The cold numbers on the current state of healthcare in India read thus: India has only 0.65 doctors, 1.3 nurses and 1.3 hospital beds per 1,000 people—the desired requirement is 2.5 doctors, five nurses and 3.5 beds. This entails an investment of around $245 billion. Our 6 lakh villages have a little more than 23,109 single-physician clinics serving it with not more than 4-6 beds each. India also faces a tsunami of non-communicable diseases (NCDs) that threatens to destroy its demographic edge. According to the World Economic Forum, by 2030, two-thirds of the deaths will be from NCDs, costing the country $5 trillion.
It is, therefore, a no-brainer that India needs massive investment both in public and private healthcare. The private sector today contributes 51% of bed capacity and handles 40-45 million admissions yearly. It is estimated that over 80% of new bed additions in the last 10 years was contributed by the private sector. This sector is the fifth-largest employer in the country and has the potential to generate 75 lakh direct jobs by 2022. This investment by the private sector has resulted in creating global standards of healthcare at one-tenth the global costs. It has also helped stem the brain drain of Indian doctors migrating to developed countries. In fact, the drop in doctors leaving the country has been as much as 85% between 2004 and 2015. Private sector hospitals have a high fiscal multiplier effect and catalyse significant economic activity. Significantly, growth of private sector has led to significant increase in FDI in the sector.
So, how can Budget 2018 nurture Indian healthcare? Two of India’s most globally competitive industries hold important lessons for the healthcare sector. Policy changes in India’s patent laws in the early 1970s lead to the country’s pharmaceutical industry evolving from almost non-existent to accounting for 20% in volume terms and 1.4% in value terms of the global pharma industry. The Indian pharma industry, which is expected to grow over 15% per annum between 2015 and 2020, will outperform the global pharma industry. Similarly, in the 1990s, the IT sector benefited from the policy support of the government in terms of subsidised infrastructure, tax holidays, and monetary and fiscal incentives. And the sector responded by generating millions of skilled jobs, and enhancing India’s stature as a knowledge economy in the eyes of the world. Healthcare has even greater potential.
It is time to accord healthcare “national priority” status. Formulate modalities for declaring special healthcare zones in key geographies with attendant benefits such as earning exemptions for facilities located there, infra support, manufacturing incentives, incentives for accelerated job creation and training of skilled workforce: every hospital bed creates five direct jobs, and an exponential number of indirect jobs. This will help create an attractive investment climate and provide access to optimal long-term financing structures for healthcare providers, apart from stimulating domestic production of medical equipment, devices and consumables, which will ultimately make the cost of care more affordable. We respectfully urge the government to support the sector with a comprehensive set of measures such as:
- Provision of land free of cost or at highly subsidised rates to set up facilities. In return, private hospitals can be made to mandatory treat economically disadvantaged patients, and while in the past there have been allegations that it has been abused by private hospitals, the idea is sound—it is the monitoring that needs beefing up;
- Higher FSI for hospital buildings, as they are required to be located in central areas;
- Rates for power to be reduced to about 50% of applicable commercial rates;
- Extended tax holidays to enable ploughing back of earnings into infrastructure investment.
With these incentives, Indian healthcare can become a jewel in the country’s economic crown, with a significant contribution to GDP and skilled job creation.