5 Things to know about India's Healthcare System

India was ranked at 112 out of 190 countries by World Health Organization's 2000 report. What are some key strengths and weaknesses of India's health care? How should the country transform itself to achieve its future Healthcare vision?

Vijay Ramnath Jayaraman
Published: 11, Sep 2014

Vijay Ramnath Jayaraman is a healthcare management consultant. He helps hospital leaders across U.S. and India in dealing with financial challenges. He is a Global Shaper, a group of leaders under the age of 30 charged with catalyzing positive social change in their respective communities by World Economic Forum (WEF). He was recently chosen as a 2014 Carnegie New Leader by the Carnegie Council, New York. He is also a founding member of an Institute of Healthcare Improvement (IHI) chapter. He has degrees from Georgia Institute of Technology and Anna University. At Forbes, Vijay focuses in the areas of politics, economics, and the business of healthcare in India and U.S. The views expressed on this site are his own and do not reflect those of his employer or clients. Please feel free to contact him directly @vijayramnath


Image: Shutterstock

Now that the 2014 general elections are in the rear view mirror, Prime Minister Narendra Modi and his ministers face the challenge of expectations set by the media and all his supporters. One of the key challenges his team will be facing is: Healthcare.

With the World Health Organization’s 2000 World Health Report ranking India’s healthcare system at 112 out of 190 countries [1], some key questions in his mind should be: How should the country transform its healthcare system? What are its current pain points? What could be achieved during his tenure?

For those living in urban areas, healthcare is merely a political issue. They argue that the country faces bigger challenges such as economic development, infrastructure, jobs, and border disputes with Pakistan. I believe that the 2014 elections have presented India with a unique opportunity to take a fresh look at its healthcare landscape. I was happy to browse through the PM’s campaign website which had a section on his achievements in this sector.

But here are 5 things you should know about India’s healthcare system.

1. Rural Versus Urban Divide: While the opportunity to enter the market is very ripe, India still spends only around 4.2% of its national GDP towards healthcare goods and services (compared to 18% by the US) [2]. Additionally, there are wide gaps between the rural and urban populations in its healthcare system which worsen the problem. A staggering 70% of the population still lives in rural areas and has no or limited access to hospitals and clinics [3]. Consequently, the rural population mostly relies on alternative medicine and government programmes in rural health clinics. One such government programme is the National Urban Health Mission which pays individuals for healthcare premiums, in partnership with various local private partners, which have proven ineffective to date.

In contrast, the urban centres have numerous private hospitals and clinics which provide quality healthcare. These centres have better doctors, access to preventive medicine, and quality clinics which are a result of better profitability for investors compared to the not-so-profitable rural areas.

2. Need for Effective Payment Mechanisms: Besides the rural-urban divide, another key driver of India’s healthcare landscape is the high out-of-pocket expenditure (roughly 70%). This means that most Indian patients pay for their hospital visits and doctors’ appointments with straight up cash after care with no payment arrangements.  According to the World Bank and National Commission's report on Macroeconomics, only 5% of Indians are covered by health insurance policies [3]. Such a low figure has resulted in a nascent health insurance market which is only available for the urban, middle and high income populations. The good news is that the penetration of the health insurance market has been increasing over the years; it has been one of the fastest-growing segments of business in India.

Coming to the regulatory side, the Indian government plays an important role in running several safety net health insurance programmes for the high-risk population and actively regulates the private insurance markets. Currently there are a handful of such programmes including the Community Health Insurance programme for the population below poverty line (like Medicaid in the US) and Life Insurance Company (LIC) policy for senior citizens (like Medicare in the US). All these plans are monitored and controlled by the government-run General Insurance Corporation, which is designed for people to pay upfront cash and then get reimbursed by filing a claim. There are additional plans offered to government employees, and a handful of private companies sell private health insurance to the public [3].

3. Demand for Basic Primary Healthcare and Infrastructure: India faces a growing need to fix its basic health concerns in the areas of HIV, malaria, tuberculosis, and diarrhoea. Additionally, children under five are born underweight and roughly 7% (compared to 0.8% in the US) of them die before their fifth birthday. [4] [5]. Sadly, only a small percentage of the population has access to quality sanitation, which further exacerbates some key concerns above.

