11/10/2011 18:30 BST | Updated 11/12/2011 05:12 GMT

India's Healthcare Industry Rises to the top of the Value Chain

Any recent visitor to West Bengal will tell you about the unquenchable sense of energy on just about every street corner. But I found this to be especially true in the life sciences and healthcare sector with whom I have just spent some time while addressing the CII's Annual Healthcare East Conference in Kolkata.

I had the pleasure of meeting Dr Devi Shetty, the inspirational founder of Bangalore Health City whose heart hospital is performing complex operations at NHS quality but a fraction of the cost -not because of cheap labour, but because of a transformation of clinical and administrative processes. His company, Narayana Hrudayalaya Hospitals, has already expanded into many other states and is planning to develop a low-cost hospital model for West Bengal.

The Indian pharmaceutical sector alone is expected to see growth of 11-14% up to 2013. This is because India has emerged as a hub of drug discovery and development services, growing at more than three and a half times the global rate. There has also been a huge growth in new hospitals and medical infrastructure as well as medical devices. Combined with improving regulatory and IP framework there is no doubt that India is attracting the interest of global healthcare companies.

While UK Health Secretary I was conscious of how a growing British healthcare market has benefited from the Indian talent influx, attracted by our linked education, training and health sector career opportunities. Now the flip side of that coin is the opportunity for innovative British companies in the growing Indian healthcare market. Today the total value of the sector is more than $34 billion, or roughly 6% of GDP making it one of India's largest sectors. By 2012, India's healthcare sector is projected to grow to nearly $40 billion.

With India growing at almost eight per cent whist Europe is growing at less than one per cent it is no wonder that UK businesses are looking east. Those businesses ahead of the curve are already seeing tangible results of working with partners in India whose commitment and enthusiasm is infectious. For example, MSD India, the fully owned subsidiary of US-based Merck & Co, is planning to set up a R&D centre in India in a joint venture with UK-based Wellcome Laboratories.

The centre - MSD Wellcome Trust Hilleman Laboratories - will be a 50:50 joint venture with a total investment of $130 million (approximately £78 million) aimed at pioneering affordable vaccines for developing countries. And it should not be forgotten that this truly collaborative UK-India partnership is a two-way street. For example, Indian pharma company, Dr Reddy's Laboratories has opened its newly expanded Chirotech Technology Centre, a purpose-built facility to house its laboratories and offices, at the Cambridge Science Park.

Businesses from both sides should do their research before investing in each other's markets but there has also never been a better time to be brave about seizing the opportunity. Ernst & Young believe there will be three primary catalysts to growth in the Indian healthcare industry: a boom in the demand for healthcare infrastructure (including an additional 1.75 million beds required by 2025 at a cost of $86 billion), the growing penetration of health insurance (currently growing at around 50%) and increasing investments by private equity and venture capital firms who have pumped around $2 billion into the industry in five years. The boom in medical tourism is complementing the growth in the domestic health industry, with the appeal of world-class healthcare offered at a fraction of the cost in western countries. This area has also seen annual growth of 25-30% and is poised to reach $2.2 billion by 2012.

The Indian government has of course been playing its part to build its country's healthcare sector with investments in better medical infrastructure and rural health facilities. This includes the National Rural Health Mission (NHRM) allocating over US$ 10 billion for the upgrading and capacity enhancement of healthcare facilities. The Indian government is also keen to boost R&D and actively promote start-ups. This is likely to provide significant opportunities for UK universities to undertake collaborative research programmes with Indian organisations and to set up links with education institutes to provide training courses in this area.

But of course, the private sector accounts for more than 80% of total healthcare spending in India and during my visit I found a real openness to foreign companies investing. UK firms already investing include Huntleigh Technology which has set up a subsidiary company in Mumbai and Randox Laboratories which has a successful presence in India's diagnostics/pathology market. Smith & Nephew as well as Smiths Medical International have subsidiaries in India, as do Omega Diagnostics and Algeos, while BUPA has a joint venture with Max India. Companies like these are likely to be among those networking and exploring further opportunities at the MEDTEC India 2011 conference in Mumbai from 19-20 October, Hospital Infrastructure India 2011 in Mumbai from 14-16 December and Medifest 2011 in New Delhi from 15-17 December.

Long regarded as simply a base for generic manufacturing, India is now seen as moving up the value chain and offering a broader market for products. No one represents this more than Kiran Mazumdar Shaw, who formed her company in a garage after her preferred career as a master brewer hit a glass ceiling due to her gender. Her company Biocon is now Asia's largest biotechnology company. None of this is a threat to British companies but a huge opportunity as it is evidence of a growing Indian middle class demanding the best in world-class healthcare. British businesses should start their footprint in India - a country that will soon be setting the global pace for innovation in the life sciences and healthcare sector.