Topic 1 : The healthcare promise
Introduction: As India prepares for the general elections, it’s imperative to acknowledge healthcare as a vital investment for the nation’s well-being and prosperity. Despite its significance, healthcare often takes a back seat in political discourse.
Acknowledge the importance of health in the national budget
- The government is committed to spending 2.5 per cent of the GDP on health by 2025.
- Given that India’s GDP will grow to nearly Rs 323 lakh crore (US $3.8 trillion) by 2025, public health expenditure should rise to Rs 8 lakh crore, with the Centre contributing 40 per cent or Rs 3.23 lakh crore.
- But, the central budget allocation for 2024-25 is Rs 90,000 crore — only 28 per cent.
Forge a strategic partnership with the private sector
- Addressing healthcare requires a fundamental change in mindset, with the government playing a catalytic role in transforming the landscape, leveraging the strengths of both public and private sectors, leaving behind the trust deficit between the two.
- By forging strategic partnerships and incentivising the private sector, which caters to nearly 70 per cent of healthcare needs, the government can ensure quality health services and bridge the existing gaps in the health system.
Case study of PPP in the health sector: Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY)
- The programme provides a Rs 5 lakh hospitalisation cover for over 60 crore people.
- With this transformative change, the government moved from the role of a provider to a payer, recognising that providing healthcare services to 1.4 billion people is not a task that either the public or the private sector can achieve alone.
- More than 34 crore beneficiary cards have been distributed, over 27,000 hospitals have been empanelled (43 per cent private and 57 per cent government hospitals) and 6.5 crore hospitalisations have already been accounted for under the scheme.
- Two-thirds of the total money spent goes to private hospitals, which reaffirms patients’ preference for private hospitals.
- Most states have adopted the scheme but a majority of medium and large private hospitals have not joined the scheme, primarily due to low reimbursement rates.
- In 2018, FICCI analysed the cost of 10 in-patient procedures covered under AB-PMJAY across seven private and two public hospitals, including AIIMS New Delhi.
- It revealed that the reimbursement rates failed to even cover the costs incurred by hospitals by as much as 75 per cent for some procedures.
- Since then, the government has commissioned several costing studies under the Department of Health Research and Institute of Cost Accountants of India, for procedures covered under AB-PMJAY, but their findings have not been published.
- Irrationally fixing rates, without consideration of costs and delays in reimbursements, have acted as a deterrent for private providers’ participation in several health schemes.
- To draw more participation from the private sector, reimbursement rates must be corrected and a differential pricing model should be implemented to differentiate hospitals based on their clinical excellence, accreditations, scale and investment in technology.
The infrastructure gap in the health sector must be addressed
- India’s hospital bed density is 1.3 beds/1,000 population, which is significantly below the recommended 3 beds/1,000 population mark — a deficit of nearly 24 lakh beds.
- In urban areas, more than 70 per cent of the bed capacity expansion in the last decade has been by the private sector.
- What is concerning is the slowdown in fresh investments, especially in tier 2, 3 cities and beyond.
- The government needs to provide a conducive ecosystem and the private sector needs to reciprocate with quality, affordable healthcare services.
- It is high time that the health sector be accorded national priority status to make it eligible for priority sector lending, akin to agriculture, education, MSMEs, housing, etc.
- This is nearly a decade-old appeal from the health sector stakeholders and even recommended by the Group of Ministers on Health in 2020.
- The government also needs to enable provisions of short-term interest free loans, subsidised loans with long repayment period, special land availability, tax incentives for infrastructure expansion and skilling HR, zero-rated GST, rationalisation of custom duties on essential life-saving items and production-linked incentives for indigenous manufacturing of medical devices and drugs.
Primary health and wellness centres must have special attention
- Strengthening primary healthcare through the 1.7 lakh Health and Wellness Centres (now renamed as Ayushman Arogya Mandirs) and creating a mechanism to cover OPD care under health insurance, will ensure better health outcomes, lower out-of-pocket expenditure and reduce the burden on secondary and tertiary hospitalisation.