For primary healthcare, the Indian government spends only about 30% of the country’s total healthcare budget [6]. This is just a fraction of what the US and the UK spend every year. One way to solve this problem is to address the infrastructure issue… by standardising diagnostic procedures, building rural clinics, and developing streamlined health IT systems, and improving efficiency. The need for skilled medical graduates continues to grow, especially in rural areas which fail to attract new graduates because of financial reasons. A sizeable percentage of the graduates also go abroad to pursue higher studies and employment.

4. Growing Pharmaceutical Sector: According to the Indian Brand Equity Foundation (IBEF), India is the third-largest exporter of pharmaceutical products in terms of volume. Around 80% of the market is composed of generic low-cost drugs which seem to be the major driver of this industry [7].

The increase in the ageing population, rising incomes of the middle class, and the development of primary care facilities are expected to shape the pharmaceutical industry in future. The government has already taken some liberal measures by allowing foreign direct investment in this area which has been a key driving force behind the growth of Indian pharma.

5. Underdeveloped Medical Devices Sector: The medical devices sector is the smallest piece of India’s healthcare pie. However, it is one of the fastest-growing sectors in the country like the health insurance marketplace. Till date, the industry has faced a number of regulatory challenges which has prevented its growth and development.

Recently, the government has been positive on clearing regulatory hurdles related to the import-export of medical devices, and has set a few standards around clinical trials. According to The Economic Times, the medical devices sector is seen as the most promising area for future development by foreign and regional investors; they are highly profitable and always in demand in other countries.

1.       “World Health Report 2000 - Country profile India”
2.      " Arogya Raksha Yojana” Web. 30 Apr. 2012.
3.      “Healthcare in India Whitepaper” Columbia University
4.      “Healthcare: Reaching out to the masses” KPMG whitepaper
5.      "Major Disease in India."  India Health Progress
6.      "Financing and Delivery of Health Care Services in India”, Ministry of Health and Family Welfare Government of India.
7.      “India Brand Equity Foundation Healthcare Report”

  • Dr. Amit Kumar PAndey

    Dear Sir I am authoring a book on health care management. I seek your permission to use few of the contents with the proper reference in my book. (If you Permit)

    on Jun 22, 2016
  • Anushka

    Thanks for posting Really Such Things.

    on Jun 15, 2016
  • Prarthana.Viragi

    Thank you. have read your articles and would to hear more about healthcare services in India. As i'm carrying out my research in public healthcare services, your guidance and suggessstions and opinions are open, would be greatful, thank you.

    on Apr 18, 2016
  • Hitesh

    Good article with scope of some additional points: Challenges due to lengthy doctorate degree completion schedule. Low Bed capacity to match such a huge population No state/national level plans/initiatives to minimise seasonal/periodic illness/infections

    on Feb 17, 2016
  • MedLoyal.Com

    Nice article and covers the current Healthcare issues. We are trying to resolve few of these by aggregating 20 Healthcare services in India at one place. We have started from Delhi-NCR, but will go PAN India.

    on Jan 25, 2016

    very nice article ..... VERY MUCH INFORMATIVE.....

    on Jan 1, 2016
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    on Dec 30, 2015
  • Sonal Bisht

    Exceptional blog you guys have conserved there, I absolutely appraise your effort.

    on Dec 16, 2015
  • vaishnavi arya

    A really good article. It helped me a lot in my next healthcare project. thanks to the author....

    on Oct 26, 2015
  • M.Indira

    Good article. Though some changes are happening, still we need to evolve mechanisms for better and affordable health care facilities, especially for senior citizens. We need differential pricing in health care service delivery. More partnerships between public and private players is essential.

    on Oct 1, 2015
  • DR.Jesu Vallaban

    A Large population of india, no sufficent Doctors & Medical Education. Need - Help, Enabled, Active , Lifestyles, Towards, Health 5 Things to know about India's Health Care Syatem Very good article.

    on Sep 26, 2015
  • Arvind Patil

    Very good article. Problem is we lack sufficient doctors. Medical education in India is too expensive only reach can afford. Most of MBBS or MD prefer to set up their practice in Metro cities. They refuse to take up jobs in Government hospitals. they prefer to go abroad. Answer to this is Government should set up medical education under its control and regulate all medical colleges in govt/private sector. 70 % of the students passing out from these medical colleges should be required to practice in Rural areas where 70% of people live.

    on Sep 20, 2015
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    on Sep 18, 2015
  • gablr » Is India too fat?

