Overview

The Indian healthcare sector has become one of India’s largest sectors, both in terms of revenue and employment. It has experienced rapid change in recent years and has become significantly more visible over the last decade, with a renewed focus from the government and growing market demand for healthcare services and products. The Indian population is growing at a rate of 1.6 percent per year and has an elderly population of over 100 million. Rapid economic growth, rising middle class incomes, and increased market penetration of health insurance providers are fueling growth in the industry. In addition, changing demographics and a shift from chronic to lifestyle diseases has led to a boom in government healthcare spending across the country.

The Indian healthcare industry reached over $370 billion in 2022. According to Nexdigm, the healthcare industry is expected to reach over $610 billion by 2026. This increase in market size is due to growing demand for specialized and higher quality healthcare facilities. The products and services driving this growth include hospitals, medical devices, clinical trials, telemedicine, medical tourism, health insurance, and medical and diagnostic equipment. The industry’s rapid development is fueled by large investments from existing corporate hospital chains and new entrants backed by private equity investors.

Nonetheless, considerable challenges exist in terms of service accessibility and patient care quality. According to the Lancet Medical Journal’s Global Burden of Disease Study, India ranks 145th among 195 countries surveyed. However, India’s healthcare access and quality index score has improved in recent years, increasing from 44.8 (out of 100) in 2015 to 67.3 in 2020.

The COVID-19 pandemic awakened the Indian government and private sector around the importance of investing in healthcare. Industry experts believe there will be a significant increase in government healthcare spending in India over the next several years, in part spurred by lessons learned from the pandemic. Public spending on healthcare in India stood at two percent of GDP in 2022 versus 1.2 percent in 2020. The Indian government has proposed increasing this to 2.5 percent by 2025, with a special focus on underprivileged populations. As expenditures in the Indian healthcare sector increase, corresponding growth in the medical equipment sector is anticipated. 

Although healthcare-related barriers to entry are low compared to other industries, non-tariff barriers and price controls on medical devices and medicines limit market prospects. Additionally, weak intellectual property protection and enforcement create hurdles for the biopharmaceutical industry’s exports to India. While India’s healthcare market has undergone significant economic growth over the last 25 years, it remains difficult to navigate. India tends to be a price sensitive market, and the country primarily produces low- to mid-tech products. International competition has been severe, and India is often described as a “crossroads” market in the middle of many production and trade routes.

Policy and Regulatory Environment

Medical Devices: The Indian government regulates medical devices (including instruments, implants, and software intended for human or animal medical use) as “drugs,” under the Drugs & Cosmetics Act (D&C Act), 1940. In July 2022, the Ministry of Health and Family Welfare (MoHFW) unveiled the New Drugs, Medical Devices and Cosmetics bill, intended to replace the D&C Act, to increase safety, effectiveness, and alignment with global standards of medical devices, drugs, and cosmetics available in India. The draft bill is expected to be presented during upcoming parliamentary proceedings. Once approved by the Parliament, the new bill will provide a regulatory regime governing medical devices, pharmaceuticals, and cosmetics in India.

In May 2023, the Government of India introduced the National Medical Device Policy, with the goals of achieving universal access to quality medical devices; boosting domestic manufacturing capacity for affordability; enhancing product quality and global competitiveness; improving clinical outcomes through early diagnosis and accurate treatment; promoting a healthier lifestyle through extensive device applications; fostering innovation in the sector; and developing strong local manufacturing capabilities and resilient supply chains. The policy also aims to streamline regulation, enabling infrastructure, R&D, and innovation to facilitate the sector’s growth and development.

In January 2018, Medical Device Rules (MDR) became effective to regulate the Clinical Investigation, Manufacture, Import, Sale, and Distribution of the medical devices in the country. The MDR 2017 classified several categories of implantable devices under the provision of the regulation. Medical devices in India are classified according to the risk to patient health. The current risk classifications are Class A: devices with the lowest risk (e.g., surgical dressings and alcohol swabs); Class B: devices with low to moderate risk (e.g., needle kits and cervical drains); Class C: devices with moderate to high risk (e.g., bone cement, bifurcation stents and catheters); and Class D: devices with high risk (e.g., coronary stents and cardiac catheterization kits).

In January 2022, the Indian government issued a notification requiring all medical device companies to register their devices with the Central Drugs Standard Control Organization in compliance with a mandatory ISO 13485 certification. This requirement is designed to ensure the safe production and control of medical devices and in-vitro diagnostic products. Previously, medical devices were subject to a voluntary registration scheme. Starting in October 2021, Class A and B medical devices were subject to mandatory registration, and from September 2022, Class C and D medical devices will be subject to mandatory registration. When the mandatory registration period expires in September 2023, the medical device classes will transition to a licensing regime.

