Healthcare In India - A Burden Or Relief To The Economy
Author: LawSphereX
Category: Labour & Employment
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HEALTHCARE IN INDIA: A BURDEN OR RELIEF TO THE
ECONOMY?
Hiya Saxena & Abhimanyu, B. A. LL. B. (Hons. ), Dr. B. R. Ambedkar National Law University, Sonepat Healthcare is India’s largest growing sector in revenue and employment. The health of the workforce plays an important role in the growth of the economy. A healthy and young population is seen as an asset for economic development, whereas an ill and old population is seen as a burden. A healthy population is more effective in production and boosts the economic output. A healthy individual is likely to get employment as compared to an unhealthy individual. There exists a strong correlation between health expenditure and Gross Domestic Product (GDP). Healthcare services include hospitals, medical equipment, medicines, clinical trials, medical tourism, etc. To invest in human capital means to invest in the health and education of the population.
This plays a significant role in strengthening the production capacity and achieving economic goals. In India, both public and private entities invest majorly in healthcare and thus deliver a wide range of healthcare services. Health is an important determinant of human capital and, therefore, a crucial aspect of economic growth. Healthier workers are more physically and mentally well-equipped to produce higher yield and earn higher wages. The healthcare system of a country is a crucial pillar of its economy. An advanced healthcare infrastructure enhances productivity and boosts labor supply. Additionally, it provides essential services and employment opportunities, directly contributing to economic growth. In India, healthcare is one of the largest sectors in terms of revenue and employment, expanding at a remarkable pace due to contributions from both public and private players.
Achieving significant milestones, the Indian healthcare industry reached a valuation of $372 billion in FY23 and continues to grow steadily and this sector has also been instrumental in job creation, employing approximately 7. 5 million people in 2024, making it one of India’s largest employers. Furthermore, it has facilitated the emergence of new technical roles. 1
1 Healthcare system in India, Healthcare India - IBEF.” India Brand Equity Foundation,
www.ibef.org/industry/healthcare-india.
Recognizing the sector’s significance, India has increased its public healthcare expenditure. According to the Economic Survey of 2023-24, public healthcare spending stood at 1. 9% of GDP in FY24, up from 1. 6% in FY23. The Indian healthcare market, valued at $99. 98 billion in 2023, is projected to grow at a CAGR of 8. 3% between 2024 and 2032, reaching an estimated 93. 59 billion by 2032. 2 With the rising demand for remote healthcare solutions and advancements in telemedicine, the sector is also expected to expand, with the telemedicine market projected to reach $5. 4 billion by 2025. The health insurance industry also witnessed significant growth, with total premiums written reaching $31. 84 billion by February 2024, contributing 33. 33% to the overall gross premiums in India. 3 The pharmaceutical sector attracted $22. 76 billion in foreign investments between 2000 and 2024.
The Indian medical industry is growing at an unprecedented rate, securing over billion in investments in early 2024, marking a 220% increase compared to the previous year. Recognizing the critical role of healthcare, the Indian government has intensified efforts to strengthen the system. For FY2024-25, a budget of approximately 0 billion has been allocated to further develop the country’s healthcare infrastructure. 4 India’s healthcare infrastructure is a mix of both public and private institutions. India, being the most populated country in the world, demands an immense and well-equipped healthcare system. Both public and private facilities are available in different areas based on the development of the region. Public hospitals are funded by the government and are available in both urban and rural areas, but they are most prevalent in rural areas.
They are easily accessible, offer affordable facilities, and have a wide reach. However, due to lower costs, public hospitals often experience overwhelming crowds that can be challenging to manage. Public hospitals lack quality healthcare due to insufficient funding and scarcity of medical staff. Treatment costs are lower than in private hospitals, and many basic facilities are provided for free or at very low cost. This becomes a crucial aspect in a country like India, where a large amount of the population lives below the poverty line. Government-sponsored health insurance schemes are readily accepted at public hospitals and make healthcare easily accessible. The infrastructure at the public hospitals is poor, with outdated equipment, inadequate beds, and poor sanitation.
