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  • Institute for Studies in Industrial Development4, Institutional Area Phase II, Vasant Kunj, New Delhi - 110 070

    Phone: +91 11 2676 4600 / 2689 1111; Fax: +91 11 2612 2448E-mail: info@isid.org.in; Website: http://isid.org.in

    Institute for Studies in Industrial DevelopmentNew Delhi

    180Working PaperMarch 2015

    T.P. Bhat

    INDIA:Trade in Healthcare Services

    About the Institute

    The Institute for Studies in Industrial Development (ISID), successor to the Corporate Studies Group (CSG), is a national-level policy research organization in the public domain and is affiliated to the Indian Council of Social Science Research (ICSSR). Developing on the initial strength of studying Indias industrial regulations, ISID has gained varied expertise in the analysis of the issues thrown up by the changing policy environment. The Institutes research and academic activities are organized under the following broad thematic areas:

    Industrialization: Land acquisition, special economic zones, encroachment of agricultural land, manufacturing sector, changing organized-unorganised sector relationship, rise of service economy in India, training and skill formation etc.;

    Corporate Sector: With special emphasis on liberalization-induced changes in the structures of the sector, corporate governance, individual firms/groups, emerging patterns of internationalization, and of business-state interaction;

    Trade, Investment and Technology: Trends and patterns of cross-border capital flows of goods and services, mergers & acquisitions, inward and outward FDI etc. and their implications for Indias position in the international division of labour;

    Regulatory Mechanism: Study of regulatory authorities in the light of Indias own and international experience, competition issues;

    Employment: Trends and patterns in employment growth, non-farm employment, distributional issues, problems of migrant labour and the changes in workforce induced by economic and technological changes;

    Public Health: Issues relating to healthcare financing, structure of health expenditure across states, corporatisation of health services, pharmaceutical industry, occupational health, environment, health communication;

    Media Studies: Use of modern multimedia techniques for effective, wider and focused dissemination of social science research to promote public debates;

    Other Issues: Educational policy and planning, role of civil societies in development processes etc.

    ISID has developed databases on various aspects of the Indian economy, particularly concerning industry and the corporate sector. It has created On-line Indexes of 210 Indian Social Science Journals (OLI) and 18 daily English Newspapers. More than one million scanned images of Press Clippings on diverse social science subjects are available online to scholars and researchers. These databases have been widely acclaimed as valuable sources of information for researchers studying Indias socio-economic development.

  • INDIA: Trade in Healthcare Services

    T.P.Bhat

    InstituteforStudiesinIndustrialDevelopment

    4,InstitutionalArea,VasantKunjPhaseII,NewDelhi110070Phone:+911126764600/26891111;Fax:+911126122448

    Email:info@isid.org.in;Website:http://isid.org.in

    March2015

    ISIDWorkingPaper

    180

  • Institute for Studies in Industrial Development, 2015

    ISID Working Papers are meant to disseminate the tentative results and findings obtained from the ongoing research activities at the Institute and to attract comments and suggestions which may kindly be addressed to the author(s).

  • CONTENTS

    Abstract 11. Introduction 22. StatusofHealthcareinIndia 43. GlobalTradeinHealthcareServices 64. LimitationsonTradeinHealthcareServices 125. GlobalOutlook 146. TradeDimensionofHealthcareinIndia 157. IndiainWorldHealthcareMarket 188. ExpectedBenefitsandRisksfromHealthcareServicesExports 279. MeasurestoEnhanceTradeinHealthcareServices 2810. Conclusions 31References 35ListofTable(s)Table1 HealthSpending:AComparisonofSelectedCountries 5Table2 FourModesofServicesSupply 7Table3 SpecificCommitmentsofWTOMembersonIndividualHealthcareServices 8Table4 NumberofWTODevelopedMemberswithSpecificCommitmentson HealthcareServices,July2000 11Table5 MemberofWTODevelopingMemberswithSpecificCommitments

    onHealthcareServicesJuly2000 12Table6 RevenueEarnedbyIndiainMode1TradeinHealthcareServices 20Table7 RelativeCostofSelectiveSurgeries 21Table8 AcquisitionofIndianCompaniesbyForeignMNCs 24

  • ListofBox(es)Box1 ScopeandStructureofCommitmentunderGATS 37Box2 SeizingOpportunitiesintheUK:TheCaseofSouthAfrica 38Box3 ASuccessfulGovernmentledStrategytoDevelopMedicalTourism:

