the country’s pharmaceutical sector, including the patent market. In addition to generic drugs, there are investment opportunities in other segments of India’s pharmaceutical sector, including over-the-counter drugs, vaccines and contract manufacturing and research.
India’s domestic pharmaceutical market is estimated at US$ 42 billion in 2021 and likely to reach US$ 65 billion by 2024 and further expand to reach ~US$ 120-130 billion by 2030.
According to a NITI Aayog report, India supplies. 70% of WHO’s vaccine requirement (as per the essential immunization schedule).
India is also a preferred destination for clinical trials. The cost of clinical trials in India is 40%-60% lower than developed markets. India has over 500 contract research labs and over 600,000 English-speaking, skilled investigators.
In the medical devices and equipment segment, expansion of diagnostic and pathology centres as well as miniaturized diagnostics have high potential for growth. India’s medical devices market stood at US$ 10.36 billion in FY20. The market is expected to increase at a CAGR of 37% from 2020 to 2025 to reach US$ 50 billion.
- Use of technology: Digital Healthcare has emerged as a Viable Alternative to Traditional Delivery Models. Online consultations and technology platforms are in high demand especially in today’s times. Key segments where new opportunities are likely to emerge for health technology players in the near future include development of tools to facilitate emergency care and improvements to medical infrastructure, through technology-based optimization. This includes expanding the scope of wearable devices to track health conditions, developing patient-facing mobile health applications as well as greater integration of AI, robots, and blockchain technologies.
- In August 2019, the Ministry of Health and Family Welfare introduced the ‘e-Sanjeevani’ app, an integrated web-based telemedicine solution. It aims at making healthcare services fair by bridging the gap between urban and rural India.
Thus, affordable and quality healthcare can be enabled by Artificial Intelligence, wearables and other mobile technologies as well as Internet of Things. Digital health can especially improve outcomes for people suffering from multiple co-morbid conditions because of the possibility of remote monitoring of health status and delivery of virtual care services through smartphones and artificial data solutions. This, in fact, could prove to be the next major booming industry in India.
CONCLUSION
India is in the making to become one of the major countries with new opportunities for investments. This would lead the country to a fast-growing Healthcare sector that would ensure promotion of a holistic well-being, to provide each accessible and high-quality healthcare services at feasible cost.
Hospacxx Healthcare Consultancy is dedicated to bring their best work for clients across Indian and other International States in Business Development Projects, Quality Assurance Services, Operations Management, Financial Planning & more. For more information, you can visit the company website on www.hospaccxconsulting.com or contact us directly.
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