Medical Tourism In India Or Healthcare Tourism Economics Essay

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Liberalization, Privatization and Globalization has made world a smaller place. Because of LPG, a number of Multi-National Corporations came into existence. It expanded the horizons for companies of one country to operate into more then one country. But still there are many restrictions, rules and regulations which a company has to follow to enter into a new market. Therefore, before starting up a new venture or entering into a new country the risks involved and the opportunity should be thoroughly studied.

This particular research report is done on the basis of identifying the feasibility of entering into a new country i.e. India, into medical and hospital care. The research report gives insight to Mars-M (M-M), an Australian-owned medical corporation, whether it should expand internationally by establishing a private hospital to provide medical and hospital care for domestic and international patients in India or not.

The research report is divided into 4 parts. 1st part contains the nature of the private hospital market in India - including demand, competitors and cost factors. The second part focuses on the Foreign Direct Investments policies and tax incentives offered by the Indian Govt. the third part concentrates on the suitable and appropriate way to enter into the Indian market i.e. joint venture with one of the most reputed companies into private hospital care. Followed by the last and the final part recommendations why Mars-M (M-M) should give green signal for investment in India.

Table of Content

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Nature of private hospital market



Demand for private hospital market in India



Cost factors



Location Analysis



SWOT Analysis



Government policies



FDI in hospital care



Joint Venture with the Wockhardt












The research report has been prepared to analyze the feasibility of investment into private hospital sector in India. It covers all the aspect required to arrive at the investment decision for Mars-M (M-M), an Australian-owned medical corporation, who is in search of a suitable country for investment with a view to facilitate local as well as international people with the medical and health care.

This report analyses the hospital care industry in India, strength and potential to serve the enormous population of the country. It also includes analysis of competitors in private hospital care, demand potential, appropriateness of selecting the location, initial cost factor for starting a new venture in India by MNC, all political and financial structure of India followed by the policies and incentives given by Indian Govt. and World Bank.

Private Medical and Hospital care Industry in India

Indian Healthcare Industry to Double in Value by 2012

Rising income levels

Changing demographics

Shift in disease profile from chronic to lifestyle diseases to propel the growth

The health infrastructure across Indian states is projected to grow by an average of 5.8 percent per annum between 2009-2013, taking the total expenditure in 2013 to USD 14.2 billion

Of the 32 Indian states that the report considered, the six states of Maharashtra, Rajasthan, West Bengal, Uttar Pradesh, Tamil Nadu and Andhra Pradesh are forecasted to represent approximately 50 percent of the expenditure for 2009-2013 period.

While the Indian healthcare system has grown manifold over the past few years, it has yet not been able to keep pace with the rapid rise in the population. One example of that is the availability of hospital beds in our country -against a world average of four beds per 1,000 population, India lags behind at just over 0.7 presently." There is a growing need to deal with the issues of urban healthcare infrastructure as rural to urban migration has significantly increased the demand for these services.

The Indian healthcare industry is estimated to double in value by 2012 and more than quadruple by 2017. The main factors propelling this growth are rising income levels, changing demographics and illness profiles, with a shift from chronic to lifestyle diseases. This is likely to result in considerable infrastructure. The healthcare sector in India is undergoing a phase of reform propelled by rapid economic growth. Apart from the healthcare providers, emerging markets such as diagnostic chains and medical device manufacturers are attracting increasing amounts of investment.

In comparison to all 32 states, Maharashtra forecasted to maintain its dominance as the state with highest cumulative healthcare infrastructure expenditure, with spend of $ 7.3 billion between 2009 - 2010


Indian hospitals are fast becoming the first choice for foreign patients owing to easy access to visa facilities, coupled with the best emerging medical infrastructure, which will help India earn to an extent of US$ 1.86 billion in foreign exchange by 2012. Currently, India's earnings through medical tourism annually is an estimated US$ 821.40 million.

Medical tourism can be broadly defined as the provision of 'cost effective' private medical care in collaboration with the tourism industry for patients needing surgical and other forms of specialized treatment.

Jointly facilitated by the corporate sector involved in medical and healthcare as well as the tourism industry - both private and public.

India has originated as one of the most important hubs for medical tourism.

