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Sector Overview

Indian Healthcare Sector is one of the largest and fastest growing sectors in terms of revenue and employment. It comprises of Hospitals, clinical trials, outsourcing, medical devices, telemedicine, medical tourism, health insurance and medical equipment. Highly talented human resource with technological advancement enables India to provide cross border services, such as telemedicine, telesurgery and telediagnosis. Moreover, India has also emerged as a strong outsource destination for service such as medical transcription, coding and billing, back office support etc.

India holds strong position in advanced healthcare services such as organ transplants, cardiovascular procedures, cancer treatments, etc. with high success rate. High growth of Healthcare sector is the result of government initiatives, high Private and foreign investments which has promoted the Infrastructure for Healthcare Services in the country. Indian Hospital Industry stood at US$ 61.79 billion during the FY2017 and is expected to reach US$ 132.84 billion by 2022. Globally, Health care spending is projected to increase at an annual rate of 4.1% in 2017-2021, up from just 1.3% in 2012-2016. India is expected to rank amongst the top three healthcare markets worldwide in terms of incremental growth by 2020.

Indian Healthcare system is categorized as under-

Public – It includes government secondary and tertiary care institutions focusing on basic healthcare facilities in key cities and rural areas.
Private – It comprises of majority of secondary and tertiary care institutions with major presence in metros, tier I and tier II cities.

Wellness Industry has continued to emerge from a niche lifestyle concept into a mainstream commodity with high growth prospects. Wellness industry is estimated to be worth over $3.72 trillion, representing more than 5% of all global economic output (Global Wellness Industry Report 2018).

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As per the recent estimates of Ernst & Young, Indian wellness industry is estimated to grow at a CAGR of nearly 12% for the next 5 years and is expected to reach Rs 1.5 trillion by 2020. Rise in disposable incomes, changing lifestyle, etc. are some important factors driving the growth of wellness services.

 

Indian healthcare sector stood as the fourth largest employer, employing approx. 319,780 people in FY2017. The sector is expected to generate 40 million jobs in India by 2020. Indian healthcare sector, is expected to record a threefold rise to US$ 372 billion in 2022 from US$ 110 billion in 2016. As per the Economic Survey 2017-18, net sales of healthcare services have been growing at an average of 12.1%.

Groth Net Sale
Source: Economic Survey 2017-18
 
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Medical Tourism – Medical Tourism industry is experiencing strong growth of 22-25% with market size of US$ 3 billion during FY17. Industry is expected to double its size to US$ 6 billion by the end of 2018. Medical tourist arrivals in India has increased to 1.07 million in January 2018 from 0.98 million in January 2017.

 
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Emergence of Telemedicine - Telemedicine is one of the emerging sector in India which can bridge the rural-urban divide in terms of medical facilities. Through Telemedicine, low-cost consultation and diagnosis facilities can be provided to the remotest of areas via high-speed internet and telecommunication. Major big hospitals like AIIMS and Apollo have adopted telemedicine services and entered into a number of PPPs. Telemedicine market in India is expected to rise at a CAGR of 20% during FY16-20, reaching to US$32 million by 2020.

 
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Rise in Per Capita Healthcare expenditure – Government expenditure on healthcare sector as percentage of GDP has grown to 1.5% in FY17 from 1.2 per cent in FY14. Factors such as rising incomes, easier access to high-quality healthcare facilities, greater awareness of personal health and hygiene, Economic prosperity, etc. have positively contributed in increasing expenditure on healthcare services. The private sector has emerged as a vibrant force in India's healthcare industry, contributing in both national and international repute. Private sector accounts for almost 74% of the country’s total healthcare expenditure.

