Increased privatisation of Indian healthcare system would not only be beneficial for up gradation of medical facilities of the country but will also be beneficial for the poor and common people. It will also attract foreign investment and will able to keep the physicians staying in the country motivated.

Privatisation is the process of transferring ownership of business from the public sector to the private sector. In a broader sense, privatisation refers to transfer of any government function to the private sector1. In terms of healthcare, it refers to providers who exist outside the public sector, either commercial or charitable. The private sector thus includes both ‘for profit’ hospitals, nursing homes, physicians, private commercial contractors/agencies, and ‘not-for-profit’ charitable institutions, industrial establishments, community associations or citizen groups.

Types of health services include clinical or non-clinical services, either in hospitals or mobile services, in rural and urban areas. They also include preventive health care (e.g. antenatal care, institutional deliveries, immunisation, post-natal care etc.) and health promotion programs (e.g. IEC and health education activities).

Stakeholders in both sectors include patients, doctors, medical associations, administrators, contractors, private entrepreneurs, NGOs, charitable institution and community leaders.

Over the years, private health sector in India has grown phenomenally. As financial constraints erode capability of the public health system, the poor are forced to spend out of pocket to seek healthcare from private sector. India has one of the largest numbers of public health institutions in the world. In 1999 there were 137,000 sub centres, 28,000 allopathic dispensaries, 23,000 primary health centres, 3,500 urban family welfare facilities, 3,000 community health centres and 12,000 secondary and tertiary hospitals.2,3 However, public institutions have not been able to deliver healthcare services at the desired quality and efficiency4. A large proportion of population continues to suffer and die from communicable diseases, pregnancy related complications and malnutrition.

It is estimated that 80% of spending on health in India is out of pocket and that the private health sector in India is worth 500-600 billion Indian rupees, which is around 5% of the GDP – one of the highest in the world. It is also estimated that 93% of hospitals, 64% of beds, 80% of doctors, 80% of outpatients and 57% of inpatients in India are accounted for in the private sector.5 The private health care provides 79% of outpatient care for those below poverty line, much of which is of low quality and the payment is primarily out of pocket 6.

The nature of private sector itself has changed a lot in the last few decades. Until mid-70s, hospital services were predominantly in the public domain and even within private health sector, large hospitals were mostly in the not-for-profit or charitable sector. For profit private hospitals were primarily small nursing homes. However, huge growth in number of specialists in mid-seventies changed the scenario completely and by the mid-eighties the for-profit private hospitals came in limelight. With rapid changes in medical technology, the corporate sector recognised new emerging opportunities, and thus, starting early ’90s, private healthcare sector started expanding with in-flow of huge investments.

India is emerging as a favourite destination for medical tourism. Medical education was almost entirely public until late ’80s, after which, private medical schools started getting established, especially in southern Indian states like Tamil Nadu and Karnataka. Public medical schools contributed significantly to the growth of private sector. An average of 80% of medical graduates entered private practice or migrated out of country.5

With a billion plus people, India is the second largest country in terms of population. Providing basic services and amenities to its citizens is a constant challenge. This leads to the creation of two groups � ‘haves’ and ‘have nots’ in terms of access to primary healthcare. Most of the basic government healthcare schemes are unable to reach the people who are in need. The functioning of most clinics that are situated in rural areas is inadequate to serve their immediate vicinity. The penetration of quality primary health care to rural areas is also plagued by lack of skilled and professional workforce.

Advantages of Privatisation

  • Convenience: The private sector is perceived to be easily accessible, better managed, and more efficient than its public counterpart. Individualised care is obviously easier in private than in public sector.
  • Freedom of choice: In private sector one can choose both the doctor and the time and place of his/her treatment. In certain conditions the patient may even choose the treatment method. This is especially true for surgery where more than one option is available, such as choice of laparoscopic or open surgery available these days.
  • Service quality: A privatised health care system can provide better nursing and allied services. It can provide better facilities for attendants. Patients and their relatives are not neglected and ignored and treated with dignity and respect. The choice of convenient timings, treatments and costs – though these factors can be limited in both private and public sector settings. Thus, privatisation has helped improve health services � their type, scope, quality and consequences.

Disadvantages of Privatisation

High cost: Privatisation will increase the cost of healthcare in the country thus depriving poor people from access to healthcare. This will increase the divide between rich and the poor and denial of the right to health, and undermine the state’s responsibility in providing basic healthcare to citizens.

  • Profit motive: National preventive programmes get neglected in private health sector as they are more focussed on curative aspect of health because of higher profits in curative treatment than preventive side.
  • Quack practitioners: There would be increased dependency of poor people on quacks and superstitious methods of treating medical problems. Quack practitioners can undermine healthcare, by spreading communicable diseases like AIDS and Hepatitis-B, and will often provide inadequate guidance on the use of drugs, thus increasing drug resistance.7
  • Drug Resistance: Irrational use of anti malarial drugs by private practitioners and easy availability of these drugs in pharmacy (without prescription) has created lot of difficulty in national control program for Malaria. India is facing a big challenge due to resistance to different forms of anti malarial drugs and same is true for Tuberculosis (resulting in multi drug resistant tuberculosis – MDR TB and extremely drug resistant tuberculosis – XDR TB)9
  • Unnecessary/Over Medication: Private sector stress on procedure-oriented medicine. Well-considered, comprehensive advice is bypassed for a computerised laboratory test, resulting in the loss of the human touch.
  • Lack of Staff Development: Small and medium segment private providers give little emphasis in training and development of their staff because of the cost involved.
  • Lack of accountability and transparency: Many of the private sector initiatives involve high cost and incur large public debts. Thus many of these development also meant debt-led development -through political patronage, causing unsustainable lending and un-recoverable debts without commensurate benefits10
  • Inaccessibility for rural population: Most private hospitals in India are situated in urban areas and especially in towns and cities. This is primarily driven by the profit objective involved in it and also because of the fact that it urban areas provide better infrastructure and higher patient pool. Thus, it creates barrier in terms of access for rural people.
  • Lack of Accreditation: Most private hospitals in India are not accredited and do not have a proper practices in place � such as, quality and safety systems, waste management system etc. This causes medical malpractice, errors, public distrust and bio-hazards. Same is true of private laboratories that are not following the proper guidelines for laboratory waste disposal.
  • Inadequately qualified paramedics: Employment of less qualified paramedics is in vogue in private sector hospitals as they serve as a source for cheap labour.
  • Conclusion

