Pavan Choudary, Director General, MTaI & MD, Vygon India assesses candidature of the medical devices sector against various objectives of Make in India
The Make in India programme of the GOI has identified 25 thrust sectors. While the objective to make in India is unquestionable, the sectoral goals – what you expect from each sector through the initiative need more characteristic definitions.
Let us see, by taking the example of medical devices, why a general purpose tonic for all the 25 sectors will not propel each of these. To do so, we will need to assess the candidature of the Medical Device sector against the various objectives of Make in India articulated so far.
Employment generation: Worthwhile objective. The unemployment figure hovers around 50 million. This is already a monstrous number, growing bigger by the day, and a sponge needs to be found to absorb and curb this swelling tide (The services sector wave didn’t take us far and is waning sharply). It is for this reason that you cannot fault the thrust of the government on Make in India. Medical devices however, have very low employment intensity as compared to some of the employment-intensive sectors such as textile, apparel and leather, and food and beverages, which find their rightful place in the Make in India group and should be relied on for finding employment. The leather industry needs careful handling at this stage and the government cannot afford to disturb this employment spinner. The other non-Make in India industries that we can look towards for employment are wood products (excluding furniture) and non-metallic, mineral-based products.
On the other hand, the medical device industry in a surrogate role, through healthcare workers (HCW) training, can markedly boost employment generation. From physicians to pharmacists, from serologists to sonographers, from radiographers to respiratory care assistants, almost all HCWs are trained, made patient-ready and brought up-to-date by the med-tech industry. A lot has been written about the shortage of doctors and nurses in India. To add to that, the med-tech worker shortage is legionary. There are over one lakh vacancies available for trained Emergency Medical Technicians (EMTs) alone, and about 65 lakh vacancies in allied healthcare such as dental technicians, medical laboratory technicians, and radiographers among others. By bringing FDI on the automatic route for this sector and simultaneously working on the Uniform Code on Medical Device Marketing Practices (UCMDMP), the government is ready to galvanise this area. The steady surge in FDI since the decision to bring it on the automatic route was formalised in the beginning of 2015, is demonstrative of the potential of this sector, and what ease-of-doing business and global participation can accomplish. This sector will generate far more jobs through Skill in India and Heal in India, than through Make in India.
Contribution to GDP: Here as well, medical devices contribute a small fraction of the total GDP, and the best case outlook is also diminutive.
Cost reduction: Though this is a worthwhile objective, we need to understand that this objective may be at times served by making in India, and at times defeated by it. First of all, it is not possible to manufacture everything here. Manufacturing of this long-gestation-period medical device industry needs deep pockets, continual influx of technology, and simultaneous readiness of product- specific technological ecosystems.
Indigenous manufacture may not necessarily always mean lower cost. The spectrum of medical devices is so diverse – from Cannulae to Cyclotrons and from Syringes to Sternum Saws – that even countries which have been pursuing the manufacture of medical devices for years are making only a small spectrum of what they consume locally. (They, of course, export this product mix robustly).
The outlier is USA due to the support of an exceptionally large market and other historical reasons.
One cannot, however, rush time, for there is the risk of missing out on building competencies which are vital for sustained growth and survival. Countries which have improved their manufacturing footprint in medical devices have moved forward progressively with their product mix.
IRELAND – ONE STRONG STEP AT A TIME
Though Ireland’s medical device industry had a stratospheric catapult from 2015 when it reduced its corporate tax rate to 6.5 per cent, it had already moved step by step in building its manufacturing might for medical devices. You can’t do it all at once. There are some products which you can make in the short run, some in the long run, and some never. Another point to note is that even in segments like consumables where countries like China have near self-sufficiency, they have had to reduce duties to 3.3 per cent for several products. This means that the consumable sub-sector is also further stratified with products which a country at a certain stage makes, and does not make. This shows the extremely fragmented nature of this 15,000-device strong sector, which means that Make in India should be sensitive to not only distinctive natures of the 25 sectors, but also sub-sectoral nuances.
Conserving Foreign Exchange: The per capita consumption of medical devices in India is just $3 as compared to a global average of $45.
Therefore, the total medical device import bill is just $3 billion annually. Global companies win foreign exchange for India by exporting the products their plants manufacture here. Due to their example, inter-company flow of personnel in the industry, and the market they have created also serve as an indirect fillip to the domestic industry, which helps bring foreign exchange home. The high-tech and superior-quality medical devices promote the medical tourism industry which is already a $3 billion industry and is likely to grow to $8 billion by 2020. Global medical tourism needs the smooth flow of technologies across borders. If a country does not have the latest and highest quality medical technologies, it will not attract medical tourism for long. In fact, if there is interference with technologies coming in through the creation of barriers, it may give rise to reverse medical tourism, just as there was before the reforms set in.
When there are impediments planted on our way to promote Make in India, by way of erecting trade barriers, it may be prudent to remember cases like the following. To reduce the imports of steel (but with the real purpose of protecting the domestic steel industry), the US-imposed restrictions on imports. This did protect the US steel industry, but deprived the automobile industry of low-cost, good-quality steel. As a result, the US automakers had to pay more for steel than their foreign competitors did. This is one of the important reasons why the higher value-added industry of automobiles still languishes in the US. The manufacturing becomes sparse as plants are moved off-shore. Therefore, clearly there are unintended consequences of governmental actions from all over the world which our government can learn from. One wrong move, and the remedy could become food for the disease, or give birth to a bigger disease.
Each sector could be potent from a particular point of view, but this does not mean that each sector will yield the same result. Nor should each sector be asked to run the same race. The tracks will be different, the trophies to be won will differ, the tonics should be targeted.
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