INDIA: Trade in Healthcare Services

During the last two decades international trade in healthcare services has expanded under the GATS. Increasingly it has acquired new dimensions with application of advanced information and communication technology, flow of foreign investment, cross-border mobility, rising income levels and demographics dynamics. India is one of the main participants in this process. Currently, India’s healthcare sector is growing at 20 per cent per annum. The government’s expenditure on healthcare is highly inadequate. It is also a low priority area. India is a participant in the GATS agreement. It has made binding commitments to minimize trade barriers. Trade liberalization is facilitated through four modes. Mode 1 represents cross border supply, mode 2 (consumption abroad), mode 3 (commercial presence) and mode 4 (presence of natural persons). In mode 3, the commitments to attract capital and skill are liberal. But it is more restrictive in mode 4. Modes 1 and 2 are subject to limitations. The developing countries have made more market access commitments in medical and dental services. Economic Needs Test (ENT) is also applied under mode 3 and mode 4. The GATS do not stipulate any constraints on terms and conditions, for example, on treatments of foreign patients. The parties are free to make any policy decisions. The Indian market segment is dominated by hospital business. Other activities include pharmaceuticals, medical equipment, insurance and diagnosis. India has emerged as a hub for clinical research and attracts patients from the US, the Middle East and South Asia. The low cost medical services have boosted medical tourism. However, all modes are not totally free. In modes 1 and 2 there are no national treatment and market access restrictions. In mode 3 foreign equity ceiling of 74 per cent remains. In mode 4 restrictions are on foreign personnel on entry visa basis. India has established superiority in IT-enabled and back-end services. India has built up reputation in offering specialist medical and surgical interventions at competitive prices under mode 2. The foreign investment under mode 3 is modest due to a variety of factors. Though India has an advantage in mode 4 but heavy restrictions prevent migration of health personnel. It also causes internal brain drain which results in denial of quality services to the poor domestic patients. Some efforts are made to rectify this problem but it is not successful. The earning of foreign exchange has taken priority. On the whole, India enjoys distinct advantages in modes 2 and 4.The global healthcare market is highly competitive. There is a need for export strategy. Such a strategy should be based on “niches and market prospects.” The bilateral and regional trade agreements should be made use of to derive market access in health services abroad.