The Future of India\'s Diagnostic Sector : Anticipating Continued Grow... The Future of India\'s Diagnostic Sector : Anticipating Continued Growth in the Diagnostic Sector Read more

Summary

The Indian diagnostic sector, buoyed by economic growth, technological advancements, and rising health awareness, is set for significant expansion. However, it must navigate regulatory challenges, competition, and the need for continuous innovation to fully realize its potential.

In the healthcare industry, the diagnostic segment in India is set to experience robust growth. With the healthcare sector being a significant contributor to the country's revenue and employment, this growth is particularly notable. Recent data reveals an increase in healthcare spending, reaching 2.1% and 2.2% of India's GDP in FY23 and FY22, respectively, up from 1.6% in FY21, according to the Economic Survey 2022-23. This escalation is mirrored in the rising allocation for health within the total social services budget, which climbed from 21% in FY19 to 26% in FY23.

The diagnostic sector, crucial for disease detection and treatment, has seen its market expand significantly. Valued at USD 14.57 billion in 2022 and USD 16.23 billion in 2023, projections suggest it could soar to USD 43.57 billion by FY32, as per Polaris Market Research. Similarly, SPER market research forecasts the Indian diagnostic lab market to reach USD 44.92 billion by 2032. Factors like an aging population, increased income, preventive testing awareness, advanced diagnostic tests, and government healthcare initiatives are driving this growth.

Diagnostic services, split into pathology and imaging, are witnessing rapid expansion. Pathology services, representing 60% of the market, and imaging services are both growing due to increasing demand for diagnostic and preventive health check-ups. The industry's future looks promising, with a diverse market composition of standalone labs, hospital-based labs, and organized players, predominantly influenced by physician referrals.

Shift Towards Preventive Healthcare and Economic Implications

Post-COVID-19, India's focus on preventive healthcare has significantly shifted. The rise in per capita GDP from US $1,958 in 2017 to over US $2,388 in 2022 (World Bank data) has contributed to this change. The diagnostic sector is expected to benefit from this shift, with diagnostic companies projected to see a revenue increase of 12%-14% in the medium to long term.

Chronic diseases like obesity, diabetes, and hypertension are on the rise due to lifestyle changes. This increase in non-communicable diseases, expected to jump from 19% in 2008 to 28% in 2030, is driving growth in the healthcare and diagnostics segments. The aging population, better medical facilities, and a correlation between aging and the need for diagnostics further bolster this growth. India's status as a destination for cost-effective, high-quality medical treatments is also enhancing the diagnostic sector.

Despite its potential, the diagnostic industry remains fragmented, with organized players holding just 17% of the market. Major players like Dr. Lal PathLabs, Metropolis Healthcare, SRL Diagnostics, and Thyrocare Technologies collectively hold a mere 6% market share. The industry's fragmented nature is attributed to low entry barriers, minimal capital requirements, and lax regulations.

Strategies for Growth and Expansion

To counteract fragmentation, diagnostic companies are pursuing both organic and inorganic growth strategies. Expansion into new areas, often through franchise models, and acquisitions of smaller players are common tactics. For instance, Dr Lal Path Labs' acquisition of Suburban Diagnostics and Metropolis' and Thyrocare's expansion efforts highlight these strategies. Strong balance sheets and low debt reliance enable these major players to continue their inorganic growth momentum.

Performance Analysis of Top Companies

The diagnostic companies saw a surge in operating income in FY21 and FY22, thanks to COVID-19 testing. Non-Covid-19 revenue continues to rise in FY23 due to the growing preference for preventive healthcare and wellness packages. The major players in the diagnostic industry are adapting by integrating technology and digitization. They are focusing on customer-centric approaches, digitizing the entire home visit process, and employing AI and machine learning techniques. Startups like Tata 1mg and PharmEasy are entering the market, focusing on home diagnostic services. Additionally, companies are expanding into Tier-2 and Tier-3 cities, broadening their geographical network.

In conclusion, India's diagnostic sector is poised for significant growth, driven by changing healthcare paradigms, economic growth, and technological advancements. The sector's expansion is expected to continue, with a focus on preventive healthcare and advanced diagnostics playing a pivotal role.