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Why and Where to invest in India’s Healthcare Industry

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“Health is wealth” is a well known proverb probably everyone is familiar about. But in the Indian context, this healthcare industry is lacking to a great extent and is characterized by certain irregularities and under development. Though it is also true that the Indian healthcare industry is witnessing growth at a rapid pace and it is expected that the sector will touch US $238.76 billion by 2020.

However on comparison with the other economies in the global world we see that the Indian economy still has a high death rate, highest birth rate which leads to high infant mortality rate due to improper healthcare infrastructure availability.

Growth in the Indian Healthcare Industry

According to the Investment Commission of India, the healthcare industry in India has experienced remarkable growth of 12% per year during the last 4 years. This huge growth in the industry was driven by a number of factors such as:

  • Increase in the average life expectancy
  • Increase in average income levels
  • Rising awareness for health insurance among consumers.

The rapidly improving infrastructure facilities in the healthcare sector allows India to provide the best-in-class treatment at affordable prices as compared to countries like USA and UK. The education system of India in the field of medical science has been developing a lot. Institutes like AIIMS etc. have been producing quality doctors, researchers who are working for the betterment of the country and provide world class treatment. If we talk about the private participation in the sector, we find that the private hospitals have been excelling in the field pertaining to cardiology, joint replacement, orthopedic surgery, gastroenterology, ophthalmology, transplants and urology.

Not only this, with the advent of private players in the industry, the sector has got a new energy and India is becoming one of the most sought-after destination for the facilities like medical tourism which serves its consumers with well-educated English-speaking medical staff, state-of-the art private hospitals and diagnostic conveniences, along with a huge cost advantage over the expensive healthcare services in the Western world.

Also Read about Medical Billing Companies in India.

Where to Invest in the Indian Healthcare Industry

It is expected that the Indian pharmaceutical market will touch US$74 billion sales by 2020 from US$11 billion mark now. During December 2011 India’s pharmaceutical market grew at 15.7% with growth in key therapy areas which included:

  • Anti-diabetics,
  • Derma and
  • Vitamins

These three outperformed the market. India pharmaceutical sector too has shown rapid growth. The sector is gaining a global leadership position as a result of which currently about 1/5th of global supplies are from India. India has a vast pool of trained pharmaceutical scientists, doctors and researchers, which opens up avenues for joint collaborative research for new drug discoveries along with joint intellectual property rights.

If we talk about the services segment in the healthcare industry like the Indian health insurance market, we see that the sector is one the fastest growing and second largest non-life insurance segment in the country. From last two fiscals the sector is posting tremendous growth which is now expected to at a CAGR of over 25 per cent for the period spanning from 2009-10 to 2013-14.

Why the need to invest in Indian Healthcare Industry

The Government too has come forward for the development in this sector and has decided to increase health expenditure to 2.5 per cent of GDP by the end of the Twelfth Five Year Plan (2012-17), from the current existing expenditure of 1.4 per cent. Also worth mentioning is that the National Rural Health Mission’s allocation has been proposed to be increased to US$ 3.72 billion in 2012-13 from US$ 3.23 billion in 2011-12. Foreign investments too in the form of FDI has been invited which is intended to provide a positive growth and energy to the sector.

The sector holds enormous potential waiting to be unleashed to its maximum and still a lot more needs to be done. According to a report by PWC an estimated 189 million people in the country will be more than 60 years of age by 2025 which needs higher healthcare spending. India will need as many as 1.75 million additional beds by the end of 2025. Further, an investment of US$ 86 billion is required to achieve 1 doctor, 2 beds and 2.3 nurses per 1000 population by 2025.

Some of the few healthcare companies in India are as follows:

  • Apollo Hospitals (NSE:APOLLOHOSP)
  • Fortis (NSE:FORTIS)
  • Max Healthcare
  • Sanofi Aventis India (NSE:SANOFI)
  • Dr Reddy’s Lab (NSE:DRREDDY)
  • Becton Dickinson India.

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Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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