Region/Countries: Asia, India Industry: Biosciences / Medical Devices, Other Date: February 2018

Why this is important to Wisconsin businesses: The government has lifted restrictions on foreign direct investment in several key areas to help the sector grow to meet the needs of India's population.

The health care industry in India has grown greatly in recent years, from $45 billion in 2008 to $110 billion in 2016—a compound annual growth rate (CAGR) of 11.8 percent. Besides increasing incidence of lifestyle diseases, this growth is being driven by factors including rising income levels, greater health awareness, and improved access to insurance. Another factor is the infusion of private equity and foreign investment, with the private sector accounting for almost 74 percent of the country’s total health care expenditures. These investments have resulted in the creation of new infrastructure by private providers. In addition, investments by international health care groups in the Indian market are expected to boost innovation and quality of care. The industry is expected to grow at a CAGR above 26 percent during the period 2016-20 and to reach $280 billion by 2020.

India’s health care sector comprises hospitals, pharmaceuticals, diagnostics, medical devices, and medical insurance. It is dominated by hospitals, with a share of 71 percent, followed by pharmaceuticals at 13 percent. Medical devices constitute 9 percent of the health care space.

The industry currently contributes 6 percent of the country’s GDP. Though India’s population accounts for 21 percent of diseases worldwide, the doctor-patient ratio is poor at one doctor for every 1,674 inhabitants (compared to a worldwide average of one to 1,000, according to the World Health Organization), and out-of-pocket expenditures are as high as 62 percent of total health care spending. Provision of quality health care is a top priority in India, and what is needed is a unified approach for long-term solutions to optimize disease care, preventive and promotive care, and patient-centric care through data-driven, efficient technologies.

Currently, foreign direct investment (FDI) is permitted up to 100 percent under the automatic route in the hospital sector and in the manufacturing of medical devices in India. In the pharmaceutical sector, FDI is permitted up to 100 percent in greenfield projects (new projects) and 74 percent in brownfield projects (existing projects) under the automatic route. FDI above 74 percent in brownfield projects requires approval from the Foreign Investment Promotion Board. Presently, drugs and pharmaceuticals are one of the top 10 sectors attracting the most FDI into India.

The cap on FDI in the insurance sector has been increased from 26 percent to 49 percent under the automatic route, subject to approval/verification by the Insurance Regulatory and Development Authority of India, with the requirement that ownership of the insurance company must be retained by an Indian firm.

The health care industry does face some challenges. For example, the existing health care infrastructure is insufficient to meet the needs of the population. Though the central and state governments offer universal health care, with free treatment and essential drugs at government hospitals, the hospitals are understaffed and underfunded, forcing patients to visit private medical practitioners and hospitals. In addition, India’s expenditures on health care information technology are low. A shortage of qualified medical professionals, inadequate insurance and lack of a central regulatory authority are other challenges that hinder the system’s effectiveness.

The Indian health care sector is diversifying, and opportunities are emerging in every segment, including providers, payers and medical technology. With growing competition, organizations are cognizant of new challenges and are looking to explore the latest business dynamics and trends impacting their respective segments. New players are building their entry strategies, and domestic players are exploring new care models to stay competitive. Indian companies are entering into mergers and acquisitions with both domestic and foreign companies to drive growth and gain access to new markets.

India's competitive advantage lies in the increased success rate of Indian companies in getting Abbreviated New Drug Application approvals. This market offers vast opportunities for Wisconsin companies in areas including health care infrastructure, health insurance, diagnostics, research and development, and medical tourism.