Why Atmanirbharta in medical devices needs trade

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The sector needs investment, not an insular policy. Atmanirbharta is incomplete without imports and exports

When the fast-moving coronavirus emerged, the world was clearly not prepared for the outbreak. Starting as a “disease that emerged at a poultry market” in Wuhan, China, COVID-19 brought the world to a halt within weeks. Months into the pandemic, and we saw economies depending on each other for everything from PPE kits, to exporting large quantities of hydroxychloroquine, and ventilators. Closer home, India shook hands with Japan, America, and many other countries, seeking aid, as well as extending help to over 150 countries. Even while the self-reliant rhetoric was being considered the only way to emerge unscathed from crisis, interdependence became more apparent as the intensity of the pandemic unfolded. For instance, while India exported 23,00,000 personal protection equipment (PPE) to countries like the UK, US, among others, we also imported ventilators from the US to address our needs.

Hence, as we weather the storm, self-reliance will have to walk in hand with a globalised approach to extricate us from the situation. This is where every policy decision we make will count. Take, for instance, the government’s New Public Procurement Order which aims to bolster the stake of domestic players in the medical device market. The amendment to this PPO states, “Any company who does not qualify as Class I – local supplier (local content of 50 per cent or above ) or Class II – local supplier ( local content of 20 per cent – 50 per cent, are debarred from participating in any government tender which is below Rs 2,000 million and not a Global Tender.” While the short-term goal seems promising for local players, are we losing the long-term vision as we walk towards the self-reliant path?

An important aspect of creating policies in times of crisis is to envision how they will shape our future.

Let’s understand what the new order essentially means. The amendments in PPO 2.0 “empower” local players by deterring companies with less than 20 per cent of local content in their goods or services to participate in the government tenders. In other words, preference for government tenders will be given to companies with products and services that constitute 50 percent or more local content.

If you look closely into the import dependence on medical devices from around the world, the move could seem like a lopsided one. India imports more than 75 per cent of its medical devices from around the world. While the move to take a leap from this import dependency sounds promising, it is important to understand the current situation. To begin with, per capita spending on medical devices in India is the lowest at $3 as compared to $28 in Brazil, $43 in Russia and $304 in the USA. We are still a market that is struggling with quality issues, with affordable healthcare a major constraint. The COVID pandemic is not over and we will continue to require ventilators, PPE kits and more.

The proposed procurement order could stand in the way of patients’ access to high risk medical devices in government hospitals as India is still heavily import dependent. Take for instance, the case of PPE kits. As per a recent report by Institute of Competitiveness in India, even though India was successful in localising the production of PPEs, fabrics and masks, the country still relied on imports for procuring seam sealing equipment. So, even for something as simple as seam sealing equipment, we are looking at the global players.

In yet another case, even as India claimed to make the cheapest ventilators, there were reports of two hospitals rejecting 81 of those domestic ventilators after they failed the quality tests. Media reports revealed that they were not fit for patient safety as they showed discrepancies in the FiO2 (the concentration of oxygen inhaled) displayed. While they were touted to give global counterparts a stiff competition, patient safety cannot be put at risk.

Atmanirbharta (self-reliance) is incomplete without imports and exports. At a time when global optimism is swelling in the Indian market with Japan willing to invest Rs 2,200 crore in the medical devices and pharma sector in the country, we should look at fostering ties through a policy regime that favours investment. This is even more critical today as India aims to make it to the top 50 in the Ease of Doing Business rankings.

India’s 1.4 per cent share in the global device market is testimony to the fact that we are still not prepared to make all medical devices in India. Moreover, India is eyeing global partnerships where we are inviting countries like Japan to invest in Indian pharma and medical devices sector. The current proposed PPO could potentially dent the country’s position on the global front. Reciprocal measures of disqualifying manufactures from a country may lead to reduced imports, trade conflicts and export reduction. Today, India is eying the future of the medical device industry. For this market to reach $50 billion by 2025, we need policies that lay the foundation for a competitive manufacturing hub that welcomes innovations from around the world. Considering we are the world’s second most populous country, we will need more than just a market dominated by indigenous healthcare products.

The writer is Senior Consultant (Health), NITI Aayog