JOIN USNow that the dust has settled on what was supposed to be the first wave of regulatory price restrictions in healthcare services, it is worth an effort to analyse the long-term effects that such regulations will bring about in a country as large as India.
There is enough evidence to prove that in comparison with developed economies, India's provision for healthcare spending is hugely below par. Therefore, the Union government's proposal to increase healthcare spending to 2.5% by 2035 is very encouraging.
This intent to increase healthcare spending, when read in conjunction with the recent price regulations, clearly confirms the intent of the government on a larger level, that is, to provide affordable healthcare to the entire citizen base of 1.3 billion people.
As a citizen, I have nothing to complain about this intent: it is a step in the right direction. Of course, how this is implemented is a different debate altogether.
What is also a positive sign, from a private healthcare operator's perspective, is the fact that while the government has brought about these regulations, and has made clear its intentions of wanting to provide affordable healthcare, it has not demonstrated any intention of wanting to become a "provider" by itself and hence start building hospitals.
The government just wants to remain a "payer" in this process while leaving the "provider" space to private players. This is an encouraging sign not just for strategic healthcare providers but also private equity (PE) funds that want to deploy money in the healthcare space.
Thus, while these regulations may indeed end up eroding margins by a few hundred basis points for private healthcare players, I do not believe that they would render the entire healthcare market unattractive in terms of bringing in foreign investments. For the past decade or so, foreign investments, especially through PE funds, have been a major source of fuel for the growth of healthcare in this country.
Even though there has been a lot of noise in the recent past about how regulatory changes might become a risk for further funds to come in, when the storm has died, these funds will once again start flowing in. After all, private healthcare players, along with the government, will have to play a role in bringing about some much-needed change in a sector as essential as healthcare.
Another important sector of healthcare that deserves attention is the medical device industry. Overall, the Indian market is facilitating an environment of healthy growth in this sector. The last few years have seen an increase in domestic manufacturing of medical equipment.
Medical equipment sector
The government has introduced new policies to foster the growth of the medical equipment industry, with India beginning to be positioned as a manufacturing destination for sophisticated medical technology. These developments are a new ray of hope for indigenous medical equipment production which is set to fulfil the healthcare needs, locally and globally.
While private players mostly fund healthcare infrastructure, there is still a large deficit of this in rural areas, where a majority of the Indian population resides but is unable to afford quality healthcare.
As per reports, India has only 1.1 beds per 1,000 population, a much lower statistic as compared to the global average of 2.7. Due to inadequate funds and facilities, there also exists a large skill gap at primary health centres and community health centres.
However, the government is taking active steps towards combating this skill gap. In 2016, they launched a nationwide mobile health programme, designed to train community health workers and to reach out to millions of women within three years.
Thus, with increased cooperation between private players and the government's policies on healthcare, we can hope to see better outcomes in the country's healthcare sector.
In conclusion, the regulatory changes that are being introduced by the government, when looked at in balance along with some of the sops that are being introduced to encourage innovation and homegrown medical technologies, continue to keep healthcare as a sunrise sector. This is certain to attract substantial deployment of capital in the coming years.
(The writer is Chief Executive Officer, India Operations Division, Parkway Pantai Limited)