    [...] therefore, has to wonder how the Indian population is expected to get the right care when they have inadequate access. Most people pay out of pocket for their health care and this makes quality care accessible only [...]

    on Sep 18, 2015
  • Dr.Usha

    Well comprehended article from authentic references, for quick overview. It should certainly be a ready reckoner while to develop policies.

    on Aug 22, 2015
  • Dr.Jayant Shrivastava

    Large population of India and low economic growth is the reason behind these problems.

    on Aug 4, 2015
  • Srushti Patel

    Very helpful absolute article.. Hospital Management is so important, not only for the patients, but also for medical professionals and the healthcare system as a whole..

    on Jul 18, 2015
  • Garima Roy

    Very informative article.. I think there is a lot of difference between private and government healthcare. Particularly in Private sector, you can find the best service but at a higher price and on the other side, Government sector hospitals bestows so-so service at a low price. But we should not forget that life is more important than money and we should be more concerned about our health than on money. For example- Health care at home India is a decent healthcare company when it comes to catering best home health service at a reasonable price. One should try it for the health care purpose...

    on Jun 5, 2015
  • Bhagavan p s

    Why the core health sector always considerz Pharmavy as an industrial activity and not as its own internal department with defi.ex logistic and clinical support system for bettering and patient focussed clinical system?

    on May 14, 2015
  • Sarah

    Vijay, I am not sure why you compare India's spending on healthcare to the U.S's healthcare spending, as if this is some sort of benchmark that needs to be met. The US spends an atrocious amount on healthcare, yet has some of the worst outcomes in the developed world. The US cost of care is the highest in the world, which is most certainly not a good thing. In fact, there is much that we can learn from other countries about how to provide low-cost, high-quality service. The US is, simply put, not a good benchmark against which to compare other countries, and you do your readers a disservice by doing so.

    on May 10, 2015
  • Nikhil

    What about the people? I feel there are not enough people in the sector to providecare. http://health.economictimes.indiatimes.com/news/industry/mapping-the-effects-of-shortage-of-paramedical-work-force/46764966

    on Apr 1, 2015
  • Apolosi

    Thank you for the article. with all the challenges you have shown does this mean that small nations that looks up to India should look at other models of healthcare system? sorry this is very late

    on Mar 17, 2015
  • Mayank Gupta

    Great Insights! When it comes to Primary Healthcare, private organizations are struggling to meet up the needs of common man. But it is quite difficult to spread the awareness across the country. For Example, eVaidya Onilne Doctors Consultation service is growing tremendously to reach each and every needy and provide them primary healthcare regardless there location and time. Recently they have started eVaidya Health Centre in Vijayawada, through which patients can reach specialists on video. Such kind of initiations would lead India stating that Primary Healthcare is everyone's birth right. So spreading news about such kind of organizations is quite mandatory to build better India.

    on Jan 28, 2015
  • Bhs

    Looks like the author has more theoretical knowledge than being practical. I am not really sure who the target audience are for this article. The message is obscure and there is no meaningful information to take. According to me Indian Healthcare is all about the corruption and nexus between Doctor + Corporate's and Politicians and nothing can be changed here until there is fundamental change in the ethics of the medical professionals practice and I don't think that will happen in my life time. That does not mean nothing can be done, there are few solutions to lift the Indian Healthcare system from corruption. 1. Invest more on Primary and Secondary Education 2. Improve Public awareness on HEALTH probably using TV, Radio and News paper. My 2 Cents Bhs

    on Jan 26, 2015
    • MR

      The nexus of corruption between Hospitals/Doctors and the Drug Industry has existed for eons now, is here to stay, and it's prevalent all over the world, where-ever there's money to be made!!!