In June 2021, the Quality Council of India and the Association of Indian Medical Device Industry added new features to the Indian Certification for Medical Devices Scheme of 2016. This new scheme, called Indian Certification for Medical Devices Plus (2021), was designed to verify the quality, safety, and benefits of medical devices, and help government agencies identify counterfeit products and falsified certifications. In addition, the new rules eliminated the need for re-approval of manufacturing and import licenses.

In February 2022, the Ministry of Chemicals and Fertilizers’ Department of Pharmaceuticals amended the list of medical devices that had been exempted from India’s Procurement Order 2017 to ensure patient access to critical medical technologies not currently produced in India. The current relaxation on Global Tender Enquiry (GTE) under rule 161(iv) of General Financial Rules (GFRs) 2017 for procurement exempts a total of 364 medical devices due to non-availability of Class 1 and Class 2 suppliers.

Pricing: In July 2017, the Indian government introduced price controls on cardiac stents, and the selling price dropped by up to 70% as a result of this populist move. That order was followed by a similar cap on knee implants later in the year. The devices were price capped after inclusion in the National List of Essential Medicines.

Currently, 37 medical devices are classified as drugs and regulated under the Drugs and Cosmetics Act. Of these, cardiac stents, drug-eluting stents, knee implants, condoms, and intra-uterine devices are included in the National List of Essential Medicines and are subject to price caps. In February 2020, the Indian government levied a five percent ad-valorem health tax on imports of a variety of medical, dental, surgical, and veterinary devices. Several medical device segments (such as orthopedic knee implants) that were previously exempt from customs duties were withdrawn from the duty exemption.

Effective June 2021, the National Pharmaceutical Pricing Authority issued orders to impose price controls on 6 medical devices namely: oxygen concentrators, blood glucose monitors, blood pressure monitors, pulse oximeters, nebulizers, and digital thermometers, in line with the Trade Margin Rationalization (TMR) approach, which is the difference between the price at which manufacturers sell to the trade and the price to patients. The National Pharmaceutical Pricing Authority had initially introduced the TMR policy for medical devices and drugs in 2018 to help improve patient access to affordable and accessible healthcare.

The Indian government is currently working to streamline trade margins for a wide range of essential drugs, including those that are patented, to reduce their costs and improve accessibility for patients. This initiative initially covers around 139 drugs and falls under the TMR framework. These drugs belong to categories such as anti-infectives, oncology medications, and treatments for chronic kidney conditions.

Public Procurement Order: In June 2020, the Department for Promotion of Industry and Internal Trade amended its 2017 Public Procurement Order, giving priority to Indian companies whose products contain 50 percent or more local content. Products with less than 20 percent local content are categorized as “non-local suppliers” and cannot participate in government tenders.

U.S.-India Trade Data for Medical Devices and Equipment ($ million)

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Total Imports, Total Exports, and Imports from the United States: U.S. Census Bureau and Global Trade Atlas (HS 90, 3821 and 3822)

Data Sources: Statistical data includes unofficial estimates from trade sources and industry.

Leading Subsectors

Medical Devices: The Indian medical device market is estimated at $11 billion and is an attractive export sector for U.S. firms, despite numerous market challenges. Importing nearly 80 percent of its medical devices, India remains highly dependent on foreign suppliers, particularly with respect to higher end equipment such as cancer diagnostics, medical imaging, ultrasonic scans, and polymerase chain reaction technologies. Imports are growing rapidly as world-class hospital groups such as Max, Hinduja Group, Fortis, and Apollo build high-end infrastructure and spur on India’s medical tourism sector, which now contributes $9 billion to the Indian healthcare market.

The Indian government’s newly introduced Production Linked Incentive scheme in medical device manufacturing aims to encourage domestic manufacturing, attract significant investments, and reduce reliance on imports in this industry. Opportunities for U.S. suppliers exist for a range of devices, including medical and surgical instruments; medical imaging equipment; electro-medical equipment; orthopedic and prosthetic appliances; cancer diagnostic solutions; ophthalmic instruments and appliances; orthodontic equipment and dental implants; Point of Care Testing (POCT) diagnostic devices; digital healthcare, health IT, and telemedicine services.

Health Insurance: Medical care in India is provided at-cost and most Indians pay out-of-pocket since they fall outside insurance schemes, which makes healthcare out of reach for many. Health insurance is gaining momentum, with 30 percent of the population covered by government insurance and private insurance. Several private insurance companies have entered the market and have petitioned hospitals to provide cashless treatment to subscribers of insurance companies.

