Our Take on... India’s Healthcare Sector
In our previous article we touched upon the diagnostic sector. As a natural extension to the same, we write on Healthcare. A demand supply mismatch and entrepreneurs those work to fulfil it.
“Take up one idea. Make that one idea your life - think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success.”- Swami Vivekananda
The idea of affordable healthcare in India has been taken very seriously by Dr. Devi Shetty, Founder of Narayana Hrudayalaya (‘NH’). India lags significantly in the healthcare domain. To an investor, it represents a massive opportunity when looked at it from the right lens.
When assessing the healthcare industry, one must remember that India doesn’t have a social security net to cover education and healthcare expenses. Both combined merely form 6-7% of GDP as a way of Government spending.
Hence, it's important to keep in mind that affordable healthcare is a goal that must be achieved by creating the right shareholder value as well. It’s the objective of every business to solve a massive problem on a scale and create insane amounts of profits so that the process can be repeated.
Let’s look at India’s healthcare industry!
Government of India spends a mere 3% of GDP which turns out to less than Rs. 5,000 per person for the year represented as $56.5 in the above table. As a result, India has one of the highest out of pocket spending at 51% of the total healthcare spending by a person, amongst the highest in the World.
In a nutshell, one out of every 2 people is not covered by medical insurance. The person has to then break open his or her savings in order to meet such expenses. Let’s look at some data to prove the point because the bad news doesn’t stop here.
As per the NSS 75th Round Health in India Report, nearly 17% of the rural population and 13% of the urban population are dependent on borrowings for funding their healthcare expenditure for July 2017- June 2018. And nearly 80% of the rural population and 84% of the urban population use their household savings on healthcare-related expenditure.
India’s healthcare infrastructure needs an upliftment too!
For those of us who live in metros such as Mumbai, Delhi, Bangalore, Ahmedabad, etc, often underestimate the requirement of healthcare in the country. Because we tend to have access to quality diagnostic centers, doctors, hospitals and small nursing homes at our peril. However, it’s not the same for the rest of India.
The numbers represent a wakeup call to each and every one of us.
We merely have 15 beds for a population of 10,000. We are behind developing countries such as Malasiya, Brazil, Vietnam.
One can argue that India is a large country of 1.4 billion people with years of colonial mindset, so on and so forth. It’s important to note here that if we are going to be the 3rd largest economy in the next 25-30 years, then this is a problem we must solve immediately. We cannot hide in the shadows. Not anymore.
Add to the massive gap in bed density, India also lags significantly behind in healthcare personnel. Medicine is one of the toughest courses in India to crack along with limited seats in Government colleges add to the woes. There’s also the issue of reservation but that’s not the nature of this blog to discuss on. Private medical institutions cost well above Rs. 25 lakhs per year for a student.
In plain and simple English – it’s expensive.
Going forward, we can expect some collaboration between government and private medical institutions to bring down such costs. They can be in the form of giving the land to build a hospital at a concessional rate to subsidize certain costs of students.
Now let’s look at Disease Profile of India
For the purpose of our report, we will stick to the non-communicable disease profile. As opposed to the decreasing rate in communicable diseases, lifestyle-related illnesses or non-communicable diseases (NCDs) have been increasing rapidly in India over the past few years.
The contribution of NCDs to the disease profile rose from 30% in 1990 to 55% in 2016. Recent statistics show these illnesses accounted for nearly 66% of all deaths in India in 2019.
As per the World Economic Forum, the world will lose nearly $30 trillion by 2030 for treatment of NCDs and India’s share of this burden will be $5.4 trillion.
In 2019, of the total disease burden, the contribution of the group of risks (unhealthy diet, high blood pressure, high blood sugar, high cholesterol, and overweight) which mainly cause ischemic heart disease, stroke and diabetes rose to 27%.
Incidence of cardiovascular diseases has increased in the last decade. Accounting for 27% of the lifestyle related deaths sounds an alarm to our ears. Cancer, diabetes, kidney diseases and other NCDs too are on the rise.
A simple thought experiment of our lifestyle which is sedentary in nature. Most of us are looking at a computer screen every single day and trying to make a living out of it. We eat junk food when we binge watch some television series on the internet. Our movement is restricted completely. There are so many things that require our immediate attention except for health.
So, when cardiovascular, cancer, diabetes and kidney diseases knock us out, we are suddenly looking for highly trained doctors and quality healthcare. That is in short supply.
A hospital that is at the forefront of treating cardiovascular diseases is Narayana Hurdayalaya. We will cover our version on it in the next blog!
Disclaimer: Indigenous Investors is a subsidiary of Zaveri Savla Consultants LLP. This article has been written to share our thoughts on the sector under our regular study. In no way, this is an investment advice of any sort. An investor is supposed to do their own research about the company and base his buy/sell decision on the same.
Data has been sourced from various articles and reports who have provided their consent to share the same with a wider audience. References of the data have been provided in the image itself.