      on Jun 17, 2015
  • Dr Ruben Maha

    Very nicely written by the author. I want to point out the technology landscape in Indian healthcare. Otherwise, I find this a vital article for a lot of young readers.

    on Nov 28, 2014
  • Karthikeya

    What made you think readers didn't know about these issues? Ask any half-educated perosn on the street and he/she will talk about these 5 things. What's the new insight you are trying to convey? Aren't blogs meant to do that? Forbes India is really losing it!

    on Nov 14, 2014
    • Abhsihek Bal

      Karhikeya, The xxx is trying to sell his credentials out here which is n't there in the first place. From Anna Univeristy and a paid seat at George.. whatever what can you expect. It has become a fashion now to launch a blog and throw in some stats (most of which he has planted in wrong, anyway), invite discussions and try to sell something under the garb of being a visionary, global consultant.. blah blah. As you rightly said, any tom and dick and half blind harry can throw in better figures than this self trumpeting monkey. I see a lot of them on the social platform. And I am glad that he will get the message across. Believe it or not, these half wits visit their own pathetic web pages more than any other..

      on Jan 16, 2015
  • Siddiqui

    Purchased Samurai Virus Buster for my mother, she didn't get sick this winter for the first time in years.

    on Nov 7, 2014
  • Ronak

    Hi Vijay, Thank you for putting the whole health care system and its faults in nutshell. Much appreciated and valuable information. Thank you. Ronak.

    on Nov 2, 2014
  • Lavanya

    Well said Mr. Vijay. I would especially like to stress on the Rural versus Urban Drive. Every year Indian government tells that they do lot of investment on rural health, but still the situations are same & in some areas its worse. So, pathetic to see this conditions inspite of boasting that the health care has improved today.

    on Oct 26, 2014
    • Rupesh Shankar

      Hello Lavanya/All, I am working on big concept in improving healthcare industry across India. I am in need of some support for the same. Please let me know if you are interested to help us. rupesh.shankar@rococoseri.in Thanks Rupesh Shankar

      on Jan 16, 2015
    • Vijay Ramnath Jayaraman

      Very true Lavanya. Thanks for visiting us today!

      on Oct 27, 2014
  • Hari Pudipeddi

    India is always compared to US, a nation which has established it’s 300 Years of Independence and quite a few times, the policies are compared and contrasted with the US. I personally feel we should not do this comparison and focus on how to build Innovative solutions to address the needs of a country like India. India is 4 times more in population when compared to the US and we are an economy which has been struggling to establish itself in the 65 Years of Independence. I do not wish to go into history, but just a point of reference when in 1800’s, India was one of the richest land’s in the world and hence we have been invaded by quite a few people and finally ruled until 1947. There was a lot of damage done and we should take responsibility for it. What is over is over and today, we are a nation of proud accomplishments. From the recent Mission to Mars to the complete eradication of Polio, it is not an easy task when a country has such a varied distribution of population and practices of many native medicine. In India, the Union Government is responsible for allocating Budget for Health Services. This money is distributed to the State Government’s considering various parameters and the State Government’s are responsible for delivering Health Services to the common man. If we go deeper into understanding how the HealthCare is structured in India, the Primary HealthCare Centre is the first point of contact for any of its 1.2 Billion Population. A PHC serves to a population of anywhere between 1,500 - 5000 people. For more information on the exact numbers and categorisation, please refer to my earlier blog post on HealthCare Infrastructure in India. Today, the need of the hour is for us to push for some strong amendments to the HealthCare Law in India. Here are few of my thoughts on how we can work on building the foundations for a stronger HealthCare system in India. 1. On-line or Centralised Drug Database - This might look naive, however, this plays a very crucial role in building up a strong Health Delivery System. For technology to play a bigger role in building up India’s Health System, having a central Drug database is a must and the first step. 2. Fee Regulations for Private HealthCare - We hear the economic distribution of Private Vs. Public Health in almost all the case studies on HealthCare in India. 70% is still out of pocket. We need to have a law to regulate the cost of basic Health Services across the country. For example, for a first / basic consultation, the Doctor fee or the Hospital charge should be same across the country. This will help in more people approaching bigger/better facilities to ensure they receive the best consultation and there is no competition among Hospitals or for Doctors. My argument here is that the first point of contact for any consultation should be regulated. 3. Common Health Practices across the nation - We do not have a strong law in the country where the Hospital Workflow’s remain constant. Each hospital has it’s own rule and patients are bound to abide by them. If I need to fight out, i should take time out to go to the Court. We need to establish common rules of how Hospitals treat patients and the rights patients have to access their Health data. 4. Common Registration System - Each Hospital has their own rule of how they treat the Patient registration System. This has to be regulated to ensure the basic Patient demographic data is always constant and can be carried by the individual. Use of Adhaar like system to enforce this is very practical and brings ease of managing this aspect.

