India has a burgeoning medical tourism industry which, according to some estimates, is going to be worth Rs.9,500 crore in 2015 and Rs.54,000 crore in 2020. This industry evidently relies on medical imaging and diagnostics. According to an article published in 2013 by the Center for the Advanced Study of India at the University of Pennsylvania, over 75 per cent of India’s medical imaging equipment is imported, constituting a Rs.18,000-crore industry in 2011 and growing at a compounded rate of 16 per cent in 2010-2015.

There is an import duty on fully-finished devices averaging 10 per cent, which consumers pay. What is worse is that if device components are imported individually and assembled in India, there is an additional excise duty and VAT on the components, increasing the device cost. Therefore, taxation is not in favor of domestic production and against exports.

Another funny thing is that disposable medical equipment, which are technologically non-intensive, comprise less than 10% of our imports, i.e., we can locally produce the rest. Technology-intensive equipment make up around make up more than half of our imports, with the exception of X-ray imaging devices which comprise 25% of our exports. These are numbers from the Annual Survey of Industry, CMIE and the Department of Commerce (GoI).

The more some devices remain import-intensive, the more they could inflate healthcare costs in a country where only around 20% of it is publicly funded yet.

This seems a weird position to be in. On the one hand, we plan to expand our public healthcare system to more than 500 million people by 2020, and on the other, don’t reduce costs of the devices that will form the spine of this system. There was a situation in 2010, ahead of the presentation of the Union Budget, when the Department of Pharma sought a cut in the customs duty on some medical devices to facilitate imports while the Association of Indian Medical Device Industry sought a hike in the customs duty to promote domestic innovation.

Thanks to our population, per capita expenditure on medical technology is a frugal $2-2.5. This is an important figure because it highlights how lucrative the Indian market must seem like to giants like Siemens and GE. Further on the downside, urban centers are the primary consumers of high-quality, ‘high-technology’, high-price medical imaging/diagnostic equipment and implants. A July 2010 report from Deloitte explained this well:

One example to illustrate low penetration is sales of pacemakers. At 18,000 units per year, India’s pacemaker penetration is just 1% of western levels. According to Dinesh Puri, CEO, MediVed, India should be selling a million pacemakers a year, considering heart disease is a major killer in India.

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