The Indian healthcare sector is growing rapidly and is projected to reach $638 billion by 2025, according to a report.
Valued at $110 billion in 2016, the Indian healthcare market reached $372 billion in 2023, marking a 22.5 per cent CAGR growth during this period, revealed the report by Bajaj Finserv AMC.
Overall, the sector has seen a 17.5 per cent CAGR growth in the last decade. The report identified large-scale innovation in hospitals, pharmaceuticals, diagnostics, and other industries as primary drivers behind the growth.
“The sector has experienced a massive surge in private healthcare spending during and post-Covid-19, with the hospital market size growing from $62 billion in 2020 to $132 billion in 2023. In pharmaceuticals, India emerged as a global vaccine hub, led by organisations like the Serum Institute and Bharat Biotech,” said Sorbh Gupta, Senior Fund Manager - Equities, Bajaj Finserv AMC.
“In diagnostics, a core shift occurred towards digital diagnostics, while demand for home testing kits accelerated post-pandemic. In addition, the functional foods and personalised nutrition market is growing at a 16 per cent CAGR and is expected to reach $12 billion by 2027. Meanwhile, the fitness and wellness industry are projected to grow at a 27 per cent CAGR, reaching $12 billion by 2025,” he added.
Further, the report showed that life expectancy in India is projected to reach 84 years by 2045, up from 67 years in 2021.
Meanwhile, the country’s median age is expected to increase by 1.3 times, from 28.8 in 2025 to 38.3 in 2050. This increase in life expectancy and an ageing population is expected to fuel growth in the healthcare sector, boosting demand for age-related healthcare services.
Rising investments in Tier 2-6 cities have also led to a marked improvement in healthcare infrastructure in India. Medical education has significantly expanded and the number of medical colleges has increased by 1.8 times, reaching 758 in FY24 (in the last 8 years).
Over the past 4 years, the number of doctors has increased by 1.1 times, while the number of hospital beds is expected to increase by 12 times by 2045.
However, the sector still has a long runway for growth. Three million beds are needed to meet the 3 per 1,000 targets by 2025, and 1.54 million doctors and 2.4 million nurses are required to meet the rising demand.
According to the report, health insurance is still underpenetrated in India. The out-of-pocket expenditure (as a percentage of current healthcare expenditure) in India stands at 54.8 per cent, as compared to 17.1 per cent in the UK, 11.3 per cent in the US, 35.2 per cent in China, and 12.9 per cent in Japan.
However, the health insurance market in India is expected to expand from Rs 0.91 trillion in 2024 to Rs 1.5 trillion in 2029. This can be seen in the health insurance premium collection which increased to $13.07 billion in FY24 from $3.82 billion in FY16.
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