2 Ibid.
3 Ibid.
4 Ibid.
Such hospitals often lack specialized healthcare services, and patients are recommended to opt for private services in some cases. The medical staff at the public hospitals is overburdened due to the huge population. Staff shortages are a common issue at public hospitals. Public health services are the roots of the medical system in the country and play the most important role during healthcare crises like epidemics and pandemics. Private health services are primarily concentrated in cities and urban areas, where they tend to be expensive. Private hospitals and medical centers are readily available in these regions, making access relatively easy for urban residents. Private hospitals provide high-quality health services with specialized equipment and services. The staff at the private hospitals is not overburdened like that of the public hospitals.
The cost of treatment at private hospitals is very high. Costs for services like surgery, basic treatment, and consultation are much higher compared to the public hospitals. The higher cost of services at the private health institutions makes them inaccessible for the majority of the Indian population that lives below the poverty line. Unlike public hospitals, private health institutions invest heavily in infrastructure. Higher investment in infrastructure ensures a clean and sanitized environment, specialized modern facilities, and equipment. Private hospitals are well-equipped with sophisticated and specialized treatments like cancer treatments and heart surgeries. These hospitals provide better working conditions and higher salaries for the doctors and staff, which attracts good quality medical personnel. Private hospitals mainly cater to the wealthier population.
They, too play an important role in the healthcare system of the country, though their reach is limited. Healthcare schemes like Ayushman Bharat play a vital role in healthcare advancement in the country. The Ayushman Bharat scheme is based on universal health coverage as given in the National Health Policy 2017. It ensures that no individual is denied access to quality healthcare services. It is an attempt to shift from a sectoral and segmented approach of healthcare services to a comprehensive need-based system. Under this scheme, the government announced the creation of 1,50,000 Health and Wellness Centers. Another aspect under this scheme is the Pradhan Mantri Jan Arogya Yojana. PM-JAY is the world’s largest health insurance scheme and is fully funded by the government. It guarantees Rs.
5,00,000 per family per year for secondary and tertiary care hospitalization across public and private empaneled hospitals in India. It has approximately 55 crore beneficiaries. It covers up to 3 days of pre-hospitalization and 15 days of post-hospitalization expenses for diagnostics and medication. Under this scheme, public hospitals are re-imbursed for the healthcare services at par with the private hospitals. 5 Technological advancements in the medical field currently represent a $30 billion opportunity and are expected to double by 2028. The progress of the medical industry plays a crucial role in disease prevention and treatment, ultimately enhancing the quality of life for patients in various ways.
The improvement of infrastructure, along with the development of advanced machines and equipment for medical care, contributes significantly to the growth and innovation of the healthcare sector. Thanks to these advancements, many patients today can receive medical care from the comfort of their homes, relying on devices like wheelchairs, contact lenses, hearing aids, and pacemakers. 6 As the world’s fastest-growing population, India faces the challenge of limited healthcare services to meet the increasing demand. However, on the brighter side, India boasts worldclass doctors, modern infrastructure, and advanced medical equipment, making it an attractive destination for medical tourism. Despite this, a large portion of the Indian population struggles to afford quality medical services, highlighting a critical area for improvement.
The Indian healthcare industry is heavily reliant on the import of high-quality medical products, with approximately 75% of the market comprising imported healthcare goods. Interestingly, 60% of the medical products manufactured in India are exported. However, despite their high quality, these Indian manufactured products are often perceived as inferior in other developing countries. With the rising prevalence of both communicable and non-communicable diseases and India being the fastest-growing population in the world, there is increasing pressure to enhance the healthcare system. The country is poised for significant growth, focusing on infrastructure improvements through private investments, government initiatives, and increased spending in the sector. Growing at an annual rate of 15% and valued at $7.
5 billion, the Indian medical market still relies heavily on imports, with 77% of its demand met by foreign products. By 2030, India is expected to become the largest driver of growth in the nutraceutical market after China. While the Indian healthcare sector is modernizing at a compound annual growth rate
5 About PM-JAY - National Health Authority | GOI. nha.gov.in/PM-JAY.
6 “Healthcare Innovation in India.” Bain, 19 Nov. 2024, www.bain.com/insights/healthcare-innovationinindia/#:~:text=Healthcare%20innovation%20in%20India%20is%20currently%20an%20approximately%20 %2430%20billion,2028%20(see%20Figure%203).
