Medical manufacture hub in the making

India has some of the best doctors in the world and state-of-the-art healthcare facilities. The strong foothold in the medical devices manufacturing sector will only further reduce the cost of treatment and at the same time enhance the country's image as a global healthcare destination

India has outlined plans to boost local manufacturing in bulk drugs and medical device industries to reduce India's reliance on imports. Plans include setting up research and manufacturing sites across the country to develop drugs and medical devices. India, often called 'pharmacy of the world', has a robust $40 billion pharmaceutical sector that is seen as a reliable supplier of generic drugs.
Industry executives in India have long called on the government to provide subsidies to boost local manufacturing. The pandemic has exposed weaknesses in global supply chains and posed a "threat to the health security of the country".
The Covid-19 lockdown situation and the call by the Indian Prime Minister Narendra Modi towards becoming more self-reliant, or Aatma Nirbhar, has brought in several opportunities to many sectors, prominent among them being the medical device manufacturing in India.
The cost of healthcare in India is almost 35 per cent more competitive as compared to developed countries such as the US and UK. That is the reason many foreign tourists visit India to get affordable treatment. There is also an exponential rise in the domestic demand in the preventive healthcare segment. This segment has been growing at 18 per cent CAGR and expected to be worth $100 billion in the next two to three years. The current demand and supply-side dynamics do provide a huge opportunity for local manufacturers for producing medical devices in India.
At the moment, India imports almost 85-90 per cent of the sophisticated medical devices from other countries, prominent among them being China. In the year, 2019-2020, medical equipment worth almost Rs4,560 crores was imported from China. India as a market for medical devices is among the top 20 countries in the world, worth almost $11 billion. With several initiatives launched by the Central Government such as the Ayushman Bharat scheme - to provide access to affordable healthcare services to all - this market is expected to grow to $50 billion in the next five years. Presently, local medical equipment manufacturers are mostly involved in the production of low-end products for domestic and as well as international consumption. After Japan, China and South Korea, India is the fourth largest market in Asia with the potential to grow at 28 per cent.
Niti Aayog, the think tank body of the Government of India, has started working out a roadmap for the promotion of medical equipment manufacturers in the country. The Government has also allowed 100 per cent foreign direct investments (FDI) in companies manufacturing medical devices through the automatic route. The Indian Government has already chalked out plans intending to remove all roadblocks and offer tailor-made solutions to attract investment to make India a manufacturing hub for medical devices.
Medical device manufacturing comprises of five broad segments, including patient aids like pacemakers and hearing devices, dental products like braces and dentures, MRI and other diagnostic machines, prosthetics like knee implants and artificial joints, and disposal and consumables like needles and syringes.
Under initiatives like Make in India, several state governments have taken up the onus of setting up medical device manufacturing parks in their respective states and have got the approval from the Government of India to do so. There would be six medical devices manufacturing clusters in the country in states like Andhra Pradesh, Kerala, Telangana, Tamil Nadu, Maharashtra and Sikkim. These clusters would provide a huge boost to domestic manufacturing of high-end medical devices at a lower cost and significantly enhance job creation.
The unfolding crisis has displayed the potential of Indian manufacturers to scale up the manufacturing to meet the higher demand for PPE kits, ventilators and other lifesaving equipment. However, there are a lot of challenges that the Government needs to address to make the country a hub of manufacturing medical equipment. Firstly, there is a need to set necessary infrastructures like supply chain and logistics channels. There is an irregular power supply in several parts of the country, which impairs the manufacturing process. The Government also needs to take steps to reduce the high cost of finance for local manufacturers.
The medical equipment manufacturers have been long demanding to reduce the effective rate of Goods and Service Tax (GST) on medical devices to five per cent from the present 18 per cent. Due to the high GST rate, it becomes more advantageous to import the equipment than manufacturers the same in the country. There is also a need to rationalise custom duty for necessary components and transitional inputs going into the production of medical equipment in India. It will further help if the government begins to incentivise high-end medical equipment manufacturers in order to promote the production of these devices in the country.
There is also a need for the Government to set up import restrictions and duty protection on the import of medical devices in India. This would restrict imports and at the same time, provide a boost to local manufacturers. There is a need to increase the skilling and training programs to tackle the shortage of talented and trained people in the sector. The Government also needs to put in place a robust regulatory framework to maintain high-quality standards and create a healthcare ecosystem in India.
- Deepak Sood is the Secretary-General of the national industry body, ASSOCHAM.