Backward integration ignites India’s manufacturing revolution in medical device sector

Rajnikant Shah, Chairman, Medtech Life highlights that backward integration is when a company reduces its dependence on outsourcing and/or imports by taking control of its supply chain by manufacturing or acquiring the raw materials and components in-house

India is currently at a rising point, as it stands on the edge of becoming a major technology products supplier internationally. Also, the Indian market is among top 20 markets globally in terms of market size. With the recent launch of the National Medical Policy, 2023, the government envisages emerging as an upcoming global leader in the manufacturing and innovation of medical devices. The goal is to achieve a 10-12 per cent share in the expanding global market over the next 25 years. The size of India’s medical devices market currently stands at $11 billion. This figure is expected to rise to $50 billion in the coming years. To effectively seize this opportunity, one strategy is crucial for India- backward integration.

What is backward integration?

Backward integration is when a company reduces its dependence on outsourcing and/or imports by taking control of its supply chain by manufacturing or acquiring the raw materials and components in-house. The benefits of this approach are manifold: it enhances operational efficiency, ensures stringent quality control, reduces dependencies, and ultimately boosts profitability. By managing supply chain components, companies gain greater control over production schedules and material availability, thus reducing production delays and enhancing responsiveness.

This strategy also helps in maintaining high standards of quality of products, thereby securing customer trust and loyalty, when the final products meet the company’s exacting standards. Backward integration empowers Indian manufacturers to deliver medical devices that are both superior in quality and accessible to the masses.

India as a country is rich in resources, manpower and knowledge that are not only world class, but cost effective as well. Countries like China are in forefront of manufacturing products which vary in quality, depending upon the price. A price sensitive market like India ends up procuring poor quality products from China, which eventually becomes a norm in the country. It is important that India develops these products on its own, higher in quality and also with an affordable price tag to it. The industries in India need to focus and implement backward integration.

Backward integration, however, comes with its own set of challenges. Supply chain disruptions also pose a potential risk. However, the advantages of increased control, quality, and innovation often outweigh these challenges. A prudent approach, backed by careful consideration and planning, can mitigate potential pitfalls.

What sets India’s medical innovations apart on the global stage is their affordability and accessibility factor. The government’s production-linked incentive (PLI) scheme for medtech products, with its substantial financial outlay, exemplifies this commitment. Moreover, during the height of the COVID-19 pandemic, foreign investment in the sector surged by 98 per cent year-on-year, signalling international confidence in India’s capabilities.

The global stage is set for India’s medical devices manufacturing sector with India’s commitment to accessibility, affordability and quality. Backward integration is the key to exponential growth of manufacturing economy India envisages to be known as. As challenges are stepping stones to success, with careful planning, they can be turned into opportunities. Through embracing backward integration, India can spearhead medical device innovation, setting a global standard for quality and affordability that’s second to none.