(CAGR) of 16%, the demand continues to outpace supply. Furthermore, India allocates only 1. 4% of its GDP to the healthcare sector, significantly lower than the global average of 6%. 7 A healthy and young population is seen as an asset to economic growth, whereas, on the other hand, an ill and old population is seen as a burden. This is because a healthy workforce adds to the production of goods and services in an economy. India is highly populated, but a vast majority of its population is a burden on the economy because of their inability to contribute to the production process due to their poor health conditions. This creates a negative impact on the development process and decelerates economic growth. Access to better healthcare ensures the presence of workers and their addition to the output.
On the other hand, inaccessibility to healthcare facilities increases absenteeism in the workplace. Preventive care like healthy eating habits, good sanitation, physical activity, etc. , enhances the performance of the workers, who add more to the production of the output because of their good health condition. Mental health plays a pivotal role in workforce productivity. A stable and healthy mind ensures that the body is working to its maximum capability, which improves workers' efficiency and leads to better yield in output. A worker experiencing poor mental health may feel demotivated and less productive. Offering mental health counseling and stress management workshops can address these challenges, boosting employee well-being and enhancing efficiency in the production process.
Healthcare programs help to improve the morale of the workers, who feel motivated to work and thus enhance job satisfaction, which leads to higher productivity. Wellness programs like nutrition counseling, stress management programs, etc. , can encourage employees and workers to adopt healthier habits. There are several effective ways to boost productivity in the workplace. These include offering insurance that covers both physical and mental health, promoting a healthy work-life balance, and ensuring that efficiency remains uncompromised. Communicable diseases impact workforce participation by causing illness, disability, and, in some cases, death. This leads to reduced employee presence in the workplace, lowering productivity and overall efficiency. Communicable diseases often require social isolation to prevent them from spreading to other individuals.
Quarantine prevents individuals from contributing to the production of goods and services, increasing the workload on healthy employees. As a result, these overburdened employees may experience declining health, 7 Chapter 8. Health Sector - an India Economic Strategy to 2035 - Department of Foreign Affairs and Trade. www. dfat. gov. au/publications/trade-and-investment/india-economic-strategy/ies/chapter-8. html. ultimately affecting overall productivity. Non-communicable diseases have grown in importance and are the main causes of death and economic burden. The average human lifespan is declining due to an increase in death due to chronic diseases. Non-communicable diseases are often chronic, which leads to early retirement, higher absenteeism, reduced productivity, and decreased efficiency due to poor health.
Even when present at work, individuals face problems in working up to their utmost capacity. This can be mitigated by providing options for employees managing non-communicable diseases to adjust their work schedules when needed. Government policies to provide for better and affordable healthcare facilities will ensure a reduction in absenteeism and ensure higher productivity. Insurance schemes by the employer also motivate the employee to work because of higher job satisfaction. Workers with poor health earn less due to their inability to work efficiently in the production process. This hampers their paying capacity to look after the medical bills. High medical bills put a burden on household expenses, leading to financial hardships, specifically for people with low incomes.
Recent examples include the COVID-19 pandemic, where numerous people lost their jobs due to less production, which in turn reduced the GDP of the country. The economy was declining at a fast pace. Employers were unable to pay salaries to their employees due to over-expenses and lack of profits. This created havoc in the entire world, where people lost their jobs. Many individuals resorted to suicide due to increases in financial difficulties and being unable to pay off bills and debts. The country and the entire world saw a major shift in the economic sector. Private and public investors started investing in the healthcare sector more resulting in development of medical infrastructure, attracting patients from all over the world and promoting medical tourism. Medical tourism refers to the practice of traveling to another country to seek medical services.
