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A much-needed cure for the Indian health care system

What Indian healthcare industry is expecting from Budget 2017?

A much-needed cure for the Indian health care system

Tuesday January 31, 2017,

5 min Read

The Indian health care industry’s growth has been rapid with a CAGR of 17 per cent and is expected to be a US $280 billion industry by the year 2020. Yet, the state of public healthcare services remains unchanged with the accessibility to healthcare, doctors and medical facilities being lower than it should be for a country as large and populated as India. The average growth in expenditure on total healthcare is not only lower than the average annual GDP growth rate, but the expenditure is also still lower (as a percentage of GDP) than the expenditure of many developing and low-income countries.

The purpose of collecting tax is to spend it on the public’s welfare through expenditures in important areas such as health, education, infrastructure, and the public distribution system. However, since the government spending on health care is not at par with the demand, heavily taxing health care services is counter-productive to the industry. The argument against high service taxes in the health care sector is that private health companies are providing the public access to advanced medical technology and infrastructure, something the government has been unable to do nationally.

In addition, there are massive gaps between rural and urban India in terms of health care systems. Almost 70 per cent of the population still lives in rural areas with no or limited access to hospitals and clinics. The majority of specialists live in urban areas where most large hospitals are located. A large section of the population of the country does not have access to affordable health care services as most private hospitals are too expensive. Subsiding private services for the public is required in the absence of a strong, affordable public health care system.

Incentivisation will encourage private entities to invest in and develop the rural health care sector, bringing better facilities and easier access for patients to hospitals, clinics, and pharmacies. Interest free loans to investors for developing health care in the rural areas and underdeveloped areas will attract more private players, a practice adopted by many developed nations. For example, Japan, which has one of the most developed and affordable health care systems in the world, provides such incentives and subsidies to companies investing in health care for the poor. Moreover, the government also needs to consider providing financial and tax incentives for investors to set up hospitals in Tier II and Tier III cities in India that lack good hospitals specialising in advanced health care services.

Health care services are no different than other services that the country exports. Private health care earning foreign exchange through treatment of international patients should be incentivised just as software exports were a few years ago. Similarly, the government must not force private health care companies to provide free healthcare without allowing the necessary subsidies and incentives to them.

Digital healthcare in India is growing at a significant rate, and with higher penetration of internet services and availability of smartphones in rural areas, health services can be made more democratic and accessible. Development of digital healthcare focussed towards rural India will help bridge the gap between urban and rural areas in terms of availability of health care services for the masses. Many digital health care companies today are looking to enter the rural markets for their vast potential as well the urgent requirement of such services in those areas. The government must recognise this need and allow companies the right environment and incentives to invest in the rural health care sector.

While rural India is the most affected due to the lack of a dependable public health care system, urban Indians are in no better condition than their rural counterparts when it comes to accessing good quality affordable health care services. The number of people visiting public hospitals has reduced drastically in the urban areas. The problem essentially lies with government hospitals and their infrastructure. The Central and the State Governments in India run many universal health care schemes, and government hospitals offer treatment and essential drugs for free. However, the government sector is understaffed, underfinanced and government hospitals neglect hygiene and these are some significant reasons that force many people to visit private hospitals and medical practitioners. Besides the lack of overall healthcare infrastructure, another important influence on India’s healthcare industry is how a large section of the population is not medically insured and out-of-pocket expenditure on health care is high.

The government also needs to set guidelines for CSR (corporate social responsibility) for the corporate sector. Companies should allocate 15% to 20% of their CSR budget to be spent on providing healthcare for the poor and people who cannot afford quality healthcare. Public Private Partnerships in health care are needed to effect substantial changes in the system through the combined resources of the government and the private sector.

The Union Budget 2017 needs to seriously consider the current state of the healthcare sector and allocate more funds to improve the infrastructure and to increase capacity. Also, steps need to be taken to prevent and control the leakage of allocated funds at various levels. To ensure transparency in the allocation of funds and expenditure by government hospitals and medical officers, important initiatives like Digital India can be linked to the health care sector.

Ravi Virmani - Founder & MD at

Ravi Virmani - Founder & MD at

About CredihealthIndia’s first and only virtual healthcare concierge service, Credihealth is an online medical assistance company that leverages technology to help patients navigate through the complex healthcare system. Founded by Ravi Virmani in January 2014, the company has been hailed as ‘The Google of Healthcare’ by Economic Times. Credihealth has entered the market as a disruptive force and is continually challenging the conventions of the traditional health care industry.