Hospital and Medical Infrastructure: Healthcare is provided through primary, secondary, and tertiary care hospitals in India. The former two categories are fully managed by the government, while tertiary care hospitals are owned and managed by either the government or private companies. The private sector’s contribution to healthcare has been growing at a faster pace than that of the government. The medical infrastructure market is growing at an estimated 15 percent annually. Both the government and the private sector are planning several new specialty hospitals, as well as modernization of existing hospitals. India faces a chronic shortage of healthcare infrastructure, especially in second and third tier cities and rural areas. Current estimates are that India will require up to 1.75 million more hospital beds by the end of 2025, which creates an opportunity for foreign companies to set up hospitals in India through FDI. According to industry sources, India’s hospital industry is growing at a compound annual growth rate of over 5.75 percent and is expected to reach $155 billion by 2032.

Biotech and Biopharma: Biotech and Biopharma are two of the fast-growing segments of the Indian life sciences sector and represent diverse opportunities for U.S. companies. The Indian biotech industry is comprised of over 800 companies and a market size of $80 billion, constituting approximately three percent of the global biotech industry. India is also a leading destination for clinical trials, contract research, and manufacturing in this sector.

Digital Healthcare: Though in its infancy, digital healthcare and telemedicine have expanded rapidly since the onset of the COVID-19 pandemic. People are adapting to new health technologies and intelligent solutions to reduce barriers between hospitals and patients. Telemedicine technology and artificial intelligence will provide significant opportunities for U.S. firms in the coming years. Several major Indian players such as Apollo, AIIMS, and Narayana Hrudayalaya have adopted telemedicine services. The Ministry of Health and Family Welfare along with NITI Aayog, the Indian government’s public policy think tank, have recently released official guidelines for telemedicine practices that allow registered medical practitioners to provide remote consultation under the supervision of the National Medical Commission, formerly the Medical Council of India. Healthcare services in rural India are not readily available, with the average rural Indian traveling over 60 miles to receive affordable healthcare at the nearest facility. Rural Indians will benefit from the increased focus on digital healthcare technologies by the Indian government and the private sector as India adjusts to this new service sector in the post-pandemic era.

Refurbished Medical Equipment: India medical equipment market is capital intensive, creating significant opportunities for suppliers of refurbished medical and laboratory instruments. These instruments are used as back-up equipment in higher end hospitals, while less sophisticated hospitals and district hospitals consider refurbished medical and laboratory equipment to be optimal due to the lower cost. Some international companies operating in India sell used medical laboratory instruments to their Indian customers. Because Indian hospitals and agents demand continuous service support and spare parts for refurbished instruments and equipment, U.S. companies operating in this area should consider establishing offices in India.

However, the import of used critical care medical equipment for reuse in India is regulated through Hazardous and other Wastes (Management, Handling and Transboundary Movement) Rules. Under Schedule VI (hazardous and other wastes prohibited for import) of the Hazardous and other Wastes Rules, 2016, the Ministry of Health and Family Welfare lists 27 critical care medical devices that are prohibited from import and reuse. Second-hand capital goods with a minimum residual life of five years can be imported by actual users without a license, and importers are required to furnish a self-declaration specifying the residual life of the goods. Refurbished equipment cannot be transferred, sold, or otherwise disposed of within a period of five years from the date of import, except with permission of the Director General of Foreign Trade. Parts, accessories, and tools up to 15 percent of the value of equipment may be imported for maintenance and operation. U.S. firms should remember that valuation of used equipment can result in disputes with Indian customs authorities.

Opportunities

The growing demand for quality healthcare and the absence of matching delivery mechanisms pose both a challenge and an opportunity in the Indian market. The need for equipment and medical consumables is a significant opportunity for U.S. companies, and several leading U.S. manufacturers of hospital equipment and medical supplies have already opened offices in India to serve this growing market.

Despite the Government of India’s Make in India initiatives, the healthcare industry is heavily reliant on imports, with growth areas including diagnostic kits, reagents, hand-held diagnostic equipment, and operating room simulations, with 50 percent of these products imported into India. Hand-held, portable diagnostic equipment, including devices for blood sugar and blood pressure testing, is also a fast-growing segment as India has over 70 million diabetics, a number expected to swell to over 135 million by 2045.

India has become a leading destination for high-end diagnostic services, after large investments in advanced diagnostic facilities. Health insurance and hospital administration are other areas of opportunity for U.S. companies, including the introduction and maintenance of industry standards and the certification of healthcare centers. Construction, financing, and management of specialty hospitals to meet growing demand in India is also a burgeoning opportunity.

For more information about opportunities in this sector, contact United States & Foreign Commercial Service Commercial Specialist Ruma Chatterjee.