    on Oct 12, 2014
    • Rupesh Shankar

      Hello Hari, I am working on big concept in improving healthcare industry across India. I am in need of some support for the same. Please let me know if you are interested to help us. rupesh.shankar@rococoseri.in Thanks Rupesh Shankar

      on Jan 16, 2015
    • Vijay Ramnath Jayaraman

      Excellent summary on some key areas for improvement looking into the future, Hari.

      on Oct 15, 2014
  • Mohd Amaan

    A very informative guide by author, Now India need a fresh model for its health care. That should based on Rural and Urban Factor.

    on Sep 30, 2014
    • Vijay Ramnath Jayaraman

      Good point, Amaan. Rural-Urban divide is the biggest factor in deciding the future model for our care. Thanks for visiting us!

      on Sep 30, 2014
  • Gavin McKinsey

    Good overview, Vijay. Good for someone who has little knowledge on Indian health landscape.

    on Sep 17, 2014
    • Vijay Ramnath Jayaraman

      Thanks Gavin. Please check-out the works of some of our friends at Forbes India and visit us again!

      on Sep 17, 2014

    Mentioned point regarding healthcare system by Mr. Vijay are really appreciable. If Govt really wants to improve healthcare facility, Govt and private sector has to work together and we have to cover whole population under insurance facility. Upcoming technology will also play pivotal role in improvement of health care.

    on Sep 13, 2014
    • Vijay

      Well said, Mr. Khan. In a country like India where private businesses run most of the healthcare, partnership with government will be vital for the poor maximizing coverage and care. Please be sure to check our other friends at Forbes Blog and visit us again! Thanks.

      on Sep 13, 2014
  • sanjay

    Well the article hardly presents anything new, the issues and challenges are well known and chronicled in past too, you surely missed another point on NCD . While on one hand we have international patients flocking Indian hospitals for treatment available at a fraction of cost , the rural and urban poor have limited or no access to even basic / primary care. Now the problems are well defined.. the bigger task is how to address these challenges in a meaningful way leading to an optimum outcome. Can technology be an enabler, is there a need to implement PPP programs , or capacity building a way forward or a combination of above in a limited manner. regards sanjay

    on Sep 12, 2014
    • Vijay Ramnath

      Sanjay, You are right about issues surrounding access for the rural poor. You were also right to point out how an international patient seems to benefit from our system while the rural population is still suffering. Also, the impact of technology on solving these problems is significant. Since this is our first blog, we want to start off describing these issues on high-level and then talk about the ways to overcome these problems in later essays for our readers. Please visit our technology and health section which addresses such problems. Thanks for visiting our page today and please be sure to visit us again for more updates. Thanks!

      on Sep 13, 2014
  • mani

    your blog is really good and gives insight into indian healthcare system.

    on Sep 12, 2014
    • Vijay

      Thanks for visiting the blog today. Please be sure to check out the blogs and articles of other friends at Forbes India.

      on Sep 12, 2014
      • Sue

        Hi, I am interested to know what, if any, preventative work is going on in India in terms of cardiovascular disease prevention? As you are no doubt aware, heart disease is the biggest killer in India and as a CVD Nurse Specialist and educator I am keen to know what is being done to address this hugely preventable disease? Thank you

        on Nov 14, 2014
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