Attracting strong interest from private equity funds, the healthcare industry in India is expected to reach USD 155 billion in terms of revenues by 2017, according to a study by LSI Financial Services.
At present the industry is pegged at USD 65 billion, of which 30 deals valued at USD 754.33 million were signed last year, the report by the Kolkata-based financial services company said.
Stating that the healthcare sector attracts 4.6 per cent of total GDP spent in India, LSI Financial Services Managing Director Rajya Vardhan Kajaria said: "There is a huge demand- supply gap in the healthcare delivery business in India.
"The presence of public healthcare is not only weak but also under-utilised and inefficient. However, the private sector is quite dominant in this sector".
He said 74 per cent of the total spending on healthcare in India is from the private sector and that inadequate public investment in healthcare infrastructure has given opportunity to private hospitals to take a major share of the market.
The report was conducted in 100 top health care companies across India during the last three to four months, he said.
"Government policy has not been conducive to attract specialist doctors to rural areas and so the healthcare infrastructure in such areas where 65 per cent of the population live, continues to be inadequate," the report said.
It said while the national doctor-patient ratio was 1:1700, in rural areas it has plummeted to 1:25,000.
"Healthcare indicators in rural India are significantly bleaker than those in urban areas. This is witnessed by the fact that the difference of life expectancy between urban and rural India is currently 12 years," it said.
The government in order to alleviate the problem, announced an increase in allocation for National Rural Health Mission to Rs 20,822 crore for 2012-13, which is more than 15 per cent of Rs 18,115 crore alloted in 2011-12.
Observing that government spending in healthcare as a percentage of GDP was lowest at the global level, the report said: "In Union Budget 2012, the government has decided to increase its healthcare expenditure to 2.5 per cent of GDP by end of 12th Five Year Plan from the current 1.4 per cent".
Some of the strengths of the sector in the country are high quality healthcare at competitive prices and increase in awareness in Tier-II and Tier-III cities.
However, shortage of trained medical personnel,high capital intensive nature, inflation and rising costs were some threats for the industry, it said.
The weaknesses were retaining and training nursing and clinical staff and inadequate reach of health care services in rural areas, it said.
Taking a cue of the opportunity in the industry, the study said India would witness a large number of mergers and acquisitions in the pharmaceutical and healthcare in 2012 as several companies were "bullish" on acquiring companies in this space.
Some recent acquisitions include Fortis Asia Healthcare acquiring Fortis Healthcare International for USD 665 million, Abbott acquiring Piramal Healthcare for USD 3,720 million and Daiichi Sankyo acquiring Ranbaxy Laboratories for USD 4,539 million.
The sector would continue to offer investment opportunities in increasing bed capacity and to medical technologies and diagnostics in Tier-II and Tier-III cities.
"The preferred model is hub and spoke model. Through experimentation it has been found that the best specialty and super specialty hospitals as hub in the metros and tertiary and primary hospitals as spokes in rural areas", it said.
Speciality sectors like cardiology, neurology and joint replacements are likely to attract most investment in bigger cities.
On the outlook for the industry in India, it said: "Due to demand-supply mismatch, there is enormous potential for growth in Central India followed by the eastern and North-astern region".
"With a decline in cost resulting from Rupee devalution against US Dollar, medical tourism from developed countries becomes attractive.However, in future the big thrust in this area would come from Africa, Bangladesh," it said.