An Analysis of Foreign Direct Investment in Healthcare Sector in India
Healthcare is one of the fastest growing services sector in India. The growing importance of the healthcare sector and the significant development of international trade in healthcare services have attracted FDI in this sector in the recent years. In India, 100 per cent FDI is permitted in hospitals and all health-related services under the automatic route. The objective of the paper is to present the status of FDI in drugs & pharmaceuticals, hospitals & diagnostic centers, and medical & surgical appliances, to identify some of the challenges and opportunities in this industry. The study is descriptive in nature and based on the secondary data that is gathered from the books, articles, reports of Department of Industrial Policy & Promotion and other valid online sources. The Indian healthcare sector has estimated revenue of around US$ 30 billion constituting 5 per cent of GDP and offering employment to around 4 million people. Hospitals account for the major share of total healthcare revenues in India. Of the total healthcare revenues, hospitals account for 71 per cent, pharmaceuticals for 13 per cent and medical equipment and supplies for 9 per cent. The Indian healthcare sector is expected to reach US$ 280 billion by 2020 from the current US$ 72 billion, expenditure is likely to expand at a CAGR of 12 per cent over 2012-15. The hospital and diagnostic centers in India has attracted FDI worth US$ 2.93 billion, while drugs & pharmaceuticals and medical & surgical appliances industry registered FDI worth US$ 12.9 billion and US$ 925.4 million, respectively during April 2000 to February 2015. Various factors could attract foreign funds into this sector. The most important driving factors are the “demand-supply mismatch” and the huge amount of private sector investment that is required in this sector to its infrastructure. With the growing economy, rising incomes, increased willingness among Indian consumers to pay for quality healthcare and to go to institutional providers, the comparable lower costs of establishments and the healthcare packages offered many companies, which are increasing affordability of health care for consumers; this is a potentially attractive sector for both foreign and domestic investors. FDI in hospitals would benefit the Indian healthcare sector if the ultimate aim is to expand capacity, improve standard, and make this sector affordable and accessible to a wider segment of the society. The Government should have a concrete healthcare policy, promote healthcare tourism, and adopt a PPP model for growth of this sector.
Healthcare is one of the fastest growing services sector in India. The growing importance of the healthcare sector and the significant development of international trade in healthcare services…