 
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Re-emergence of traditional medical care- The traditional (Ayurveda) market in India is expected to rise at a CAGR of 16 per cent over 2016-2021. The growth is further likely to be accelerated by augmentation of Ayurveda and other Traditional Systems of medicine in public health including National AYUSH Mission, National Health Mission and Prevention and Control of non-communicable diseases etc. Services offers traditional Indian health remedies based on natural and herbal ingredients along with new offerings like services on diet and nutrition, yoga, herbal medicine, humour therapy and spa. Considering overall growth of wellness therapies like Yoga etc. Morarji Desai National Institute of Yoga (MDNIY) and autonomous organization under Ministry of AYUSH has embarked upon accreditation programme for Yoga practitioners and institutions so that quality Yoga personals are available to the society. The diagnostic and Theraputic services based on Ayurveda, Yoga and other traditional systems of medicine which mainly include the medicines, Panchkarma therapies and marma therapies etc. which are mainly based on natural and herbal ingredients with holistic approach. The tertiary care in AYUSH System specially in Ayurveda has emerged strongly in the form of establishment of All India Institute of Ayurveda and Integration of AYUSH in healthcare facilities under other ministries including Ministry of Labour, Home etc. There is growing interest from numerous private equity firms in the traditional healthcare sector in India.

 
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Pharma market turnover trending north - Indian pharmaceutical market grew 5.5 % in CY2017 with total turnover reached US$ 14.97 billion of scheduled formulations and US$ 3.08 billion of non-scheduled formulations, respectively. As per available data from authentic resources there has been 13 % of growth in the export of Ayurveda and herbal drugs in last 4 years.

 
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Growth in Medical devices market - The medical devices market size, valued at US$ 4.9 billion in 2017, is expected to reach US$ 11 billion by 2022, backed by rising geriatric population, growth in medical tourism and declining cost of medical services.

 
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Home healthcare – Technological enhancement and development of medical electronics has made it possible provide high quality medical care at home at affordable prices. It can help patients to save up to 10-25% cost of the medical treatment Indian home healthcare market is estimated to reach US$ 4.46 billion by the end of 2018 and US$ 6.21 billion by 2020.

 
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Rising penetration of Healthcare Insurance – Globally, Healthcare Insurance industry is growing at a fast pace. Healthcare Insurance is also gaining momentum in India. During FY18, gross direct premium income from health insurance stood at 25.2% of overall gross direct premium income for non-life insurance segment which is a significant number indeed. Health care insurance coverage have also been extended to Ayurveda and other traditional systems of the medicine.

Advantages for India/Growth Drivers

India's competitive advantage lies in its large pool of well-trained medical professionals along with the cost effectiveness of medical treatment as compared to its peers in Asia and Western countries. Surgery in India costs about one-tenth of that in the US or Western Europe which attracts huge medical tourist in India.

Growing Demand
 

Growing Demand arrow-lft Rising disposable incomes and affordability gives steady growth in the ability to access healthcare and related services.

Increasing trends of Ageing Population is also one of the key demand driver. As elderly population is set to rise from the current 98.9 million to about 168 million by 2026. Demand is anticipated to increase in the coming years for Healthcare services.

Presence of world-class hospitals and skilled medical professionals has strengthened India’s position as a preferred destination for medical tourism. High quality healthcare with low treatment costs makes India superior in comparison to other countries. Major surgeries in India cost approximately 20% of that in developed countries. As of April 2017, Indian medical tourism market was recorded as US$ 3.0 billion and is expected to reach US$ 6 billion by the end of 2018. Major services offerings like Yoga, meditation, Ayurveda, allopathy, etc. attract medical tourists from many European and Middle East nations to India.

Strong Policy Support arrow-lft Government policy initiatives to make India as a global healthcare hub is an important advantageous factor for the growth of Healthcare sector. Government policies related to Infrastructure development for Healthcare sector, attracting Foreign Direct Investments and private sector investments contributed significantly in the growth of Healthcare services.

Quality and Affordability arrow-lft One of the most important factor driving the growth of Indian Healthcare services are high quality and affordability. India have large pool of highly qualified doctors and medical consultants giving services at affordable prices to both national and International patients.

