Healthy Example Of Co-existence

Written by Subhash Agrawal | Updated: Jan 29 2004, 05:30am hrs
Even the most spirited advocate of free-market principles will agree that notwithstanding the efficiency of the private sector and the converse slothfulness induced by state control, there are some fundamental areas where the governments role is absolute necessary. These are domains where either only the state retains the sovereign mandate to intervene, such as law and order, or where it has an obligation to ensure a minimum baseline service, such as healthcare and education. Among them, it is the latter category which remains the trickier turf to navigate, both ideologically and materially.

For instance, healthcare is a core public good but in India, it has escaped the requisite feedback loop, public scrutiny, regional customisation, local involvement and overall accountability, all of which has become a field dominated by arcane and ultimately ineffectual policy seminars, publicity campaigns and NGO activity which only a narrow band of dedicated people really follow.

The lack of an effective healthcare system in India is now acutely jarring, especially in non-urban areas, where there is a high incidence of infections, communicable diseases, delays and infant mortality. Despite huge investments over many years, our public sector infrastructure in health is neither adequate, well-managed nor sensitive. The population-to-bed ratio in India is just over 1000:1, as against the prescribed norm of 300:1. New private hospitals have started but remains geographically limited. In the bulk of the country, government and charity hospitals dominate, yet both are poorly funded, and private hospitals have a very small proportion of total beds.

But at least the government has built a minimum network of hospitals, delivery systems and research institutes, some of which have shown good results; plus, it is now waking up to its role as a catalyst for private capital and talent. What, however, remains overlooked is its crucial role as a regulator to guarantee minimum safety standards and to curb both corruption and negligence. This becomes even more salient given that over 80 per cent of all healthcare-related spending is borne directly by individuals and without resort to any group insurance or state-funded safety net. It is one of the highest levels of direct doctor-to-patient or hospital-to-patient transactions in Asia.

Take the medical products and equipment business. This is a whole matrix of importing, manufacturing (or rather, assembling), stocking and selling various non-pharmaceutical items from hospital beds to plastic gloves to hearing aids. The quality of what is sold at what price and with what level of service guarantee affects us all, and yet this whole sub-industry is remarkably disorganised. There are very few nationally known companies, no umbrella organisation and a noticeable absence of official certification requirements. Unlike the US or Europe, which have large national chains and distributors, almost 90 per cent of this trade in India is carried out by privately-held family firms or even shops, often here today and gone tomorrow. This business requires an urgent injection of professionalism, quality standards and government oversight.

In fact, many of these firms have diversified into the business, based solely on their local government contacts and not on their knowledge or expertise in the product line. And this is just in the big cities; it gets far worse in the hundreds of smaller cities and towns across India.

The poor quality and regulatory standards also have a negative impact on future domestic and foreign investment. Since the medical products business has become localised, fragmented and somewhat unclean, it is neither easy to penetrate nor an attractive business proposition for major companies who could bring in new methods, new management techniques and new means of cost-savings. Consequently, despite growth projections of almost 35 per cent per annum, few multinationals or Indian majors have shown any interest.

In the debate over globalisation and privatisation, there are many issues which are still cloudy, but it is clear that the state has limited funds and cannot provide for everybody. What the medical business shows is that the government has to increasingly play the complex role of being a competitor to, catalyst for and regulator of private initiatives.

The author is an analyst of Indian political and business trends and the editor of India Focus, a political risk report for international investors