- Non-Communicable Diseases (NCDs), also known as lifestyle diseases (diabetes, hypertension, heart diseases, cancers, strokes, chronic respiratory diseases, kidney, liver and mental health disorders) have risen to account for about 65 per cent of all mortalities in the country.
- NCDs can be largely prevented and controlled by interventions at the primary healthcare level, thus preventing a significant number of complications, morbidity, mortality and instances of hospitalisation.
The healthcare workforce can solve the problem of unemployment in India
- To support the entire healthcare ecosystem, we need a huge healthcare workforce.
- It is no surprise that healthcare is the fourth largest employer in the country.
- Given the astounding number of vacancies against sanctioned posts at various levels of the public health system and the expansion of healthcare infrastructure, the health sector has the potential to add 4 crore jobs.
- This can be a significant contributor to addressing the unemployment challenge and act as a GDP driver.
Conclusion: The time for action is now, and with adequate political will and commitment, the dividends of investing in healthcare will resonate for generations to come. Instead of viewing it as a burden on the exchequer, we must recognise healthcare as a strategic investment that yields invaluable returns in terms of human capital development, economic growth and sustainable development.
Topic 2 : Charging up
Introduction: In March, the Union government had approved a new e-vehicle policy with the aim to facilitate the entry of global EV manufacturers into the country. The policy change has attracted the attention of many global players.
The provisions in the new e-vehicle policy
- Minimum Investment required: Rs 4150 Cr (∼USD 500 Mn)
- No limit on maximum Investment
- Timeline for manufacturing: 3 years for setting up manufacturing facilities in India, and to start commercial production of e- vehicles, and reach 50% domestic value addition (DVA) within 5 years at the maximum.
- Domestic value addition (DVA) during manufacturing: A localization level of 25% by the 3rd year and 50% by the 5th year will have to be achieved
- The customs duty of 15% (as applicable to CKD units) would be applicable on vehicle of minimum CIF value of USD 35,000 and above for a total period of 5 years subject to the manufacturer setting up manufacturing facilities in India within a 3-year period.
- The duty foregone on the total number of EV allowed for import would be limited to the investment made or ₹6484 Cr (equal to incentive under PLI scheme) whichever is lower. A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is of USD 800 Million or more. The carryover of unutilized annual import limits would be permitted.
- The Investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the custom duty forgone.
- The Bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines
India as the world’s fastest-growing auto market
- Access to one of the largest and fastest growing markets in the world — India is the third largest auto market behind China and the US — at a time when others are slowing down, will be a big draw for electric vehicle manufacturers like Tesla.
- While the EV market is currently small in the country, it is gaining traction — in 2023, sales of electric vehicles surpassed 1.5 million, dominated by two-wheelers and three-wheelers as per a recent report by CareEdge.
- The scope for growth in various segments is immense, especially considering the government wants to increase the share of electric vehicles to 30 per cent by 2030.
- The reports also suggest the possibility of Tesla building a smaller and more affordable car in India, priced at less than $30,000.
- This would increase the likelihood of India being used as a base for the company to export its cars to other regions.
- Coming on the heels of the rapid expansion in Apple’s manufacturing capacity in the country, and movement in the government’s semiconductor plans, if Tesla’s plans were to fructify, it would be a big boost for the government’s Make in India plans.
The significance of global players’ presence in India
- The entry of global manufacturers will not only provide greater choice to consumers, but will also help bring in the latest technology and promote competition in a sector that is dominated by domestic players.
- It will help cut carbon emissions and reduce the country’s dependence on oil imports.
- However, care must be taken to closely monitor progress on investment and localisation criteria, and not get swayed by attempts to relax targets in favour of the companies.
- Further, for increasing EVs’ attractiveness and ensuring its faster adoption, the focus should be on ensuring that the charging infrastructure ramps up quickly.
- According to reports, US electric car maker Tesla Motors will be sending a team to India to scout for locations for a $2-3 billion electric car plant. This is welcome news.
Conclusion: Entry of global EV manufacturers like Tesla could help catalyse the segment. Government must ensure commitments on investment, localisation are adhered to.