AUTHOR DETAILS

Name of the Author : Syamala Devi Bhoganadam

Title of the Paper : SWOT Analysis of FDI in Health Care Sector

Designation : Research Scholar

Affiliation : K L University

Address for Communication: Department of management,

K LU Business School,

K L University, Green fields, Vaddeshwaram,

Guntur, AP, India

Mobile Number : +91494647743

Email_id : syamu07447@gmail.com

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SWOT ANALYSIS OF FDI IN INDIAN HEALTH CARE SECTOR

Abstract:

Service sector is one of the largest sectors among all other sectors in India in terms

of Revenue and Employment. The contribution of the Services Sector in India’s GDP has

increased in the last years. In 2012, Services Sector contributed 58% to the Indian GDP and

provides employment to 23% of the work force. The Services Sector in India has shown a

growth rate of 9.8% to the GDP between the years 2010 and 2011.

Healthcare is one of largest service sector and is expanding rapidly. During the

1990s, Indian healthcare grew at a compound annual rate of 16%. Today the total value of the

sector is more than $44 billion. This translates to $34 per capita, or roughly 6% of GDP. By

2020, India’s healthcare sector is projected to reach 280 billion.

FDI means  “investment into the business of  a country by a company in another

country”. Mostly the investment is into production  by either  buying a company in the target

country or by expanding operations of an existing business in that country”. Such investments

can  take place  for many reasons,  including to take advantage of cheaper wages, special

investment privileges offered  by the country.

FDI in Healthcare is implemented for the purpose to increase the space of medical

tourism. Medical tourism in India is growing at a compounded annual growth rate of over 32

percent during 2009-2016. The purpose of this paper to cover the types of FDI forms of FDI,

SWOT analysis relating to FDI in Indian Healthcare Sector.

Keywords: FDI, Healthcare, Strengths, Weaknesses, Opportunities, Challenges, Economy,

Service sector.

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SWOT ANALYSIS OF FDI IN INDIAN HEALTH CARE SECTOR

Introduction:

Why do services matter? Why do Health Care sector matter particularly right now?

And what do we actually know about them? The answer to the first question has been self-

evident for a while, as services have grown to account for the majority of economic activity

in the region. Asia’s and the world’s most advanced economies are today's service sector

whether in terms of economic output, employment, or even increasingly their international

trade and investments.

The answer to the second question is health care industry incorporates several sectors

that are dedicated to providing health care services and products. As a basic framework for

defining the sector, the United Nations International Standard Industrial

Classification categorizes health care as generally consisting of hospital activities, medical

and dental practice activities, and other human health activities.

Healthcare sector is currently estimated at USD 80bn and is projected to register an

annual growth rate of 15 per cent. India offers a huge patient pool, favorable regulatory

environment and cost advantage for conducting clinical trials. The low cost of medical

services in the country has resulted in a rise in medical tourism, attracting patients from

across the world.

India taking steps to become a global healthcare hub India hosts about 150,000 medical

tourists annually and this number is expected to grow by 15 percent every year. To better

serve them and to attract more people to India for low-cost medical treatments. India is

establishing new facilities with foreign tourists in mind. For instance, a medical township of

nine super specialty hospitals in Kochi will be operational by March 2014. Called Aster

Medcity, the township will offer state-of-the-art technology to treat a number of diseases

including cancer.

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The answer to the third question, however, is invariably more tenuous, as large

parts of the regional services sectors continue to be a relative terra incognita especially in

Non-OECD countries like Asia, in terms of our empirical understanding of how these diverse

sectors actually function, the current extent of their global and regional integration, and the

type of economic policy initiatives that might promote sectoral growth, job creation, and

innovation.

This paper aims to address the SWOT analysis for Health Care Sector. SWOT analysis

looks at your strengths, weaknesses, opportunities and threats for implementing FDI in

Health Care sector. It analyzes both the internal and external environment.

Literature Review:

Like trade, foreign direct investment (FDI) has occurred throughout history. From the

merchants of Sumer around 2500 BCE to the East India Company in the 17th century,

investors routinely entered new markets in foreign dominions. Foreign Direct Investment

means that Cross border investment made by a neighbourhood in one economy in an

enterprise in another economy, with the objective of establishing a lasting interest in the

investee economy. FDI may be described as   Investment into the business of a country by a

company in another country.   Mostly the investment is into production by either buying a

company in the target country or by expanding operations of an existing business in that

country.    Such investments can take place for many reasons, including to take advantage of

cheaper wages, special investment privileges (e.g. tax exemptions) offered by the country.

Foreign direct investment (FDI) is a tool for economic growth through its strengthening of

domestic capital, productivity and employment. FDI also plays a vital role in the up gradation

of technology, skills and managerial capabilities in various sectors of the economy.

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FDI in India:

After independence in India 1947, FDI gained attention of the policy makers for

acquiring advanced technology and to mobilize foreign exchange resources. In order to boost

the FDI inflows in the country Indian government allowing frequent equity participation to

foreign enterprises apart from provides many incentives such as tax concessions,

simplification of licensing procedures and de-reserving some industries like drugs, fertilizers,

aluminium etc. But due to significant outflow of foreign reserve in the form of remittances of

dividends, profits, royalties etc in 1973 government of India set up Foreign Investment Board

and enacted Foreign Exchange Regulation Act in order to regulate flow of FDI to India.