A nice blend of top-class medical expertise at attractive prices is helping more and more Indian corporate hospitals to lure foreign patients, including patients from developed nations such as the UK and the US, for high end surgeries like Cardiac By-Pass Surgery or a Knee/Hip Replacement.

Exorbitant cost of healthcare and medical facilities in advanced countries,

ease and affordability of international travel,

favorable currency exchange rates in the global economy, rapidly improving technology and high standards of medical care in the developing countries

Salient Features

Low cost medical treatment

High quality medical care

Low wait time for critical treatments

Fluent English speaking staff


The cost factors for setting up the private hospital would mainly include land, staff, and capital. The reason of going into joint venture with the Wockhardt is that it will reduce the cost factors for Mars-M in setting up a hospital in other country (India), and Wockhardt is one of the leading multinational company in India and which is recognized globally for its achievements, it also has a strong home support from its home country (India). Land if taken on a lease with the Wockhardt would be advisable as it would require less capital to invest in land. The staff will be classified according to their capabilities and degrees of knowledge. It also intends to employ local staff. Financing such a huge project would require a lot of capital; this can be achieved by raising some amount of money from the Mars-M and Wockhardt. Equities can be achieved from the shareholders of both the company since it is a joint venture. Government will also give some benefits and discount on this project. The world bank has given the government of Maharashtra state an International Development Association loan of $134m (£89m), of which 5% will be used to build the private multispecialty hospital. The hospital will be run by Wockhardt, India's fifth largest pharmaceutical company, which will own 51% of the equity. Thus it will be easier for Mars-M to earn a good reputation as Wockhardt is already well established name in private hospital care.

Location Analysis: Pune, Maharashtra (India)

The Indian health care market has emerged as a new and lucrative growth avenue for both the existing players as well as the new entrants. The healthcare industry in the country, which comprises hospital and allied sectors, is projected to grow 23 per cent per annum to touch US$ 77 billion by 2012 from the current estimated size of US$ 35 billion. India's population, geographic location and government support are encouraging.


Positive Factors

81% Literate population

Densely Populated 7,214/ Km²

Majority of High and Middle income group

Good sewerage system

Huge scope for further development

Population of Pune city (2009) excluding suburbs is around 33 Lacs (approx). Total bed strengths (which includes Private and Government Hospitals ) is 6000 approx. So number of beds per 1000 population is 1.8 , but according to WHO standards it should be 3. So we are short of 4000 beds in Pune. And this shortage will increase in future.

IT Services sector remains a major driver of the economy and jobs created here, Pune's NRI Diaspora and first-generation of successful technology entrepreneurs are encouraging a renaissance of entrepreneurial activity.

Pune is emerging as a prominent location for IT and manufacturing companies to expand.

25% of income of Pune comes from IT sector.

Pune has the sixth largest metropolitan economy and the highest per capita income in the country.

Additional 2,500 additional beds in 2016.

Negative Factors

Reputed hospitals like Ruby Hall, Apollo Jehangir, Aditya Birla

Market penetration difficult for newcomer

High Real estate rates

Scarcity of Trained Doctors , Specialist, Nursing staff (common problem f whole india)

Congested space around hospital premises


Strengths: Pune called Oxford of East, has huge student base. Also it is hub of IT industry, thus we expect high employer base utilisation of insurance an hospital services.

Weakness: Acute shortage of skilled doctors and trained Para-medical staff and investments required to uplift the current status of the healthcare.

Opportunities: Changes in demography and socio-economic mix are altering the population's disease profile and increasing the incidence of lifestyle diseases thus increasing the demand for beds

Threats: Steep population growth with lack of proper healthcare policies, Infrastructure and accessibility to the healthcare for all is challenge in the coming days.

Indian Government Policies & incentives

The State offers subsidies, loans, tax waivers and other benefits for the setting up of private practice, hospitals, diagnostic centres and pharmaceuticals.

The government subsidises the unethical and exploitative private health sector via medical education at the expense of the public exchequer.

The Government liberalized entry norms in the healthcare industry for private players in the 1980s. It offers several incentives to private players; such as, land allocation at subsidized rates for new hospital projects.

During the 2009 Interim budget, the government hiked the allocation for NRHM by US$ 423.7 million over and above US$ 2.5 billion.

