The size of the Indian healthcare delivery market was Rs.2.6 lakh crore in 2011-12. We expect it to almost double to Rs.4.7 lakh crore in 2016-17. The private sector plays a vibrant role, as evidenced by the fact that some of the large corporates in the healthcare delivery industry have clocked an annual average revenue growth of around 20-25 per cent during the last five years. We believe that the market has immense potential in the long-term due to a combination of factors.
First, a shift in demographics, fuelled by an increase in population and the rise in life expectancy, will necessitate greater coverage of healthcare. Second, higher purchasing power due to rising income levels, coupled with rising literacy levels, will boost awareness on preventive and curative healthcare and, in turn, increase the hospitalisation rate (the number of times an individual visits a hospital).
On the negative side, however, the stresses and strains of modern day living will continue to result in rapid increase in lifestyle-related ailments such as cardiac diseases, oncology (cancer) and diabetes. In value terms, cardiac ailments account for around 22-25 per cent of the overall market (in 2011-12), and we expect this to go up steadily in the next five years. Likewise, oncology, at present, accounts for around 4-5 per cent of the overall market, and is likely to grow to 5-7 per cent in the next five years. This rise in lifestyle-related ailments will concomitantly increase the demand for healthcare services associated with these diseases such as diagnostic facilities.
Another driver will be the sustained expansion of healthcare insurance coverage. As per the World Health Organisation’s (WHO) world health statistics, around 74 per cent (as of 2008) of India’s private healthcare expenditure now takes place in the form of out-of-pocket expenditure. As health insurance coverage widens, hospitalisation rates are also likely to go up.
Because healthcare costs are extremely competitive in India compared to the developed countries and other nations in Asia, the country is also an attractive destination for medical tourism. According to industry sources, nearly 6-8 lakh patients visit India from abroad for treatment. We believe that this number is likely to increase substantially in the years ahead.
On the flip side, however, the challenges are daunting, despite the fact that India has made great strides in healthcare since independence. While average life expectancy has nearly doubled to around 64 years since independence, infant mortality rate (IMR) and the maternal mortality ratio (MMR) have fallen significantly, the overall access and quality of healthcare for a vast majority of Indian remain sub-par. As compared to other countries, including developing ones such as China, Thailand, and Vietnam, India fares poorly on almost every key health indicator.
Two key factors responsible for this are the low share of government in total healthcare expenditure, and the lack of skilled human resources. In India, government healthcare expenditure as a percentage of gross domestic product (GDP) (1.4 per cent), too, is far lower than the global median (5 per cent). Not only is the government healthcare spend/GDP ratio close to 6 per cent or above for most developed western countries, even BRICS (Brazil, Russia, India, China, South Africa) nations such as Brazil and South Africa are far superior to India on this score. It is evident that even if public spending increases further in the next few years, a lot more resources will need to be raised through other avenues, including private sector, to bridge this gap.
Over the next five years, we believe that India will require investments of Rs.6 lakh crore if it has to attain the global median of 24 beds per 10,000 persons (now, this number is nine beds per 10,000 persons). In addition, opportunities exist for diversification into allied industries such as medical equipment and medicine. It is evident that the demand prospects for healthcare delivery are bright in the medium-to-long-term, which presents an attractive opportunity for the private sector.
The author is Director, Crisil Research, a division of Crisil