The Indian healthcare industry is at its breakthrough since the last few decades. While, the Make in India initiative is directing the nation rightly, the future success depends on the pace and extent of changes adapted.
At present, the healthcare industry globally accounts for approximately $1.3 trillion, of which the medical devices sector contributes about $400 billion, which is almost 31 per cent of the industry. If we look at the report generated by India Brand Equity Foundation (IBEF), the Indian healthcare industry is expected to grow up to $280 billion by 2020. At present, the industry stands at an estimated $130 billion, ensuring a compound annual growth rate (CAGR) of 17 per cent. It will result in enormous growth opportunities for the healthcare industry in India, which is still at its inceptive stage.
Though the overall healthcare industry shows a stable growth rate, the Indian healthcare sector is growing rapidly. It is a common belief that uncompromised efforts both from the government to empower the industry and also the medical device companies to tap the right market with right strategies in India, to promote the medical products, will ensure growth and success of the medical devices industry in the Indian market.
The prevailing scenario suggests that demonetisation and the upcoming GST reform, which is estimated to be one of the biggest indirect tax reforms, — are going to be the two major synergies that could accelerate the growth of overall healthcare industry, but majorly the medical devices sector. Not only this, but it is also expected that this will lead to a major shift of industries moving towards organised sector. This will have a great impact on India’s healthcare segment which is crowded with unorganised players. Henceforth it will favour the organised players. However, its probability and time frame depends on the current supply chain process and changes adopted to revise them.
GST is expected to focus on facilitating bilateral validation of invoices, online integration of data and big data analytics, which will go a long way in addressing loopholes existing in current healthcare industry. GST is sure to have a positive impact on the Indian healthcare industry.
Apart from that, the present concern for the healthcare industry is GST rates. Understanding the current status, GST rates should be in the lowest tax slab for the healthcare industry, other exemptions remaining the same for lifesaving drugs and medical devices. If GST rates are below the current total tax rate, it will eventually help consumers and businesses by making healthcare more affordable and accessible, which is already a big challenge to overcome for the Indian government.
To estimate the potential acceleration in the growth and benefits to the industry, we need to clearly understand:
- The current supply chain process,
- The current operational complexities faced by unorganised players, and
- New initiatives and the expected changes in the healthcare industry.
Understanding the supply chain is again an essential attribute, while mapping the effects of GST on growth of healthcare industry. It will also help to determine the probability of shift from unorganised to the organised market. Conversion from unorganised to organised in the B2B chain will be comparatively easy than in the B2C chain. The currently organised market in healthcare is expected to be furthermore organised and successful under the GST regime.