India’s hospital sector is poised for about 12% growth over the next 3-5 years owing to bed shortage, rising insurance penetration, medical tourism, and renewed capital expenditure in hospital infrastructure, as per CareEdge Ratings. The ratings agency said that the main driver behind the double-digit growth is the chronic underinvestment in healthcare infrastructure.
Bridging the Deficit
“Despite accounting for nearly 18% of the global population, India has only about 16 hospital beds per 10,000 people, significantly below the WHO-recommended norm of 30 beds per 10,000. This gap translates into a structural deficit of nearly two million beds. The infrastructure shortfall is further accentuated by a pronounced urban–rural imbalance. Nearly 65–70% of hospital beds are concentrated in urban centres, while around 65% of India’s population resides in rural and semi-urban areas,” CareEdge report said.
Insurance Expansion and Medical Tourism
Further, the rapid growth in the insurance coverage – from around 200 million in 2014 to around 550 million in 2024 – acts as a major catalyst in boosting hospitalisation rates. The agency said that even at 40% insurance coverage, there’s still ample scope to improve penetration. “With initiatives like PMJAY (Pradhan Mantri Jan Arogya Yojana), rising health awareness, and simplified digital onboarding, the insurance penetration is expected to reach 47-50% by FY30, driving higher hospitalisation rates and boosting demand for organised healthcare services,” the report noted.
Meanwhile, medical tourism continues to remain a key growth driver for the healthcare sector. With over 0.7 million medical tourists visiting India in 2024, the country remains a top global destination for healthcare services, offering cost savings of 60-90% compared to the international alternatives.
From a sample of nine listed players in the sector, CareEdge has estimated that the average revenue per occupied bed (ARPOB), a key metric for the sector, has grown at 8-9% compounded annual growth rate (CAGR) over the last five years, driven by enhanced case mix, high-end surgeries, and increased insurance adoption. “In FY25, ARPOB rose by 7%, and it is expected to grow at 5-6% annually over the next two years. Occupancy levels have remained stable at 62-64%, supporting strong cash flows and a renewed capex cycle,” the report said.
Despite the private capacity still being heavily skewed towards metro cities, hospital chains are rapidly scaling into tier-II and III cities, where lower build costs and underpenetration support attractive, volume-led returns. “India’s two-million-bed deficit is not a cyclical gap but a long-term structural opportunity. Rising insurance coverage, medical tourism, and expanding tier-II and III networks are ensuring that new capacities will be absorbed efficiently, supporting sustained volume-led growth alongside stable margins,” said Ravleen Sethi, director at CareEdge Ratings.