Add health to your wealth
Life is unpredictable because it is influenced by countless unpredictable factors such as accidents, illnesses, economic changes, natural disasters or personal circumstances. The complexity of the world and the limits of human foresight means that not everything can be controlled or planned for.
Nov 2024
4 mins read
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Life is unpredictable because it is influenced by countless unpredictable factors such as accidents, illnesses, economic changes, natural disasters or personal circumstances. The complexity of the world and the limits of human foresight means that not everything can be controlled or planned for. But we can transfer some of the risk/mitigate the financial risk by buying a life and a health insurance. The earlier we insure ourselves the better as rising costs can burn a hole in one’s pocket.
Insurance premiums on an average in India have increased by 25-30% over the last three years and we have one of the highest medical inflation in the world at 14%.1 Setting aside some emergency buffer for healthcare expenses needs thus is a necessity. Most working professionals in India are covered by their employers through health and life insurance but rising inflation also necessitates having additional cover if one is in job transition or there is a unforeseen loss of employment.
The covid pandemic acted as a catalyst for ushering in a sense of awareness of having a health/life insurance to protect our loved ones against life’s unforeseen emergencies. IRDAI data shows that India's insurance penetration was 4% of the GDP in 2022-23, which implies we have a long way to go. Even before one begins her investment journey for fulfilling long term goals, it is essential to create a financial back up with a health and life insurance to support the family.
Now, how can one benefit from the rapid growth we are set to witness in the healthcare sector? India’s healthcare ecosystem has seen rapid advancement and growth in the past and is likely to witness similar growth in the future. Let us understand why a dedicated healthcare fund deserves an additional allocation in your portfolio. The BSE Healthcare Index currently has a higher weightage (76.8%) comprising pharmaceutical companies, which are large cap firms. Although the sector offers a broad investible universe, the index does not adequately capture the full spectrum of opportunities that are available in the market for investors. 4 In addition to pharma companies, more attractive opportunities like contract development and manufacturing organizations, contract research organizations, diagnostics, hospitals, medical devices, health insurance, speciality chemicals,
medical technology, and more lie outside the BSE Healthcare Index. As medical costs rise accruing as profits to companies in this sector, it can add to one’s portfolio for diversification and stability.
Diverse opportunities across various sub-segments within healthcare
Diverse opportunities across various sub-segments within healthcare
The Indian healthcare sector, one of the fastest-growing industries globally, presents a wealth of investment opportunities fuelled by robust government initiatives, a rising middle class, and increasing demand for quality healthcare. In 2023, this sector reached a value of $372 billion and expected to reach $638 billion by 2025, driven by technological advancements, public-private partnerships, and an expanding ecosystem of services. Broadly, the sector consists of segments like hospitals, pharma, diagnostics, manufacturing, medical devices, contract development and manufacturing organizations, contract research organisations, insurance, and more.
Let’s look at some of the key growth drivers and opportunities in this sector.
Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY): This program provides cashless treatment of up to ₹5 lakh per family annually, targeting over 500 million people, comprising the bottom 40% of the population. Such initiatives foster infrastructure development and widen healthcare access.
National Medical Devices Policy 2023: This policy aims to boost India's medical device market from $11 billion in 2020 to $50 billion by 2028. Incentives like Production Linked Incentive (PLI) schemes and the establishment of medical device parks are set to catalyse growth. India is the 4th largest Asian medical devices market after Japan, China, and South Korea.
Medical Tourism: Indian medical tourism market was valued at $7.69 billion in 2024 and is expected to reach $14.31 billion by 2029. With $5-6 billion size of Medical value travel (MVT) and 5 lakh international patients annually, India is among the global leader destinations for international patients seeking advanced treatment. Key drivers for India in this segment are affordable quality services, well reputed doctors, increased connectivity and a preferred hub for developing nations. For ex: the cost of bypass surgery in US is $1.44 lakh versus $5,200 in India2
National AYUSH Mission: Emphasis on traditional systems like Ayurveda and yoga, which are witnessing global acceptance, offers investment potential in alternative medicine.
Pharmaceutical and Biotechnology: India is the largest supplier of generic drugs globally, accounting for 20% of the world’s supply. With initiatives like "Make in India" and research incentives, pharmaceutical R&D and manufacturing are lucrative sectors
MedTech and Digital Health: Telemedicine and health-tech platforms have seen rapid adoption, especially post-COVID-19. The market is expected to grow substantially, supported by startups and innovation hubs - AI, IoT, and robotics are revolutionizing diagnostics, surgery, and patient care, attracting venture capital and private equity investments.
Hospital and Infrastructure Development: The rise in non-communicable diseases (NCDs) and urbanization is driving demand for super-specialty hospitals. Public-private partnerships under schemes like the Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) facilitate infrastructure upgrades.
Focus on Rural and Tier-II/III Markets: Programs such as Mobile Medical Units (MMUs) and health and wellness centres are expanding access in underserved areas, creating opportunities in affordable healthcare.
Summing up..
With strong government backing and a large consumer base, the Indian healthcare industry stands as a promising domain for both domestic and foreign investors. Current healthcare expenditure in India, on a per capita basis is $74, significantly lower even when compared to other emerging markets like Brazil ($761), China ($671), Mexico ($611).3 This expenditure is set to increase due to factors like rising household income, improved affordability, increase in lifestyle diseases and more. Investors looking to tap into the Indian healthcare market should focus on emerging areas like MedTech, rural healthcare delivery, and pharmaceutical innovation with a fund which focuses on investing in this thriving structural theme. Diversified and other funds such as Flexi Cap, Multi Cap, Mid Cap, and others, may provide limited exposure (6%-10%) to healthcare theme which can be fulfilled with a dedicated healthcare fund. Adding health to your wealth can be a good addition to your portfolio!
Sources:
1: https://www.cnbctv18.com/personal-finance/health-life-insurance-premiums-price-rise-30-pc-three-years-claims-factor-disease-19469317.htm
2: https://www.medicalindiatourism.com/
3: https://www.who.int/data/gho/data/indicators/indicator-details/GHO/current-health-expenditure-(che)-per-capita-in-us-dollar
4: Source: BSE, PGIM India Internal Analysis. Data as of 31st October 2024. Classification based on AMFI Basic Industry and IBEF.
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All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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