In August 2017, 290 children died in Gorakhpur’s government-run BRD Medical College, primarily due to the lack of oxygen cylinders and a poorly functioning neonatal wing. In the same month, 49 children died in another public hospital in the same state due to medicine shortage. These incidents represent only a small fraction of a much bigger problem with healthcare in India, the lack of health equipment and medicines in hospitals. At the same time, the Indian health economy has been one of the most striking stories of the country’s industrial development. Analysis of an expansive dataset on trade in goods shows that, in 2016, India exported health-related goods worth $14.1 billion, whereas the imports were about $3.2 billion—an export surplus of almost $11 billion. Only three countries in the world had a higher export surplus in health-related goods: Germany, Switzerland and Ireland (see figure). India is the only country among the low- and middle-income countries that has achieved a sizeable trade surplus in the sector, with a dynamic growth rate in exports of 9.8%. Meanwhile, imports have remained constant. The positive reading of these figures is that the Indian health economy is globally competitive. It does not come by coincidence that analysts have called India’s pharmaceutical industry the ‘supplier to the world’. The IBEF, or India Brand Equity Foundation—the government-funded trade promotion organisation—stated that the health sector has become one of the largest sectors in the Indian economy in terms of revenue and employment.
An unfulfilled need for health
A contrasting reading of the data is that Indian producers of health-related goods have no other choice than looking for clients abroad, because the domestic market does not provide sufficient demand. At first glance, such an assessment seems preposterous. After all, India has the second-largest population in the world after China, and with its growing middle-class, there should be a large market for health, too. An analysis of internationally comparable data on the causes of premature deaths in countries shows, however, that health outcomes in India are poor in comparison to most other Asian countries. This can be shown most vividly by comparing population health in India to China, using the so-called ‘years of life lost’ indicator—an estimate of lost life years in India due to early deaths. The striking result from the analysis is that India and China do not perform so differently in terms of injuries (for example, traffic accidents) and in terms of non-communicable diseases (such as cancer, diabetes or heart attacks). But years of life lost due to communicable diseases, maternal, neonatal and nutritional diseases is 10 times higher in India as compared to China (see figure). Whatever a detailed interpretation of these facts would be, one conclusion cannot be avoided: There is a dramatic need for basic health services in India that remains unfulfilled under the current modus operandi. The inability to transform this need for health into actual demand of people for health services is a major impediment towards the development of the domestic health sector.
The need to improve health system
Looking at India’s health challenges from the perspective of the health economy also helps to sketch out some possible solutions. One of the options is to enable more Indians to access basic health services. India—despite all the economic prosperity that was achieved in the past decades—has remained a country where a large share of the population has only limited access to healthcare. In a ranking of 195 countries, India stands at 154, behind countries like Ghana and Nepal. Moreover, India has one of the lowest government spending ratios on health in the world (1.92% of GDP in 2016). This value is even lower than the recommended spending level of at least 2.5% of GDP by the country’s own Planning Commission. A key success indicator will be whether people suffer less from catastrophic health payments when they need treatment. Experience from other countries that have moved towards universal health coverage is that out-of-pocket spending does not necessarily decrease immediately when some sort of health insurance is introduced. But by reducing the fear of devastatingly high costs of treatment, more people will feel enabled to seek treatment. In other words, the need for health gets transformed into demand that can be met. The potential benefits of a functioning domestic health economy can be astonishing as the example of Germany shows—the economic output of the health sector accounts for approximately 12% of the total value added of the German economy. Employment growth in the sector was not just higher, but also more stable over the past 10 years than in the overall economy. And more than 8% of Germany’s exports come from its health economy. The export surplus of the Indian health economy is one of the great success stories of the overall development story of India. The policy-makers are now required to build a domestic health system that helps to harness the competitiveness of Indian firms in bringing better health to more Indians. After all, there seems to be no better indicator for a country’s increasing welfare than increase in life expectancy.
Christian Franz & Sahil Deo
Authors are co-founders, CPC Analytics, a data-driven consultancy