30 Minute Interview

'India has the Potential to Become Self-sufficient in the Next 10 years'

Dr GSK Velu, Managing Director, Trivitron, discusses how the Indian medical device industry, which is full of opportunities, can be at the forefront with the help of government initiatives, with Arshiya Khan. Excerpts:

Dr GSK Velu Managing Director, Trivitron

Please elaborate on the market scenario of medical device technology in India

According to official statistics, the number of clinics and hospitals has increased almost four times from that in the 1950s. This has also increased the demand for medical equipment which has made the medical device sector one of the most promising markets in India. Even more alluring than the size of the market is its projected growth. The demand for medical equipment is rising annually at an impressive rate of 15 per cent. The Indian healthcare sector has seen progressive increase in investments in healthcare infrastructure and facilities, especially hi-tech medical devices.

With input industries to medical technology sector such as electronics industry, biotech industry, IT industry and sheet metal fabrication booming in India, India can easily position itself as an alternate medical equipment and devices manufacturing destination to China, if the Government of India provides right impetus to this initiative.

Can you track the growth and trends in this segment?

Overall, medical equipment forms a promising opportunity within healthcare. An analysis by Ernst & Young pegs the global/domestic medical equipment industry at $2.17 billion (Rs 9,790 crore) in 2006 growing at 15 per cent per year, to reach $4.97 billion (Rs 22,396 crore) by 2012.

Why is the US medical device industry interested in the Indian market?

Currently, about 65 per cent of the medical equipment are imported and thus, has become a key area for forging partnerships across borders. Engineering excellence, cost-effective labour, increasing emphasis on intellectual property rights and most importantly a fast growing domestic market makes India an ideal manufacturing base. According to statistics, 85 per cent of our import requirements are met from the US, Germany and Japan.

What are the key concerns of this area? What is the way out?

Multiple levies on Indian manufacturers, increased customs duty compared to finished goods imports, excise duty, and Value Added Tax (VAT) are challenges for domestic manufacturers of medical devices and instruments. The lack of clarity in regulations and absence of pricing norms is also a key concern area for domestic players, which allows large MNCs to charge exorbitant prices for their imports. By removing anomalies in customs duties, exempting excise duties and VAT on domestic manufactured goods and providing capital grants and subsidies, the Government can take an initiative in the indigenisation of this industry.

What initiatives are undertaken by private and public sectors to boost growth of this segment?

Trivitron is soon coming up with India's first-ever medical technology park in Chennai. The main drive for developing the medical park is to position India as an alternate viable low-cost manufacturing site like China and strengthen its position in the international manufacturing map of medical technology products.

Another key objective of this initiative is to bring down cost of medical technology products by around 30 to 50 per cent over next three years and make these hi-tech products accessible and affordable to a larger under privileged section of India. Apart from this, products manufactured in the park will suit the demographic requirements of developing countries, hence improving accessibility and affordability of these products to the rural public. The Government of India has also shown deep interest in promoting such medical parks in the country.

What are the alternate ways to bring the medical device segment to the forefront?

Initially, the Government imposed high custom duty on imported medical equipment making it difficult for private entrepreneurs to set up hospitals. But, post liberalisation the duties have come down and some life-saving medicines and equipment can be imported duty free. But this has led to a reverse reaction as today over 65 per cent of the requirements of this industry are being met through imports— making it one of the most import dependent industries in the country. Indigenous initiatives are restricted to very few low- tech products and multinationals are present in the country directly only as traders without any manufacturing intent.

‘No free trading’ in the country will also ensure that the foreign players set up their manufacturing base in the country— resulting in increase of foreign income to the Government and job opportunities for thousands of biotech students. Medical device suppliers seeking to enter India's market can enter joint ventures or licensing agreements to manufacture their products within India, rather than employing local agents to distribute them.

What is the future of the medical device industry?

The medical device market is becoming too big to ignore. It is full of opportunities for investment in high quality, specialised medical equipment. Foreign participation is required, especially in high-tech devices that account for roughly 45-55 per cent of the entire market.

But India itself has the potential to slowly come out of the clutches of import and become self sufficient and outward looking in the next 10 years like China. This can only happen if the Government of India identifies healthcare as a priority section and provides right impetus to promote one of its most important segments—the medical device market.

arshiya.khan@expressindia.com