Valued at US$ 34 billion, the Indian healthcare sector is projected to grow to nearly US$ 40 billion by 2012, says PricewaterhouseCoopers in its report, 'Healthcare in India: Emerging market report 2007'.

The sector's growth will be driven by the country's growing middle class, which can afford quality healthcare. Over 150 million Indians have annual incomes of more than US$ 1,000, and many who work in the business services sector earn as much as US$ 20,000 a year. Today at least 50 million Indians can afford to buy Western medicines-a market only 20 per cent smaller than that of the UK.

The growing purchasing power of Indian patients is revealed in the increased business of air ambulance services. Around 365 airliftings worth several millions of rupees happen in Delhi in a year on average.

If the economy continues to grow faster than the economies of the developed world, and the literacy rate keeps rising, much of western and southern India will be middle class by 2020.

To meet this demand, the country needs US$ 50 billion annually for the next 20 years, says a CII study. India needs to add 2 million beds to the existing 1.1 million by 2027, and requires immediate investments of US$ 82 billion.

Funds in the sector have been largely private. In fact, it is believed that the private sector provides 60 per cent of all outpatient care in India and as much as 40 per cent of all in-patient care. It is estimated that nearly 70 per cent of all hospitals and 40 per cent of hospital beds in the country are in the private sector, says PWC.

Investments

The opportunities presented by the healthcare sector have made it a major draw for potential investors. The healthcare sector attracted US$ 379 million in 2006 - 6.3 per cent of the total private equity (PE) investment of US$ 5.93 billion. The PE deals that the sector attracted in 2006 were as large as inputs into the automotive sector.

• Apollo, which has 39 hospitals in India, will spend US$ 203 million by 2009 and take up its bed count to 9,600 from 8,000 now.
• Competitor Fortis Healthcare Ltd will add 28 hospitals to its 12-hospital chain by 2012.
• George Soros's fund Quantum and BlueRidge bought 10 per cent in Fortis Healthcare.
• Manipal Health Systems raised over US$ 20 million equity from IDFC Private Equity Fund.
• Bangalore-based HealthCare Global Enterprises raised over US$ 10 million in equity from IDFC.
• Metropolis Health Services, a diagnostic chain, raised over US$ 8 million in equity from ICICI Venture.
• Investment firms Apax Partners, IFC and Trinity Capital have invested over US$ 200 million in hospital firms.