Current Status of FDI in Hospitals - A Review

Abstract

Healthcare sector has been emerging as one of the largest service sector in India. As per a recent CII-McKinsey report, the growth of healthcare sector can contribute to 8-9% of GDP and increase employment by at least 3.5 million by 2014. The objectives of the study are to provide the current status of FDI in Hospitals and to identify some of the challenges and opportunities for Foreign Direct Investments in healthcare sector. The sectoral distribution of FDI is dominated by the service sector. The highest FDI equity inflows were received in this sector (financial & non financial services), amounting to 19% of the total FDI inflows, followed by drugs & pharmaceuticals (13%), telecommunications (8%) construction activities (7%) metallurgical Industries and power sectors (6% each), Misc mechanical & engineering industries (5% each), hotel & tourism and chemicals (other than fertilizers - 3% each). The balance of inflows (30%) was accounted for by other sectors. The FDI (Foreign Direct Investment) equity inflows have been of the order of Rs. 181,962 crore (US $ 32.2 Billion) during the financial year from April 2013 to October 2014, as against Rs. 94,179 crore (US$ 26.0 Billion) during the corresponding period last year, the cumulative FDI inflows from April, 2012 to December 2013 are Rs. 989,079 crores (US$ 258.1 billion). The FDI inflows in hospital and diagnosis sectors have received 0.03% growth from April 2013 to February; 2014. The percentage of FDI in hospital and diagnostic sector in total FDI in India has been increased from 1.72 in December 2013 to 2.80 June, 2014. However, as positive sentiment for doing business in India is resurfacing, in-flow of FDI in India is rising. Further, FDI in healthcare especially hospitals is understood to pay off rich dividends and good returns on investment in the long run. But yet, only time will tell how these investments would impact the core of the inadequacies and inequities of the Indian health system and whether the people would benefit from such measures. To conclude, the country should provide the quality health services by examining the challenges first and then the opportunities for commercialization of their health sector, rather than being sidetracking in to considering the level of foreign investment.