KOLKATA - India’s health care services industry is poised to become a major driver of economic growth as first-world patients, driven out of their own systems by high costs and crowded conditions, look for cheaper places for medical care. For India, new terms such as such as health tourism, health care outsourcing and medical back office support are suddenly gaining currency.

Already, with health care costs having spiraled to prohibitive levels across much of the developed world, the British government, for instance, is contemplating flying its ailing to India to clear up long waiting periods for treatment and surgery in the UK’s overcrowded hospitals. India’s hospital care and education facilities are rapidly improving after having been freed from the yoke of 50 years of a command economy. Hospitals in Kolkata have long queues of patients from Bangladesh, waiting for appointments with Indian medical specialists. The opening of bus service between India and Lahore is expected to bring Pakistani patients as well.

The statistics are impressive. According to India’s ministry of External Affairs, the US$17 billion Indian health care industry comprises roughly 4 percent of the country’s GDP. Hospital services, health care equipment, managed care and pharmaceuticals are poised to grow by 13 percent annually for the next six years. According to the Insurance Regulatory and Development Authority (IRDA), India’s health care industry could grow exponentially, as have software and pharmaceuticals over the past decade. The government believes that only 10 percent of the market potential has been tapped. With global revenues an estimated $2.8 trillion, health care is the world’s largest industry.

The industry’s growth is being fueled by the rising purchasing power of the Indian middle class, which is willing to pay more for quality health care. Indeed, health care is becoming steadily more available as the private sector becomes more involved in the industry and hospital management. With the kind of interest in Indian services that is being shown by other countries, industry analysts believe growth could outstrip current calculations.

Privatization is the key to the sector’s resurgence. A Central Bureau of Health Intelligence study indicates that middle and high-income groups have more confidence in health care products and services offered by private hospitals than in government-owned agencies. On average, private service is 60 percent more expensive than government-owned service.

Although private health care is a more expensive alternative for domestic residents, it is cheaper for the British government to fly patients over and back after treatment than it is to treat them at home. In fact, the cost-benefit advantage is phenomenal. Open-heart surgery costs run $34,000 to $70,000 in the UK. In the US, routine open-heart surgery runs as high as $150,000, with complicated problems considerably more. In India, open-heart surgery could cost $3,000 to $10,000 in the best of hospitals. Cost differentials therefore could be anywhere from 200 percent to 800 percent to off the chart. Analysts believe effective marketing could divert patients from African and West Asian countries who are going to the US or UK for treatment to India.

Another niche area that could be exploited is procedures that are generally not insurance-covered in advanced countries, like cosmetic and plastic surgeries and other high-end lifestyle treatments such as breast implants.

While quality remains an issue, it seems to be improving in India, with private hospitals increasingly able to import high-tech medical equipment, a situation that should improve further with the Indian government’s announcement that import duties on medical equipment are to be reduced as well. In addition, for decades, doctors and other professionals have been fleeing India for more-developed countries where they could practice medicine or other professions profitably. The US Immigration and Naturalization Service says a startling 48 percent of “H1-B” category workers admitted to the United States - those with advanced degrees, exceptional abilities or professionals with bachelor’s degrees or equivalent and skilled workers - are from India. As health care salaries and medical facilities and improve in India, that brain drain should start to reverse, as it has in the information technology industry.

A report published by Dr Vinay Kothari, the managing director of Hospihealth, a hospital and health care planner and management consultancy, states that a decade ago India was roughly 50 years behind the US. However, the report says, over the last 10 to 15 years this gap has begun to close fast, with high-tech super-specialty hospitals coming up all over the country. Most Indian private hospitals are trying to improve quality by employing quality manpower, better salary structure, training and arranging for continuing education for their doctors.

It is therefore increasingly likely that Indian health care will be close to global standards in the coming years. According to the Frost & Sullivan Indian health care Industry Forecast 1996-2006, the industry’s growth very much depends on India’s continuing macroeconomic liberalization, including further tax cuts, a broader tax base and reduced interest rates for borrowers. The forecast says that the introduction of product patents in India is expected to boost the industry by encouraging multinationals to launch specialized life-saving drugs.

India’s natural advantages of lower production costs and its skilled work force are expected to attract multinationals to set up research and development and production centers. The export of bulk drugs and formulations is set to increase at a compounded annual growth rate of 20 percent and 10 percent respectively between 2002 and 2006. Over-the-counter drugs are likely to drive the market for formulations during this period.