In post-COVID-19 world, India must boost healthcare by simplifying laws, encouraging private investment

If the govt cannot create health infrastructure directly, it must create a policy environment to allow private players to do so.

Arhan Bagati July 13, 2020 21:37:38 IST
In post-COVID-19 world, India must boost healthcare by simplifying laws, encouraging private investment

The COVID-19 outbreak has made the world realise and appreciate the importance of having a robust healthcare system, one that is fully equipped and battle-ready. The disease poses a huge threat in today's increasingly interconnected and interdependent world.

India's healthcare system has major inadequacies. A part of the reason for this is that India spends merely 1.28 percent of its GDP on health, as per the National Health Profile-2019 report. Our spending on healthcare is substantially lower than that of most other countries, including some of our neighbours (for example, Bhutan spends 2.5 percent of its GDP and Sri Lanka spends 1.6 percent of its GDP on healthcare.)

Some of the challenges of our healthcare system are lack of awareness, lack of access, workforce shortages; and lack of affordability and accountability. Further, as noted by the Harvard School of Public Health, our "underfunded health care many cases are inefficiently run." A recent study by the Centre for Disease Dynamics, Economics and Policy estimated that for India's total population of 130 crore, the country only has "1.9 million hospital beds, 95 thousand ICU beds and 48,000 ventilators". Such deep-rooted and extensive issues make India frightfully vulnerable to any healthcare crisis, like the one we are currently experiencing. While the country deals with the COVID-19 outbreak, it is also important to think about how the healthcare system can be made stronger, more resilient and reliable.

Is increasing government spending merely an ideal?

The first and most obvious suggestion would be for our government to increase its expenditure on health, so that it can improve existing facilities as well as add more of them. Suggestions to this effect have been made many times before. In October 2010, a High-Level Expert Group (HLEG) on Universal Health Coverage (UHC) constituted by the Planning Commission of India recommended that the government "should increase public expenditures on health from the current level of 1.2 percent of GDP to at least 2.5 percent by the end of the 12th plan, and to at least 3 percent of GDP by 2022." Recently, the chairman of the 15th Finance Commission said that "over the next 5 years, the Centre alone should be able to spend at least 2.1 percent of GDP on health."

However, increasing health expenditure is easier said than done. At a time when a large amount of government resources are already directed towards the pandemic, allocating additional finances towards improving healthcare facilities will put immense strain on our economy.

As an article in the Financial Express by economist Rajiv Ahuja points out, "if the GDP doesn’t grow at a desired pace...this will likely have implications on the government achieving its health spending goal."

Further, it is important to note that the government might be, in effect, paying more for the same services that are provided by private hospitals.

Is focussing on private sector the way forward?

According to the National Sample Survey Organisation, the private sector accounts for 'most of the health expenditures in the country.' The NSSO's survey stated that 79 percent of people in cities and 71 percent of people in villages visited private institutions for healthcare.

It is, thus, evident that the private sector is the bedrock of our health infrastructure, and must be supported.

India's existing healthcare advantages

In some parts of the country, good quality healthcare is available at relatively lower prices. Speaking from personal experience, when I underwent an emergency appendicitis surgery in Los Angeles, I got a bill equivalent to roughly Rs 80 lakh. The same surgery would have cost me about 1.5 lakh in India.

India also has a large pool of health professionals. It is estimated that India is the "largest supplier of migrant physicians in the world." According to a study by Dr Rita Sood of AIIMS, "medical schools in India produce the largest number of doctors than anywhere else in the world." The National Medical Commission Act, 2019, which aims to ensure the availability of adequate and high quality medical professionals, is also a step forward in this regard.

Further, robust generic pharmaceuticals account for the production of several medicines at relatively low prices.


Due to inadequate investment in health facilities, the number of people who are unable to access good healthcare keeps growing. For most ailments, the majority of people visit clinics that are short on resources, and so cannot provide holistic treatment. The poor, particularly in rural areas, have to travel very long distances to be able to access proper medical facilities.

Moreover, many medical professionals prefer to work abroad, due to lack of infrastructure and lower payment structures.

Additionally, since healthcare is a part of the 'State List', laws and policies on the subject vary from state to state. This creates a great amount of uncertainty, deterring both domestic and foreign investors. States also have different laws on construction of buildings.

Another challenge is archaic laws, such as The Drugs and Cosmetics Act, 1940 and Rules, 1945. This law was formulated in an era not blessed with many of the current-day technological innovations. The law requires at least one exclusive, legally registered pharmacist not just where medicines are sold but also where medicines are just exhibited or stored.

Such requirements, combined with bureaucratic red tape, can create many difficulties.

The way forward

Many of the challenges mentioned above can be addressed with appropriate policies. On the whole, building healthcare infrastructure should be the ultimate goal. If the government cannot do so directly, it should create a policy environment to allow private players to do so. Building such infrastructure will also contribute to creating employment, and can also be a destination for foreign direct investment.

To achieve the above, standardisation is key. A stable policy framework across states to reduce, if not nullify, the uncertainty and its seriously detrimental effects is needed. This standardization has to be complemented by a significant level of deregulation. In order to avoid any misuse of this approach by the private sector, a grievance cell comprised of independent experts can be set up in each state.

Governments should be increasingly proactive in setting up hospitals, clinics, and other such healthcare facilities. It can do so by reverse auctioning land, reducing red tape, and taking a strong stand against local troublemakers (for example, the local cop who wants his cut for the new hospital under construction). Further, the subject of 'health' should also be moved from the State to the Concurrent list, as rightly suggested by a high-level group (HLG) constituted by the 15th Finance Commission.

In the urban areas, large hospitals should be set up on a Public-Private Partnership (PPP) basis. For instance, the Punjab government in Mohali announced a PPP tender on a revenue sharing basis, which the Max Hospital chain won and then created a super-specialty centre. Countries such as the UK and Australia too have their own approach to PPPs, wherein they focus on the "development/rehabilitation of facilities and facilities management".

The World Bank also correctly notes that "India...has adopted... more comprehensive service delivery PPPs, where not only are the facilities developed and improved by the concessionaire but services are provided."

A 'Build-Own-Operate-Transfer' (B.O.O.T) model would undoubtedly be beneficial to all stakeholders. In addition to this, however, the private sector players should also commit a certain, flexible percentage (e.g. 25 percent) of their entire treatment to the Ayushman Bharat Schemes , and provide services at low fees to the poor.

On the whole, an enabling structure must be put in place and protected for the healthcare industry.

Updated Date:

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