    Medical care in India as it is today is a study in contrasts, typical of countries that have promoted segmentation in healthcare – expensive private care catering to rich and poor quality public-funded care for the poor. When poor people are forced to seek private medical services they face lot of financial problems. More than 40 per cent of patients admitted to hospitals borrow money or sell assets like land and house. 25 per cent of farmer families having a member who is in need for medical care are below the poverty line11.

    As per the National Health Policy, 2002, the government will support medical tourism. Promoting of such services will bring foreign exchange for the country, which will be treated as deemed export and will be made eligible for incentives extended to export income12. Running private medical colleges is a profit making business, but the standards of education have fallen, especially at the undergraduate level. There exists no significant regulation and specification of standards of care for private medical sector and since it is now the dominant player, the absence of regulation is very risky for its clients. Hence, the private health sector has to be reined in through comprehensive regulation, which needs to be facilitated through the legal route.13

    However, privatisation of healthcare in India should be encouraged as it would increase the overall standard of healthcare in the country. It will ensure a healthy competition among corporate hospitals for upgrading and providing better medical facilities to their clients.

    The National Accreditation Board for Hospitals (NABH) has signed a memorandum of understanding with Australian Council on Healthcare Standards (ACHS) for assistance and technical advice on upgrading quality program for meeting global standards for health clinics and medication centres in India. Such a move will make sure that Indian medical institution get recognition worldwide. In recent years, India experienced a growth in medical tourism because of the cost advantage for overseas patients and a high level service quality provided by some of the top-of-line corporate hospitals. Getting the private hospital accredited to various world health standards would add voice to it.

    Privatisation of healthcare in the country will attract healthy foreign investment and raise the pay package of physicians keeping them motivated to stay in the country � resulting in lesser brain-drain.

    The other aspect of privatisation will be education, research and training of staff. Increase in number of private hospitals would also mean the need for more physicians which could be met by the growing number of private colleges and more funds for medical research.

    Maintenance, up gradation and hygiene levels of hospitals will be better under private sector. This can also help the poor if private hospitals can be made to provide some free basic medical facilities to needy sections, as a part of corporate social responsibility.


    • Enforcement of strict ethical regulation for setting of private hospitals – as lot of small private hospitals do set up infrastructure by flaunting basic rules. Even most laboratories do not conform to bio-safety standards – the consequence of which can be dangerous, as escape of pathogens into the environment can be catastrophic.
    • Enforcement of biomedical waste disposal system – there should be dedicated infrastructure and professional team working on safe disposal. Accreditation should be made mandatory for private sector.
    • Designing of labs and facilities should be done transparently and government authorities should reserve the right to inspect their labs and make sure that they have been done in accordance with accepted norms.
    • Government should also monitor that staff selection is done transparently and under-qualified staff is not employed.
    • Private sector should be obliged to facilitate primary and preventive healthcare and public health initiatives of the government to strengthen healthcare infrastructure of the country.
    • Government should subsidise treatment of poor people in private hospitals and make it mandatory for corporate hospitals to spend a part of their profits in up gradation of existing facilities and rendering free basic healthcare services as a part of their corporate social responsibility.


    1. Chowdhury, F. L. ”Corrupt Bureaucracy and Privatization of Tax Enforcement”, 2006: Pathak Samabesh, Dhaka.
    2. Bj�rkman, JW. 2001. Multiple Systems, Multiple Reforms: South Asian Health Policies in Comparative Perspective in Handbook of Global Technology Policy edited by Stuart S Nagel. New York: Marcel Dekker, Inc. Pages 167-220
    3. Bj�rkman, JW and Kuldeep Mathur. 2002. Policy, Technocracy and Development: Human Capital Policies in India and the Netherlands. Delhi: Manohar Publishers.
      Public Health and Security : Global concerns
    4. World Bank. 2001. India – Raising the Sights: Better Health Systems for India’s Poor. (Report no. 22304, HNP Sector-India) Washington, DC
    5. Vineet Gupta . Privatisation of Health 2000
    6. Government of India :Conference on Tuberculosis control .Central TB division , Directorate General of health services , Ministry of Health and family Welfare 1997
    7. XDR TB :A serious Threat to India 2004
    8. Human development Report 2005 : accessed on 4th April 2008
    9. Health, Nutrition, Population Sector Unit India South Asia Region. Raising the sights: better health systems for India’s poor. Washington: World Bank; 2001.
    10. Ministry of Health and Family Welfare. National Health Policy, 2002. Available from:
    11. Abhay Shukla and Ravi Duggal Health System in India Source Book, 2nd Ed. 2004.


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Related April 2009