FTAs to add heft to Maharashtra health tech growth story, propel India’s health-tech sector

Anand Madia, Officer on Special Duty to the Chief Minister, Maharashtra explains how Free Trade Agreements (FTAs) can play a crucial role in propelling the India’s health-tech sector and highlights that in the post-COVID period, India has established unequivocally that its health-tech ecosystem has leap-frogged to emerge as one of the fastest growing sectors, thanks to the conducive government policies. The country, and by a natural corollary, Maharashtra now stand as mascots of global hub of health and wellness

Free Trade Agreements (FTAs) have played a significantly compelling role in the development of commerce between nations by facilitating access to each other’s technology, free flow of goods and services. Apart from reducing and eliminating tariffs, they address behind-the-border barriers that otherwise impede the flow of goods and encourage investments. The health-tech ecosystem in Maharashtra has benefited immensely from them and in the post-pandemic period, it has deservedly garnered the interest and importance it pre-eminently deserves.

In the post-COVID period, India has established unequivocally that its health-tech ecosystem has leap-frogged to emerge as one of the fastest growing sectors, thanks to the conducive government policies. The country, and by a natural corollary, Maharashtra now stand as mascots of global hub of health and wellness. The FTA and the liberalised Foreign Direct Investment (FDI) regime have fuelled the sector to give it a high trajectory in sub sectors like hospitals, medical devices, health insurance etc to become economic engines. The last decade has been phenomenal in boosting this vital aspect of human welfare.

The country’s health-tech sector comprises hospital infrastructure, medical devices/equipment, health insurance, clinical trials, telemedicine and medical tourism, which in the late 90s were still in its infancy. The FTAs have provided fillip to the sector with growing revenues resulting from rising domestic demand for a better health-tech ecosystem. While Mumbai naturally catapults itself as a hub of health-tech given its burgeoning metropolitan girth, tier-2 and tier-3 cities such as Nagpur, Pune, Aurangabad, Nashik are all set to witness a quantum jump with parallel growth elsewhere in the country.

The 100 per cent allowance in FDI for the constructions has served as a backbone to the allied and ancillary units like pharma, diagnostics, medical equipment, medical insurance and telemedicine. The World Trade Organization (WTO) has projected India as third globally in terms of exports and the graph is set to rise further. Driven by factors like population demographics, a growing middle class, rising incomes, better health awareness, and increasing lifestyle diseases, India’s healthcare market has been expanding at a compound annual growth rate (CAGR) of 22 per cent. The Indian health-tech market, which was valued at US$86 billion in 2016 is now projected to reach US$367 billion by 2023 and US$638 billion by 2025.

Segments in biotechnology, medical devices & equipment, diagnostics and medical tourism – in that order – have seen a reassuring growth with India inking deals with US, UK, Japan and the European Union. The presence of multinational companies in these sectors as also the MSMEs registering remarkable growth is testimony that all is well with the agreements.

A NITI Ayog 2021 industry report identifies the Indian health-tech market as a sunrise sector, valued at US$6.2 billion in 2020 and estimated to touch US$21.3 billion by 2027. This segment is slated to grow at 19.2 percent Compound Annual Growth Rate (CAGR), driven by factors like a rising elderly population, increase in the incidence of chronic diseases necessitating long-term care, enhanced demand for constant personalised care, as well as the increasing number of nuclear families in rapidly urbanising areas.

The FTAs serve as case studies in establishing how India has prospered in the global economy and just how feasible it will be for the nation to sign more such agreements. A drawback with India as a host country in global trade has been a slowdown in domestic production but the kinks are being ironed out and it shall find a way forward in figuring out and reforming strategies on the global map.

It must also be remembered that this was the situation on the health-tech front in other countries too but the sector managed to recoup and overcome inadequacies. The pandemic has caused what is being called a structural shift for digital healthcare in many countries, including India. The current situation prescribes that it is time for India to reboot Health-Tech and support startups.

The overemphasis on FTAs has accelerated the health-tech ecosystem. For instance, the mini trade deal which is almost coming to a fruition with the United States (US) will see a reduction in custom duties levied by India on the import of medical devices from the US. The prospective pact, on which the US was seen as soft-pedalling, is now taking shape being billed as a win-win benefit for both sides and it is only, in a manner of speaking, a case of work-in-progress-inconvenience -is-regretted.

Through constant scrutiny and evaluation of the FTAs, the Indian government has been at pains to eliminate the anomalies in inverted duty structure in the health-tech sector. It has discussed these issues with countries including the Middle East. Under the FTAs, duty free import of medical devices is allowed which is a good augury for the sector that has already come out of its cocoon through R&D support.

Liberalisation of services trade will be an important and mutually beneficial component of a possible FTA between Australia and India. The main imports from India where there has been significant growth include pharma products. Australia and India consider that further liberalisation of health services would provide consumers in both countries with tangible benefits. However, health-tech is a sensitive sector and thus health services is one of the least-committed sectors in the WTO. Less than 50 WTO members have undertaken commitments with most commitments concerning hospital services.

Vibrant economic interactions between India and Japan form the core of special strategic and global partnership. As the bilateral relationship gains traction, health-tech with focus on drugs and pharmaceuticals are among the key parameters of FTA. As per the Indian Brand Equity Foundation, the Indian drug and pharmaceutical sector in India received a cumulative FDI inflow of USD 16.5 billion from April 2000- March 2020, and is expected to grow to USD 100 billion, while the medical device market is expected to grow USD 25 billion by 2025. India and Japan have inked plans to collaborate on manufacture of high-standard generic medicine in India. By way of policy changes, India has permitted 100 per cent FDI through automatic route for greenfield pharmaceutical projects, and 74 per cent for brownfield pharma projects through automatic route and beyond that through Government of India (GoI) approval route. Further, the GoI has approved certain schemes for the pharmaceuticals sector in India, including a scheme on the promotion of Bulk Drug Parks, which aims to ensure financing for common infrastructure facilities in three Bulk Drug Parks, with proposed grants-in-aid to the relevant Indian states with a maximum limit of Rs 10 billion per Bulk Drug Park.

India and Japan plan to collaborate on multiple aspects of health-tech, including human resource development in the fields of acute medicine, surgery, trauma care, etc. In this regard, India also plans to prepare training programs in India, for the healthcare workers of both countries. India and Japan are also working on collaboration between Japan’s Asia Health and Well-being Initiative and India’s healthcare initiatives such as Ayushman Bharat, by introducing affordable technology.

The COVID crisis highlighted the need for a collective response from the international community to reinforce preparedness for this and future crises. Following a first discussion among EU ministers, the European Commission shared its ideas for an international initiative to facilitate trade in healthcare products with a group of World Trade Organization (WTO) partners among whom India is one. These ideas address the ongoing international discussion on how to facilitate access to affordable pharmaceutical and medical goods and avoid trade disruptions in times of crisis, and could form part of an international agreement open to all WTO members.

The Indian healthcare services sector is now getting worldwide attention due to its quality and its competitive advantage in various areas, with health tourism an emerging area. India is in a position to tap the top end of the US$3 trillion global healthcare market because of the quality of its services and the brand equity of Indian healthcare professionals across the globe. The Indian government places top priority on the healthcare sector and is focusing on indigenous research and development and the further creation of human capital.