Paving the road for India’s self-reliance in medical devices sector

Deepak Singhal | Updated on October 09, 2020

The focus should be on creating an ecosystem for making in India   -  GETTY IMAGES/ISTOCKPHOTO

Prime Minister Modi’s call to become Atmanirbhar or self-reliant by scaling up manufacturing, accelerating infrastructure development, attracting investments and promoting a consumption-led growth has been well received, especially by the medical devices industry.

In fact, while remaining vocal about local, there have also been efforts to make Indian products globally competitive. As a new secretary, S Aparna, takes charge at the helm of the Department of Pharmaceuticals (DoP) this month, there are great expectations from the medical devices industry, to deliver quality products in the country, and overseas, with the help of a supporting policy framework to incentivise manufacturing.

The Covid-19 pandemic was initially dreadfully challenging in India, with a huge population and highly import-dependent medical devices sector. But the Centre’s flagship “Make in India” initiative gave that needed fillip by relying on Indian manufacturers to meet the rising demand for essential healthcare equipment for the country. And this gave an added push to the Indian medical devices sector to become self-reliant.

But there is still much ground to cover. The medical devices industry is an area in which India’s vulnerability in healthcare stands exposed. The country’s health security is on shaky ground, given the 85 per cent import dependency and over ₹42,000-crore medical devices import bill. This industry needs to be rescued from this dependency, from the cash-flow challenges, poor financing viability, and supported in its will to compete with cheap imports.

Inherent disadvantages

The DoP recognised that indigenous manufacturers have an inherent cost competitiveness disability of 12-15 per cent on account of various factors. They include lack of adequate infrastructure, supply chain and logistics, high cost of finance, inadequate availability and cost of quality power, limited design capabilities, low focus on research and development and skill development.

Presently there is no mechanism to address these disabilities in manufacturing of medical devices in India, as compared to other major economies. The real challenge the MSME (micro, small and medium enterprise) entrepreneurs face is to survive and cope with these handicaps and counter marketing challenges. These MSME companies need to be rehabilitated with supporting policies like nominal duty protection of 10 to 15 per cent that nurture them back to health so that they can take care of the health of the Nation.

The focus needs to be on creating an ecosystem for making in India that is also rewarding. Consider recognising and nurturing Indian manufacturing champions who will lead other mid-size and small-sized manufacturers to follow and form ancillaries to thrive on their growth. The Covid crisis has shown that it’s the Indian manufacturers who are being the dependable suppliers to bank on.

For manufacturers, demand comes from local consumption or exports. Imports of medical devices are an opportunity cost of loss of demand as domestic purchasing power is diverted to foreign goods. Import of pre-owned medical equipment is another opportunity cost on demand. Converting opportunity cost to positive opportunity is what the Government should try to achieve and boost the economy as well as create jobs.

Another area of concern that the Indian medical devices industry has been requesting the Government to address is unethical marketing where labelled MRP, instead of protecting consumers, in this case has become a licence to charge the full MRP, which may lead to profiteering at the hospitals.

MRP is artificially increased to provide higher trade margin to hospitals to induce them to push higher-margin brands, leading to artificial inflation. By rationalising trade margin over import landed price, the consumer can gain and not feel exploited, post Covid. This will also help locally made products, as proven in stents and knee implants, and favour ethical marketing by overseas and Indian manufacturers.

At the ABHA Foundation, a virtual platform that supports entrepreneurs towards self-reliance in medical device production, we have been pushing for a Medical Devices Park near the upcoming Jewar Airport. Based on the locally available resources, talent, and skills of human capital, we must aim to gradually reduce imports in every sector, including one as critical as medical devices. And that could be an effort the new secretary at the helm of the Pharma Department could take up on priority.

The writer is Chairman ABHA Foundation (Atmanirbhar Bharat Foundation), a charitable trust, and former Chief Secretary, UP Government. Views are personal

Published on October 09, 2020

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