India – established or emerging market?

Salil Kallianpur

Healthcare marketing professional

Salil Kallianpur discusses whether India is an emerging or more established market in terms of healthcare.

During his visit to India in late 2010, US President Barack Obama surprised many when he remarked to the Indian Parliament that he thought of India as not simply an emerging market but as one that has already emerged. In the days since then, the remark proved to be merely rhetorical.

India, like other emerging markets shows signs of advancement in its financial structures and a certain level of maturity in its economy but by frequent policy switches, its economy is subject to substantial volatility. Unlike people in mature markets, people in India devote most of their budgets to food and basic needs including healthcare.

This touches on an important diversity. While India’s economy grew second only to China’s over the last two decades, its health systems are not catching up with the healthcare needs of rapidly urbanizing cities. The utilization of public health services is low and limitations such as government interventions and financial constraints do not allow universal coverage of healthcare. Even the role of health insurance remains inconclusive. Overall, providing healthcare to its population presents a major challenge to the Indian government. This surely does not behoove of an established economy and a modern, developed nation but a barely emerging one that’s grappling to ensure the benefit of that growth percolates down to it most under-privileged.

65 years after its independence from British rule, India still cannot provide all its citizens with equitable, accessible and affordable health services. The changing demographic dynamics along with rapid urbanization are posing severe challenges to policymakers to catch up with the needs of public health and medical care. India’s diverse 1.2 billion population adds complications for Government to provide comprehensive health policy for its people.

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“Unlike people in mature markets, people in India devote most of their budgets to food and basic needs including healthcare.”

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But, the shortage of infrastructural facilities and human resources can be addressed through Public Private Partnerships (PPP) and this situation throws up many opportunities on possible interventions for the healthcare industry to work closely with the government to improve the delivery of health services. While most companies measure the market opportunity in terms of the share they can capture and target the population already receiving therapy, India offers the unique opportunity to develop its vast untapped potential. Companies consider emerging markets as their growth drivers but seldom think of ways in which that growth can emerge as perhaps their most strategic, sustainable and one that can turn in profits over the next few decades. Consider a few areas that India offers the industry a unique blend of non-product revenue, sustainable profits and most importantly the goodwill of its citizens and subsequently its government.

Health financing

India spends just 5% annual gross domestic product (GDP) on healthcare out of which about 80% expenditure is private and 70% of that is out-of-pocket. This catastrophic out of pocket expenditure has the potential to push families below the poverty line. Innovative health financing solutions are desperately required with demand side financing (DSF), which include output-based aid, conditional cash transfers, consumer-led financing (vouchers, tax rebates) and provider-led financing (capitation payment, referral vouchers).

While this is likely to continue under government control, the sector offers great potential for private sector participation. This is relevant especially since it is well established that increasing government intervention even in countries with a significantly larger public sector has not achieved fruitful improvements in health. It is estimated that India has to allocate between 3.5–6.1% of GDP to provide Universal Healthcare to its citizens and that seems impossible without private sector participation.

Health insurance

Insurance policies that rely on voluntary purchase of coverage to reduce the number of uninsured have seen modest success. The insured have shown willingness to participate actively in designing their health insurance packages. Such choices do not exist in government controlled schemes and consumers would gladly welcome private sector participation if endorsed by the government. It is difficult to create an environment for market oriented competition between insurers. The introduction of competition in the field has not provided evidence of effectiveness so far and the results remain inconclusive.

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“65 years after its independence from British rule, India still cannot provide all its citizens with equitable, accessible and affordable health services.”

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Developing resources and infrastructure through public-private partnership

Government estimates indicate that in urban areas 18% of primary health centers do not have a doctor, 38% are do not have a laboratory technician, and 16% have no pharmacist. Government hospitals estimate that untrained, unlicensed practitioners in the country outnumber qualified medical doctors by at least 10:1 with the number increasing. This skews choice towards private service providers. In 2004 the share of private sector in non-hospitalized and hospitalized treatment was estimated at 19% and 61.8% respectively in urban areas.

The shortage of nursing staff and doctors is due to their migration to other countries. In addition, medical and nursing schools have difficulty in filling vacancies for teaching-staff. There is a shortage of medical colleges to produce qualified doctors. Worse still, these colleges are unevenly distributed across the nation and the cost of education is prohibitive.

While it is true that the state of healthcare in India needs urgent repair, it is also true that India’s pharmaceutical industry continues to have enormous global impact in areas such as low-cost service delivery (Aravind Eye Hospital), low-cost medicines (generics) and vaccines and in the eradication of polio.

In conclusion, healthcare is one of the fastest growing sectors in India. Its citizens are increasingly becoming health conscious and are on the lookout for quality healthcare systems that would provide solutions in a holistic way. Ironically, in a country unable to provide to its own citizens, analysts predict that healthcare tourism will be one of the next big opportunities for India. Such predictions are on the grounds that India is one of the countries with highly skilled professionals and with advanced low-cost solutions. But unless these solutions become truly affordable to its citizens first, India will stay far from being an established market and its vast potential like Obama’s comments, will remain empty.

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About the author:

Salil Kallianpur is a healthcare marketing professional based in Mumbai, India. He has experience in the pharmaceutical and the medical devices industries in India. He is an avid reader and follows the healthcare industry, its politics, strategy and current affairs and writes on the intersection of healthcare and life in general at his blog “My Pharma Reviews”. The views in this article are his own and not those of his employer.

Do you consider India to be an emerging or established market?