Moreover, the government announced a US$ 64 million initiative in October 2009 to promote domestic manufacture of medical devices such as stents, catheters, heart valves and orthopaedic implants that will lead to lower prices of these critical equipment.

According to Union Budget 2010-11, the Finance Minister, Mr Pranab Mukherjee increased the plan allocation for Ministry of Health and Family Welfare from US$ 4.2 billion in 2009-10 to US$ 4.8 billion in 2010-11.

Moreover, in order to meet revised cost of construction, in March 2010 the government allocated an additional US$ 1.23 billion for six upcoming AIIMS-like institutes and upgradation of 13 existing Government Medical Colleges.

Foreign Direct Investment in Hospitals

Since January 2000, FDI is permitted up to 100 percent under the automatic route in hospitals in India. Thus no government approval is required as long as the Indian company files with the regional office of the RBI within 30 days of receipt of inward remittances and file the required documents along with form FC-GPR with that Office within 30 days of issue of shares to the non-resident investors.6 Controlling stake is also permitted in hospitals for foreign investors. FIPB approval is currently only required for foreign investors with prior technical collaboration, but is allowed up to 100 percent. Prior to January 2000, FDI in hospitals was permitted under the FIPB route, which meant that the FIPB would consider the investment proposals and take a decision and the Indian company with the RBI would make thereafter filings. Current regulations also permit other forms of capital mobilization, which are treated as FDI. For instance, Indian companies can raise foreign currency resources abroad through ADRs and GDRs under the automatic route, upto 49 percent subject to specified conditions and such investments are also treated as FDI.

The lax investment environment for hospitals is also evident from the discussions. No major regulatory hurdles were cited by any of the respondents with regard to the setting up of hospitals.

The following discussion highlights the available evidence on hospitals that have received FDI in recent years and views on the extent to which FDI is likely to come into the hospital business in India. It needs to be pointed out that a distinction is made between FDI in the traditional sense of ownership of physical assets on one hand and private equity and FII funding of hospitals through holdings of shares by individuals or a group of foreign investors on the other. If one goes by the current definition of FDI in India, private equity stake of over 10% by any individual investor also counts for FDI and Foreign Institutional Investors (FIIs) are permitted to invest under the FDI route in addition to the FII route.

Joint ventures with Wockhardt

The Company has a built up strong presence in the Indian subcontinent through its strategically focused efforts on high growth, chronic therapeutic segments.

Wockhardt Hospital's existence is the result of a 40-year tradition of caring and innovation nurtured by Wockhardt Ltd, India's 5th largest Pharmaceutical and Healthcare company with a presence in 20 countries across the globe. By consistently investing in technology and infrastructure which match international benchmarks, Wockhardt Hospitals are today, one amongst the best healthcare institutes in the country. 

Wockhardt Hospitals currently runs 7 hospitals located at Nagpur, Nashik, Surat, Rajkot, Bhavnagar and Vashi. Wockhardt would initiate its presence in Goa with a new hospital in 2010 and by 2011, four new hospitals will be commissioned at South Mumbai, Bhopal, Patna and Jabalpur.

Wockhardt Hospitals follow process driven quality systems that adhere to international standards of clinical care, safe environment, medication safety, respect for patient rights and privacy and infection control standards. With the latest technology, multi-disciplinary capability, state of the art facilities, world-class infrastructure and excellent patient care ambience and processes, Wockhardt is poised to become the most advanced and progressive healthcare institution in India

As a result, it will be more feasible to work in joint venture with such a good reputed brand


The research report concludes that India is definitely a good country to investment for Mars-M. Because of the reason that this industry has all the factors like the Govt. policies, FDI initiatives govt. initiatives, etc... Favorable to make country a better investment centre. 100 percent FDI is also permitted in private hospital care sector which is a good symbol for the company if they want to invest directly into the country, along with that the setup and operating cost is also less as compared to other countries, hence it will attract more of foreign medial tourist.


As a business analyst I will recommend Mars-M to give the green signal to the investment proposal to India because of the reason that India has all the favorable condition to set up a private hospital and medical care, in which the company has expertise in Australia.

Along with that I will also recommend the company to do a joint venture with Wockhardt in India as it is the 5th largest pharmaceutical company in India and has the huge potential to expansion backed by the World Bank.