Traditional Indian Medicare arrow-lft India is a well-known destination for traditional healthcare and wellness services like Ayurveda and Unani as well as Yoga. Strong growth in traditional Medicare is an advantage for India.

Growing Health Awareness arrow-lft Growing health awareness and precautionary treatments with improved diagnostics are resulting in an increase in hospitalization and use of healthcare facilities. During 2008-18, strong growth has been registered in Hospitalization cases.

Number of hospitalised cases(Millions)
Hospital Case
Source: Apollo Investor Presentation March 2016
 

Some other important growth drivers includes-

  • There exists a large pool of English speaking doctors, nurses and supporting staff in India
  • India offers E-medical visa to residents from 161 countries with low e-medical visa fees
  • Government of India is putting significant emphasis on AYUSH services which are India’s unique offering to the world
  • India offers low waiting period for healthcare treatment compared to developed countries

Sector contribution to Economy

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During FY2017, Indian Healthcare has been ranked as 4th largest employer giving jobs to approx. 319,780 people and is expected to generate 40 million jobs by 2020 Asian Research and Training Institute for Skill Transfer (ARTIST) have announced plans to create 1 million skilled healthcare providers by 2022 As per National Health Protection Scheme, 1 lac jobs are expected to be created from Ayushman Bharat scheme.

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Cumulative FDI inflows into Healthcare sector (From April 2000 Up to March 2018)

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Source: Department of Industrial Policy and Promotion

As per data available from DIPP, FDI inflows in drugs and pharmaceuticals sector stood at US$ 15.72 billion during April 2000 – March 2018. Investments in Hospitals & diagnostic centres and medical appliances stood at US$ 4.99 billion and US$ 1.66 billion, respectively. FDI increased by 31.6% from 2014-15 to 2016-17 in Hospitals and Diagnostics centres.

100 % FDI is allowed under the automatic route for green field projects and for brownfield project investments, up to 100 % FDI is permitted under the government route. India’s open FDI policy along with Demand growth and cost advantages has contributed enormously to attract FDI in Healthcare sector.

Government Initiatives and Policy support

Many initiatives have been taken by Indian Government to promote Indian health and Wellness industry. It include- Make in India initiative to attract more investments and opportunities in this sector, setting up Ministry of AYUSH to promote traditional Medicare of India, relaxed FDI norms in Healthcare and Wellness sector up to 100 % through automatic route for green field projects and up to 100 % is permitted under the government route for brownfield project investments, incentives in the form duty scrips will be provided to healthcare service exporters under Foreign Trade Policy 2015-20 in the range of 3-5% on net foreign exchange earned, etc.

Various other important policy initiatives are as follows-

NHS"

National Health Mission (NHS) - Union Cabinet of India approved the continuation of National Health Mission with a budget of Rs 85,217 crores (US$ 13.16 billion) from 1st April 2017 to 31st March 2020 (March 2018). This mission is make health delivery fully functional and accountable at all the levels of health systems. Main objectives are to reduce child and maternal mortality rate, universal access to affordable and quality health care services, population stabilization and promotion of healthy family lifestyle in the country.

Mainstreaming of AYUSH is one of the strategies in National Health Mission (NHM) which aims to provide accessible, affordable and quality health care in order to improve the existing health care delivery system. Government of India has adopted a strategy of Colocation of AYUSH facilities at Primary Health Centres (PHCs), Community Health Centres (CHCs) and District Hospitals (DHs), thus enabling choice to the patients for different systems of medicines under single window. In addition National AYUSH Mission also supports the efforts of States/ UT Govt. in promotion of AYUSH services including AYUSH Wellness Centres so that quality AYUSH Healthcare services are available to the public at large.

