Easier said than done

TRADEZONE/ INDUSTRY VIEW

Beware of non-tariff barriers.

The Indian healthcare industry is poised to growth at a compounded annual growth rate of 15 per cent. These are the findings of a study carried out by Ernst & Young and reported in the Businessworld (Issue: June 25, 2007, page 56).

The research shows that at present, medical equipment (excluding medical textiles and medical consumables) account for 6 per cent of the turnover in the healthcare industry, which according to the study cited above is going to remain 6 per cent of the healthcare industry turnover, even in 2012. This translates into roughly $4.72 billion as per this report.

This evolving market needs to be reviewed from the lens that the medical equipment industry is highly diverse in nature. While it covers very high-end machines that help in supra-major surgeries, they also cover low-end equipment that is normally utilized in any hospital. The Indian SME involvement in the manufacture of the latter is very well known. It is widely believed that SMEs in the medical equipment sector currently employ around 300,000 people directly.

It will therefore be suicidal to provide the same treatment to all medical equipment under the FTAs being signed by India. The Indian SMEs that manufacture a range of medical equipment that are commonly utilized by hospitals are said to find it extremely difficult to compete with the equipment that originates from ASEAN countries.

It is important to recognize that the domestic industry unlike its ASEAN counterparts is still exposed to high transportation and infrastructure costs which kill its competitiveness in an era of reducing import duties. Interestingly, even countries such as US and Canada have protected their small local equipment manufacturers while signing ambitious FTAs with other countries.

Standards are very critical for medical equipment and this is an area which the domestic industry, especially SMEs, needs to quickly address if they have to provide themselves with a level playing field through the route of non-tariff barriers. While saying this may be easy, getting these industries on one platform and making them agree to a solution is an arduous task.

With the ASEAN and India-Thailand FTA negotiations already in motion, the domestic industry needs to get its act together. They need to identify the products in which they are globally competitive and in which they feel threatened due to the cost competitiveness of ASEAN products.

The next step is to take their concerns to the Indian Commerce Ministry, which is open to addressing concerns of domestic industry, which unfortunately hardly takes any concerted effort to take their concerns to concerned officers.

The time is ripe for the medical equipment industry, especially the SMEs, to come under one roof and start taking up a cohesive position that benefits the sector and goes beyond the short-term interests of companies. Only then will the sector benefit.

Easier said than done, isn't it?

The author is chief economist at Economic Laws Practice, Advocates & Solicitors