    TheCaseofCuba 39Box4 SWOTAnalysisofHealthServicesTrade:India 39Box5 CaseStudy:RemedyingHealthShortagesthroughTrade

    underMode3,India 41Box6 Barriersandchallenges(bothperceivedandactual)Barriersinsource

    country(India)Barriersindestinationcountry 43

  • INDIA:TradeinHealthcareServices

    T.P.Bhat*

    [Abstract:During the last two decades international trade in healthcare services hasexpandedundertheGATS.Increasinglyithasacquirednewdimensionswithapplicationof advanced information and communication technology, flow of foreign investment,crossbordermobility,rising income levelsanddemographicsdynamics. India isoneofthemainparticipants inthisprocess.Currently,Indiashealthcaresector isgrowingat20 per cent per annum. The governments expenditure on healthcare is highlyinadequate.Itisalsoalowpriorityarea.IndiaisaparticipantintheGATSagreement.Ithas made binding commitments to minimize trade barriers. Trade liberalization isfacilitated through four modes. Mode 1 represents cross border supply, mode 2(consumption abroad),mode3 (commercialpresence) andmode4 (presence ofnaturalpersons). Inmode3, the commitments to attract capitaland skill are liberal.But it ismore restrictive inmode 4.Modes 1 and 2 are subject to limitations.The developingcountrieshavemademoremarket access commitments inmedical anddental services.EconomicNeedsTest(ENT)isalsoappliedundermode3andmode4.TheGATSdonotstipulateanyconstraintsontermsandconditions,forexample,ontreatmentsofforeignpatients.Thepartiesarefreetomakeanypolicydecisions.TheIndianmarketsegmentisdominated by hospital business. Other activities include pharmaceuticals, medicalequipment,insuranceanddiagnosis.Indiahasemergedasahubforclinicalresearchandattractspatients from theUS, theMiddleEast andSouthAsia.The low costmedicalserviceshaveboostedmedicaltourism.However,allmodesarenottotallyfree.Inmodes1and2therearenonationaltreatmentandmarketaccessrestrictions.Inmode3foreignequityceilingof74percentremains.Inmode4restrictionsareonforeignpersonnelonentryvisabasis. Indiahas established superiority in ITenabledandbackend services.Indiahasbuiltupreputationinofferingspecialistmedicalandsurgicalinterventionsatcompetitivepricesundermode2.Theforeigninvestmentundermode3ismodestduetoavariety of factors. Though India has an advantage inmode 4 but heavy restrictionspreventmigrationofhealthpersonnel.Italsocausesinternalbraindrainwhichresultsindenialofqualityservicestothepoordomesticpatients.Someeffortsaremadetorectifythisproblembutitisnotsuccessful.Theearningofforeignexchangehastakenpriority.Onthewhole, Indiaenjoysdistinctadvantages inmodes2and4.Theglobalhealthcare

    * TheauthorisaProfessorandConsultantattheInstitute.

  • 2

    marketishighlycompetitive.Thereisaneedforexportstrategy.Suchastrategyshouldbebasedonnichesandmarketprospects.Thebilateralandregionaltradeagreementsshouldbemadeuseoftoderivemarketaccessinhealthservicesabroad.]

    Keywords:Trade,Healthcare,GATS,Modesofservices,India

    1. IntroductionHealthserviceshavebecomeincreasinglyglobalized.Thisglobalizationisregardedasanewphaseofworldeconomicintegration.Inthisdynamics,thenationsareinfluencedbytransnationalprocessesoccurringateverylevelofeconomicactivity.Theglobalizationofhealth servicehasbeen facilitatedbyadvancement in informationand communicationtechnology,liberalizationofforeigninvestment,greaterinternationalmobilityofpatientsanddemographicdynamics.Asaresult,healthservicesare intherealmofmultilateraltrade negotiations under theWorld Trade Organization (WTO). India is one of theprominentparticipants.Themultilateralnegotiationsare conductedunder theGeneralagreement on Trade in Services (GATS). The aims are to regulatemeasures affectinginternational trade inservicessuchashealth insurance,hospitalservices, telemedicine,andacquisitionofmedicaltreatmentabroad.However,thisagreementhasbeensubjecttocontroversybecause itmayaffect the freedomwithwhichcountriescanchange theshapeoftheirdomestichealthcaresystems.

    Thehealthsector isgrowingrapidlyeversincethesettingupoftheWTO in1995withinclusionof the services sector. Ithasbeen estimated that this sectorgenerated $13.31trillion business in 2012with developing countries accounting for over $2.67 trillion(20.06 per cent). It expected to grow by 17 per cent per annum till 2015. Indian healthindustry,valuedat$65billion in2012, ishighly fragmentedanddominatedbyprivateplayers. The healthcare sector of India is estimated to $100 billion in size by 2015,growing 20 per cent per year. The industry is expected to touch $280 billion by20201.Therewill be increasingdemand for specialized and quality healthcare services.AccordingtoInvestmentCommissionofIndia,thehealthcare industryhasexperiencedremarkableevolutionofanadded12percentperyearduringthelastfouryears,drivenby a number of factors such as increase in life expectancy, rise in income levels andawarenessofhealthinsuranceamongthepeople.

    The risingdemand from themiddle income group in Indias large cities is enhancinggrowthinprivatesectorhealthcare.UnionandStategovernmentprogrammeswillspurgrowthintheprimaryandsecondarysectorofhealthcare.Asthedemandforhealthcareservicesincrea