The hospital industry expects to grow at a CAGR of 15-20% to over $130 billion by 2023. Diagnostics on the other hand, which is valued at ~$4bn (the share of the organised sector is just around a quarter of the total value) in the healthcare sector, is expected to witness secular growth at a CAGR of over 20% to $30-40 billion in the same time frame.
India’s demographic factors present huge opportunities in the healthcare sector. Firstly, the life expectancy of India’s population has been increasing. As per United Nations estimates, life expectancy in the country has increased from 35.21 years in 1950 to 70.4 years in 2023. It is projected to increase to ~82 years by 2100. Secondly, the rise in aging population. The share of senior citizens in India’s population is expected to double to 16% over 2011-2041 (PwC India, 2020) while the total number of senior citizens is estimated to be 30 crores by 2050 (Invest India).
Thirdly, the rising income expect to result in a shift of 7 crores+ households into the middle-class section of society by 2031 leading to growing awareness for preventive healthcare. It is estimated that 8% of Indians will earn more than US$ 12,000 per annum by 2026 (Invest India, KPMG, and FICCI, 2021).
These apart, accessibility to services due to growing penetration of health insurance, higher incidence of lifestyle diseases caused by factors including obesity, poor diet, high blood pressure, and cholesterol, etc. in urban areas, and accelerated adoption of digital technologies, including telemedicine, in the post-Covid world are expected to boost the demand for healthcare.
The demand for healthcare facilities has been rising at a faster rate in Tier 2 and Tier 3 cities due to the rapid increase in per-capita income in these regions. This led many private hospital operators to foray into areas in Tier 2 and Tier 3 locations that are farther away from metropolitan cities. As per Invest India, investment opportunities in India’s country’s hospital/medical infrastructure sub-sector are pegged at over US$32 billion. Production-linked Incentive (PLI) schemes announced by the govt and a flurry of investment avenues in contract manufacturing, over-the-counter drugs, and vaccines also boosted opportunities in the domestic manufacturing of pharmaceuticals.
The centre has allowed up to 100% Foreign Direct Investment (FDI) under the automatic route (which means the non-resident investor or Indian company can invest without prior approval from the govt or RBI) in the hospital sector and in the manufacture of medical devices.
Beds and doctors’ availability
India still faces systematic issues in terms of infrastructure and resources. Significant gaps exist between the number of beds available and the beds required. The country’s hospital bed density is much lower than the global average as depicted below while there is a shortage of skilled professionals in the sector, including doctors, nurses, paramedics, etc.