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“Healthy citizens are the greatest asset any country can have”, said Winston Churchill, prime minister of the United Kingdom during World War II. He was emphasising the importance of public health and well-being for a nation's overall strength and prosperity. 

The saying is as true today as it was then for the UK, which was at war. A well-organized healthcare ecosystem has become a priority for most of the countries across the globe. For India, providing healthcare facilities to its vast 1.4 billion people is a gigantic task and needs definite planning with an efficient and robust healthcare ecosystem.

The basis of the current health strategy and healthcare structures in India was first presented by the Bhore Committee Report in 1946, a year before independence. The committee recommended that protective and remedial healthcare facilities should be provided to both rural and urban areas. However, India’s first National Health Policy (NHP) was formulated nearly four decades later, in 1983, with a focus on provision of primary health care to all citizens. The NHP 1983 states that “India has a rich, centuries - old heritage of medical and health sciences. The approach of our ancient medical systems was of a holistic nature, which took into account all aspects of human health and disease”. The policy recognised the rich and long legacy of the country’s healthcare system and hoped that the government would make it more widely accessible, affordable, equitable and inclusive.

Growth of India’s healthcare system

India’s high and sustained economic growth accompanied by social and institutional progress has underlined the sharp growth of the healthcare system. Healthcare has become one of the country's largest sectors, both in terms of revenue and employment over the years.

Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. Despite several challenges the Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services, and increasing expenditure by public as well as private players.

India’s healthcare delivery system is categorised into two major components – public and private. The government, i.e., the public healthcare system, comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centers (PHCs) in rural areas. The private sector largely provides the secondary, tertiary, and quaternary care institutions concentrating largely in towns and cities.

India's competitive advantage lies in its large pool of well-trained medical professionals. India is also cost-competitive compared to its peers in Asia and Western countries. The low cost of medical services has resulted in a rise in the country’s medical tourism, attracting patients from across the world. Moreover, India has emerged as a hub for R&D activities for international players due to its relatively low cost of clinical research and a huge technical manpower.

The Indian healthcare market is a rapidly growing sector, projected to reach $638 billion by 2025. The market was valued at $372 billion in 2022-23. It is one of India's largest employment sectors, currently employing an estimated 7.5 million people.      

The growth is driven by a combination of factors, including Increasing demand, rising income levels, health awareness and also an aging population who are contributing to higher healthcare utilisation. The government spending on healthcare and various initiatives like the National Health Mission are expanding access and infrastructure.

The expanding healthcare market and its diverse requirements have necessitated increasingly technological support. The health-tech sector is set for significant expansion, with hiring projected to rise by 15-20% in 2024, reflecting the increasing demand for innovative healthcare solutions and the integration of technology in medical services.

At the other end, the Indian medical tourism market, which was valued at $ 7.69 billion in 2024, is expected to nearly double its revenue to reach $ 14.31 billion by 2029. According to India Tourism Statistics, around 634,561 foreign tourists came to India for medical treatment in 2023, which was nearly 6.87% of the total international tourists, visited the nation. With $ 5-6 billion size of medical value travel (MVT) and about five lakh international patients annually, India is among the leading global destinations for international patients seeking advanced treatment.

India has a huge pharmaceutical industry to support the robust growth of its healthcare ecosystem. The Indian pharmaceutical industry is projected to reach $130 billion by 2030 and $450 billion by 2047. This growth is driven by strong domestic demand, a robust manufacturing base, and increasing global exports, particularly of generic drugs.

India is the largest provider of generic drugs globally and is known for its affordable vaccines and generic medications. The Indian pharmaceutical industry is currently ranked third in pharmaceutical production by volume and growing at an annual compound rate of 9.4% for nearly a decade. The Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. To add to it, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are currently supplied by Indian pharmaceutical firms.

Government spending on health remains low

The health is constitutionally designated as a state subject meaning that the primary responsibility for healthcare delivery and regulation rests with the individual state government. While the central government provides support and funding for national health programms, the states manage and implement healthcare services within their respective territories.

But since both the Centre and the states have traditionally been grappling with their finances and were unable to spend enough on health, the private sector has emerged as a big player. India's healthcare system is a mix of public and private sectors, each with distinct characteristics. The public sector, funded by the government, focuses on providing affordable primary care through a network of hospitals and clinics, particularly in rural areas. The private sector, comprising numerous hospitals and clinics, offers a wider range of specialised services and advanced medical technologies, but at a higher cost.

That the private sector is now providing specialised and advanced treatment is not surprising. If one looks into the details of the government’s spending on healthcare, one would clearly find that the Union Budget has consistently failed to put its money where it was most needed.

Maybe, the allocation on health has increased, but its share in overall budget has systematically declined indicating the sector’s falling importance. From 2.28% in 2020-21, the share of health in total budgetary allocation has declined to 1.87% in the revised estimates for 2024-25.        

