Foreign Investment in Hospital Sector in India

Date01 November 2017
Published date01 November 2017
Subject MatterCommentary
04_FTR681874.indd Commentary
Foreign Investment in
Foreign Trade Review
52(4) 247–264
Hospital Sector in India:
©2017 Indian Institute of
Foreign Trade
Status and Implications
SAGE Publications
DOI: 10.1177/0015732516681874
Shailender Kumar Hooda1
This study examines the status and trends of foreign investment inflow in Indian
hospital sector and highlights emerging issues. During the liberalized foreign
investment regime between 2000 and 2014, a large number of foreign players have
been focusing on Indian hospital sector and have enlarged their presence through
partnership and investment in joint venture projects. Though foreign investment
inflow in hospitals has increased to almost hundred times, it constitutes a small
share within total financing of health care. It is the long-term domestic borrowing
that predominates. The overall growth in foreign investment has largely been for
providing super-speciality and tertiary care services particularly in the metropolitan
cities, while investment for primary and secondary cares, clinical research, drugs
development, diagnostic services and rural area remained negligible. The study
argues that the private investment can play a complementary role in providing
tertiary and speciality care services particularly in the untapped hospital market
and it should not be considered as the substitute of public provisioning of health
care services. The role of the government is warranted to provide cost-effective
cares to general population across remotest area of the country.
FDI, foreign investment, hospital sector, corporate hospital, regional imbalance,
Countries across the world follow different approaches to provide health care
services to its population. As a welfare state approach, some countries spend a
sizable amount of public fund for health care provision, while others rely more on
1 Institute for Studies in Industrial Development, Vasant Kunj, New Delhi, India.
Corresponding author:
Shailender Kumar Hooda, Institute for Studies in Industrial Development, 4, Institutional Area, Phase
II, P B No. 7513, Vasant Kunj, New Delhi-110070, India.

Foreign Trade Review 52(4)
private sectors for health service delivery. India’s health care sector is highly
privatized where around two-thirds of in-patient and three-fourth of out-patient
services are provided under private facility. Due to inadequate public spending,
India’s health services falls well below international benchmarks in physical
infrastructure and manpower, and even below standards in comparable devel-
oping countries. In order to meet the high and growing demand, huge amount of
investment from both public and private (foreign and domestic) players is
required. In today’s globalized world, foreign investment is considered as the
most potential financing source not only to raise funds but also to promote foreign
sector involvement with better technology in hospital sector so as to provide
world-class health care services to the population and to create employment
opportunities. In a policy initiative, the Government of India (GoI) has approved
up to 100 per cent foreign direct investment (FDI) through automatic route in
2000 in hospital sector. The relaxation in import duty for importing medical
equipment and technology during 2000, granting of long-term and cheaper loan
for private health care institutions, confirmation of hospital sector with industry
status in 2003–2004 budget, introduction of private, social and pro-poor health
insurance schemes for accessing health services from private sector are among the
other pro-market initiatives that promote both domestic and foreign players to
play a bigger role in health care delivery market in India. Coupled with these
policy initiatives, population dynamics, people awareness and change in health-
seeking behaviour, double burden of disease, changing nature of lifestyle disease,
global integration and medical tourism are the other possible demand-side factors
that encourage the private domestic and foreign providers/enterprises to exploit
the Indian hospital market (Shah & Mohanty, 2010). However, in addition to these
factors, the regulatory framework, technological advancements, country risk,
availability of quality inputs, ownership and locational advantages, supporting
infrastructure, business environment of a country in the particular sector similar
to that in other parts of the economy and socio-political context of the country
also play a greater role in quantifying the level of foreign involvement and invest-
ment (Chanda, 2009). Considering the relevance of these factors, the purpose of
present study is to quantify how much foreign investment has been attracted in
hospital sector in India.
Some attempts have been made to understand the extent of FDI in hospital
sector in India, but all the related studies tried to quantify the FDI level in Indian
hospital sector on the basis of approved FDI projects in hospital and diagnostic
centres. As much as we are aware, there is not a single attempt that has analyzed
the actual FDI level in hospital sector in India. There can be high difference in
approved FDI and actual amount of FDI received by the country, as many a times
approved FDI do not materialize. Second, India generally attracts FDI equity
inflows in hospital sector through three routes, namely, (a) under SIA/FIPB1
(other than acquisition), (b) acquisition of existing shares and (c) RBI’s automatic
routes. The existing studies have utilized information on approved FDI equity
inflow under automatic routes provided by Department for Industrial Policy and
Promotion (DIPP), GoI. This shows the under-representation and/or inadequate
FDI equity inflow in the sector. There is not a complete study on actual FDI in

Hooda 249
hospital sector. Thus, earlier estimates are grossly inadequate and unable to shed
much light on the trends and actual amount of FDI equity inflow that has been
materialized in the hospital sector. Considering the limitations of existing studies,
this study examines the extent, trend and pattern of FDI from 2000 to 2014—the
liberalized foreign investment regime in health sector and highlights the emerging
issues with special reference to the corporatization of hospital sector in India.
Given the dual burden of disease and high demand for cares in different regions
of the country, it has also become important to shed light on investment made by
big business groups, corporate houses and individuals in hospital sector by bed
capacity in different services/cares/treatments, multi-super-speciality hospitals
and its regional spread since 2000. This study specifically analyzes the FDI equity
inflow in hospital sector that comprises of hospital and diagnostic centres.
Data Sources
In order to understand the extent of FDI equity inflow in hospital and diagnostic
centres, a list of FDI inflow was obtained from the DIPP, GoI across three routes
from April 2000 to October 2014. The data on actual FDI equity inflow received
is quite extensive that provides information on around 1,378 items/projects since
2000 across all the routes which consist of FDI equity inflow on 50, & 162 and
1,166 different joint venture projects under SIA/FIPB route, acquisition of exist-
ing shares and RBI’s automatic routes, respectively. This provides information on
FDI equity inflow received across different regions/states of India promoted by
Indian companies in collaboration with foreign company in joint ventures in terms
of rupees and US$.
DIPP data on actual FDI equity inflow, however, do not cover information
on foreign equity share in the joint venture projects and other information that
allow us to argue on the ongoing debate on the greenfield or brownfield nature
of FDI. To provide discussion on the same, two other data sets: (a) Detail
break-up of approved FDI during April 2000 to March 2014 provided by DIPP
and (b) Detail break-up of foreign and private investment on completed project
of hospital industry compiled from projecttoday, a large data set on new pro-
jects initiated in India by corporate groups, companies and individuals, during
the period from January 2000 to September 2013 are utilized. The approved
FDI data covers information on 95 project/items and projecttoday on around
258 projects/items.
A detail break-up of data sources presented in Box 1 reveals that the DIPP data
covers information on service classifications like health and medical services
rendered by organizations and individuals such as hospitals, dispensaries, sanato-
rium, nursing homes, maternal and child welfare clinics by allopathic/ayurvedic,
unani and homeopathic practitioners. The projecttoday covers information on
investment by beds capacity of multi-super-speciality, specific diseases like cancer,
trauma and other lifestyle diseases hospitals, and by regions (districts/states),
country route and leading corporations/companies.

Foreign Trade Review 52(4)
Box 1. Detail Break-up of Data Sources with Contents
FDI Equity Inflows
FDI Approved #
Foreign and
Received # under FIPB/
April 2000–March
domestic ##
SIA (other than acquisition),
acquisition of existing share,
Completed projects
and RBI automatic routes
January 2000–
April 2000–October 2014
September 2013
Name of Indian...

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