National Health Policy 2017 -

Union Cabinet, Government of India, approved National Health Policy 2017, to provide the policy framework for achieving universal health coverage and delivering quality health care services to all at an affordable cost. National Health Policy 2017 also make provisions for overall development of AYUSH Sector and their requisite integration into healthcare coverage system.
NHS Policy

Tax incentives - All healthcare education and training services are exempted from service tax. Tax holiday under section 80- IB is increased for private healthcare providers in non-metros for minimum of 50 bedded hospitals. 250% deduction for approved expenditure incurred on operating technology enables healthcare services such as telemedicine, remote radiology. Incentives and tax holidays are being offered to hospitals and dispensaries providing health travel facilities. Senior citizens above 80 years of age will be allowed deduction of US$ 491 towards medical expenditure if they are not covered under health insurance.

NHS"

Union Budget 2018-19 - Allocation to the Ministry of Health and Family Welfare has increased by 11.5% year-on-year to US$ 8.16 billion in the Union Budget 2018-19. Also, the Government of India has announced one major initiatives under the Ayushman Bharat programme, namely - National Health Protection Scheme which is the largest government funded healthcare programme in the world, expected to benefit 100 million poor families in the country by providing a cover of up to Rs 5 lakh per family per year for secondary and tertiary care hospitalization.

National Nutrition Mission - Government of India signed a US$ 200 million deal with the World Bank for 315 districts across India, under National Nutrition Mission (POSHAN Abhiyaan) in May 2018. The programme is aimed at reducing the level of stunting, under-nutrition, anemia and low birth babies.

Apart from above mentioned policy initiatives, many other important initiatives has been taken by the government to boost Healthcare services such as-

  • Digital Initiative of Ministry of Health and Family Welfare by setting up National Health Portal as a first hand authentic source for information on health. To improve health literacy and access to healthcare services in the country.
  • India's first ever 'Air Dispensary', which is based in a helicopter, will be launched in the Northeast and the Ministry of Development of Northeast Region (DONER) has already contributed Rs 25 crores (US$ 3.82 million) for its funding.
  • Ministry of Health, Government of India has planned to transform 150,000 sub-health centres into health and wellness centres that provide comprehensive primary care.
  • Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA), 2016 to ensure comprehensive and quality antenatal check-ups to pregnant women across India. It has crossed the 10 million mark of check-ups as on January 2018, etc.
  • Inclusion of AYUSH system of medicines into National nutrition mission is under active consideration. Ministry of AYUSH had developed 04 yoga booklets for pregnant ladies, lactating mothers, adolescent girls and children of age 1-3yrs. The same has been uploaded in the Ministry of Women & Child Development’s website under Poshan Abhiyaan.
  • Ministry of AYUSH is also participating in POSHAN Abhiyan by conducting various Awareness camps are being organized in different part of the country through AYUSH Research Councils, National Institute etc. regarding nutrition and its management through AYUSH system of medicines
  • All India Institute of Ayurveda was inaugurated in New Delhi on October, 2017. All India Institute of Ayurveda is organizing a valedictory ceremony of National Nutrition month 2018 on 26th September, 2018.

Opportunity and Way Forward

India’s healthcare industry is one of the fastest growing sectors and it is expected to reach $275 billion in the next 10 years. There are plenty of opportunities available for medical services providers as well as medical devices industry. Over the years, India has made strategic interventions in National Health Mission and the national disease Control programmes which has resulted in large employment opportunities in the healthcare sector by 2025. It is expected that over US$ 200 billion is expected to be spent on medical infrastructure by 2024. Medical devices market size was valued at US$ 4 billion in 2016 and is expected to reach US$ 11 billion by 2022. As the country has become one of the leading destinations for high-end diagnostic services, tremendous investment opportunities exists in advanced diagnostic facilities to further promote diagnostic services from India. There exists growing demand for healthcare infrastructure in India.

There are numerous investment and growth opportunities available to Indian healthcare sector as it is highly diversified including service providers, payers and medical technology. India also offers vast opportunities in Research & Development as well as medical tourism due to high quality and affordability of Indian medical services. Contract research is a growing segment of Indian healthcare industry. Nearly, 60% of global clinical trials is outsourced to developing countries.

Advantage India