Since health is a state subject, Indian states are equally responsible in strengthening the health infrastructure. States seem to be doing bit and despite limited resources are allocating a larger share of their budgetary expenditure on health over the years compared to that of the Centre. The aggregate spending of Indian states and UTs on health was around 6% of their total budgetary outlays in each of the last five years.                

And this has been the story for years. The government ritually promises to step up expenditure on healthcare but does little in reality. And if achieving a target of spending 2.5% of GDP on health, set by the National Health Policy 2017, seems difficult, actual spending of less than two per cent of GDP is baffling. About 1.9% of GDP was spent on the health sector in 2023-24.            

The figure would look more pathetic when compared with other countries. Germany, whom India is expecting to surpass in GDP soon, spends 12.6% of its GDP on health. France spends 11.9%, China 7% and Sri Lanka, Thailand and Vietnam each spend more than 4%.

Interestingly, despite low government spending, India has succeeded in bringing down the doctor-population ratio steadily over the years indicating chances of better services for patients. According to a recent report by the National Medical Commission, there were 13,86,145 registered allopathic doctors in India as of November, 2024. Assuming that 80% of registered practitioners were available, the doctor-population ratio in the country was estimated at 1:811, which was better than the WHO standard of 1:1000, Union health minister informed the Lok Sabha on November 29, 2024.

The shortage of nursing personnel, however, has remained a major problem despite a steady increase in nursing colleges across the country. As per Indian Nursing Council (INC) data, there were 38.49 lakh nursing personnel registered in the country as of December 2023 – up 38.6% over 27.78 lakh in 2015. But even after the sharp growth in the number of nurses the nurses-population ratio at 1.96 fell far short of WHO’s recommended rate of 3 nurses per 1,000 population’.    

If one looks at the availability of government hospital beds for major states the situation would shock. According to the National Health Profile–2019 around 860,688 beds were available in government hospitals in India in 2023. The ratio of government hospital beds to population was approximately 0.79 beds per 1,000 people. This was considerably lower than the National Health Policy 2017's recommendation of 2 beds per 1,000 people and the global average of 2.7 beds per 1,000.     

Households spend more on health

But if the government is unable to provide enough healthcare facilities to its people, households are compelled to spend more and more on medical treatments from their own pockets. This is evident in the mushrooming of private hospitals and nursing homes across the country. According to a report by Pharmarack there were 38,000 private hospitals in India in 2024 – up 27% from about 30,000 in 2015.

With ever increasing cost of healthcare, the expenditure on healthcare has become an important item in households’ consumption expenditure. The share of healthcare in the monthly consumption expenditure of an average household has gone up sharply over the years indicating their compulsion to go to the private sector for treatment.

The share of health in household monthly consumption expenditure has gone up from 5.4% in rural areas and 5% in urban areas in 2009-10 to 6.83% and 5.85%, respectively, in 2023-24.

GenAI transforming India’s healthcare ecosystem

The increasing intervention of AI across technologies, industries and services has opened up vast opportunity for the healthcare industry. Generative AI excels at processing diverse data to create tailored-made patient treatment plans, stimulate clinical trials and develop training materials. These capabilities can significantly boost long-term clinical outcomes and enhance patient trust in healthcare systems.

Across continents, healthcare industries are adopting opportunities created by and for the larger application of AI as a key capability in their digital strategies. The adoption of AI is transforming the landscape of technological advancements and processes in terms of providing better patient and provider experience. The GenAI market size was estimated at $ 66.62 billion in 2024 and is projected to grow by 20.8% annually compounded, to reach $ 207 billion by 2030.

India, with a large number of tech-savvy youths, is fast accepting the AI technologies. The Indian healthcare system has evolved through numerous healthcare innovations, ranging from low-cost medical devices to new-age healthcare delivery models. The country’s healthcare system has steadily developed to ensure patient safety, promote quality and critical care and control costs. India has already innovated into some of the core technologies including AI, machine learning, IoT and 3D printing which are driving these changes.

Indian healthcare facilities, however, still face challenges in terms of enhancing operational efficiency, predicting patient demands, optimising staff allocation, managing medical supplies, etc. This is where GenAI can come in and provide solutions.

India’s startup ecosystem appears to have promptly accentuated the growth prospects of the GenAI. From 25 in 2021 the number of GenAI startups has gone up to over 240 the first half of calendar year 2024 – up by 3.6 times over the same period of 2023. The country now ranks 6th globally in its share of Gen AI startup ecosystems, said a report by tech industry body Nasscom.

As per a report of PWC in 2024, ‘Understanding GenAI on the Indian Healthcare Ecosystem’ more than 50% of healthcare organisations have bundled their GenAI solutions with productivity tools to enhance efficiency and enable faster decision making by leveraging AI algorithms for tasks like data analysis. With GenAI as the prime driver, India’s healthcare ecosystem has been undergoing a digital transformation backed by government initiatives, policy reforms and technological advancement.