It is often preferred for several reasons, including shorter waiting times, superior healthcare facilities, and more affordable medical services. India has emerged as one of the topmost preferred destinations for medical tourism, playing a crucial role in boosting the country’s economy. The combination of worldclass hospitals, advanced infrastructure, and lower treatment costs compared to other nations makes India stand out on the global stage. Medical tourism not only strengthens the healthcare industry but also generates revenue for other sectors like travel and hospitality. It creates a wide range of job opportunities, not just in healthcare but also in industries like hotel management, transportation, and tourism services. Additionally, it fosters stronger diplomatic ties between nations. In 2024, the value of India's medical tourism market was estimated at $7.
69 billion and is projected to reach 4. 31 billion by 2029. According to Indian tourism statistics, approximately 634,561 foreign tourists visited India for medical treatment in 2023, accounting for 6. 37% of all international tourists arriving in the country. 8 India has established itself as a global hub for medical tourism, attracting patients from around the world. Every year, the country receives around 500,000 medical tourists, contributing $5–6 billion to the Medical Value Travel sector. India welcomes approximately 2 million foreign nationals seeking medical services each year, generating around $9 billion in revenue. India currently ranks 10th on the Global Medical Tourism Index, reflecting its growing prominence in this sector. 9 The Government of India is actively working to improve the nation’s healthcare system and promote medical tourism.
Several initiatives have been launched, including the "Heal in India" campaign, which offers relaxed visa norms and collaborations with the private sector to attract international patients. These efforts aim to enhance both India’s economy and its medical infrastructure. The healthcare system plays a crucial role in a country's development, contributing to its economy, infrastructure, and employment generation. Let’s examine the healthcare system of our neighboring country, which has a population similar to ours but is far ahead of India in this sector. We will explore its impact on the economy and how it serves as a key driver of national development. China, being the most populous country in the world, also boasts one of the best healthcare systems globally.
The Chinese government recognized the significance of the healthcare industry in national development, public well-being, and revenue generation. The country's health insurance system covers 96% of Chinese citizens, benefiting approximately 1. 36 billion people and significantly reducing individuals' financial burdens. 10 Government spending on healthcare has been steadily increasing, with the budget allocation reaching 2. 03 trillion yuan in 2024, nearly 40,000 hospitals nationwide11 supporting
8 Etimes.in. “Medical Tourism- How India Is Leading the Game.” The Times of India, 14 July 2024,
timesofindia.indiatimes.com/life-style/health-fitness/health-news/medical-tourism-how-india-is-leadingthegame/articleshow/111728382.cms.
9 “Indian Healthcare Industry Analysis | IBEF.” India Brand Equity Foundation,
www.ibef.org/industry/healthcarepresentation#:~:text=With%20US%24%205%2D6%20billion,international%2 0patients%20seeking%20ad vanced%20treatment. 10 Muacevic, Alexander. “Achievements and Challenges of the Healthcare System in China.” National Library of Medicine, May 2023, pmc.ncbi.nlm.nih.gov/articles/PMC10292030.
11 “Public Expenditure on Health Care and Hygiene in China 2014-2024.” Statista, 29 Jan. 2025,
www.statista.com/statistics/455513/china-public-expenditure-on-health-care-andbirthcontrol/#:~:text=Public%20expenditure%20on%20health%20care%20and%20hygiene%20in%20China%2 02014%2D2024&text=This%20graph%20shows%20public%20expenditure,to%20about%202.03%20trilli on%20yuan.
China's 12.8 ICU beds per 100,000 people12. Its worldclass medical technology and equipment attract patients from all over the world, mainly due to its affordable healthcare services. In fact, medical care in China costs 30% to 70% less compared to Western countries. These factors have positioned Shanghai as a global hub for medical tourism, with the market projected to generate approximately 300 billion USD by this year.13
12 王丹宁. “China to Add More Intensive Care Beds in Hospitals.” Chinadaily.com.cn,
www.chinadaily.com.cn/a/202405/07/WS6639db00a31082fc043c5b9f.html#:~:text=Data%20released%20 by%20the%20National,intensive%20care%20beds%20per%20100%2C000. 13 Shanghai Emerges as Global Medical Tourism Destination, Bolstered by Top-tier Healthcare, Innovation. english.shanghai.gov.cn/en-Latest-WhatsNew/20240926/801a7ca7253946808361311826621db9.html.