Further Government of India set up Foreign Investment Promotion Board (FIPB) for

processing of FDI proposals in India. The Board is the apex inter-ministerial body of the

Central Government that deals with proposals relating to FDI into India for projects or sectors

that do not qualify for automatic approval by the Reserve Bank of India (RBI) or are outside

the parameters of the existing FDI policy. It could be observed that there has been a steady

build up in the actual FDI inflows in the pre-liberalization period. But measures introduced

by the government to liberalize provisions relating to FDI in 1991 increased FDI Rs.2705

crores in 1990 to Rs.123378 crores in 2010. The list of investing countries to India reached to

150 in 2010 as compared to 29 countries in 1991.

FDI inflows in India (from 1948-2010)

Amount of FDI in March

Mid 1948 1964 1974 1980 1990 2000 2010

In Crores 256 565.5 916 93.2 2705 18486 123378

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The growth of FDI gives opportunities to Indian industry for technological up gradation,

gaining access to global managerial skills and practices, optimizing utilization of human and

natural resources and competing internationally with higher efficiency.

FDI in Indian Health Care Sector:

The Indian health sector rehabilitated and the liberalization policy in India

have created new opportunities in health care markets since the 1980s for organizations both

national and international with profit making motto. When the demand of the quality as well

as quantity of the hospitals is increased, the private sector as well as the public sector hospital

care providers could not fulfil the demand then a new pro-market regulatory environment has

helped Private Corporation to invest in the hospital sector. The corporations found

tremendous growth potential in Indian hospital sector with such an untapped market and a

favourable regulatory environment.

Various authors have researched the privatization of hospital care and the early

stages of its corporatization throughout the 1980s and 1990s3. Many hospital chains have

been created and have expanded since the early 2000s in all over India. Max Healthcare and

CARE Hospitals on regional level and Apollo Hospitals and Fortis Healthcare on national

level are become more diverse than they were before since the early 2000s. Each corporate

hospital chain is finding for its own market space in network models, technical and

management partnerships, and market segmentation, in terms of source of funding, in an

increasingly competitive environment. A renewed interest in supporting corporate hospital

chains have been shown by the central and state governments.

India is currently an important destination for Foreign Direct Investment (“FDI”)

which is one of the biggest emerging markets. This sector is predominantly privatized and

accounts for more than 80% of total healthcare spending in India5 with almost 75 to 80 % of

hospitals being managed by private sector. The Indian hospital industry was estimated to be

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worth about USD 44 billion as of 2010 and is predicted to be worth around USD 280 billion

by 2020. Further, the Indian hospital service industry is projected to grow at a compounded

annual growth rate of more than 9%5. The Indian Healthcare sector is emerging as one of the

fast-growing service sectors in India, contributing 6% to the country's growth domestic

product (GDP).

Types of FDI:

Foreign Direct Investment mostly from three different forms as horizontal,

vertical and platform based. In the Horizontal Foreign direct investment method a firm copies

its home country based activities at the same value chain stage in a home country through

FDI. In the Vertical Foreign direct investment method when a firm performs value added

activities stage by stage in a vertical manner in a host country. In the Platform Foreign direct

investment method source country to a destination country for the purpose of exporting to the

other country.

Forms of FDI:

The forms of foreign direct investment are too many some of them are tax confessions,

tariffs, research and development, infrastructure subsidies, investment subsides, special

economic zones, land subsidies, relocation facilities etc.,

SWOT Analysis:

The paper is made to understand the strengths, weaknesses, opportunities and threats that are

linked to the FDI inflows in Indian health care sector. By this we can analyses the both

internal and the external environment that are associated to the Indian Health care sector.

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Based on the statements given below we can analyse the situation

Opportunities Strengths Weakness Result

High High High Reduce weakness and then take opportunities

High High Low Take the opportunity

High Low High Reduce weakness and increase strengths and take opportunity

High Low Low Increase strengths and then take opportunities

Low High High Reduce weakness and create an own opportunity

Low High Low Create your own opportunity

Low Low High Reduce the weakness, increase strengths and create an opportunity

Low Low Low It takes more time

Strengths:

Potentially huge market with growing urban middle class population

Growing private hospital sector aiming to attract health tourists

Growth in health care market past 20years

Weakness:

Low per capita expenditure

Lack of implementation of government policies and infrastructure

Untapped rural markets

Excessive dependency on imports

Academic know-how not well developed

Support system from R & D not available

Opportunities:

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Overseas companies investing in India to set up research units and develop new

products

Increasing joint ventures and agreements

Overseas aid assisted projects to improve healthcare infrastructure

Regulations to improve market for domestic manufacturers

Threats:

Regulation policies may slow down the development of the market

Unorganized market for medical disposables

Lack of regulations in Medical disposables and surgical items leading to spurious

products

Findings:

From the above SWOT Analysis it was clear that the strengths are little and weakness

are more implies that the weakness should be minimized to then only strengths get be used

properly. Opportunities are there and also threats we have to rectify the threats and then take

the opportunity. The government should give a priority to the health care sector and provide

policies to them.

Conclusion:

There are many positive implications of foreign investment in hospitals. One of the major

impacts foreign investment would have is the creation of the necessary infrastructure.

Investments are also needed beyond the metros to expand access to healthcare. In addition to

helping increase physical capacity in the health care sector, such as increasing the number of

hospital beds, diagnostic facilities, and increasing the supply of specialty and super-specialty

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centres, foreign investment can also help in raising the standards and quality of healthcare, in

upgrading technology, and in creating employment opportunities, with potential benefits to

the health sector and the economy at large.

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