India’s healthcare innovation landscape is poised for a significant leap, with its market potential expected to double to approximately $60 billion by FY 2028. Pharma services and healthtech are anticipated to drive about 80% of this growth, maintaining their positions as the largest segments in the market, according to the findings of ‘Healthcare Innovation in India’ report by Bain & Company and HealthQuad. This growth will be driven by rising consumerization of health, reconfigurations to the global healthcare value chain, a deepening of Indian scientific and technological expertise, and regulatory tailwinds.
The report outlines the opportunity in healthcare innovation where companies increasingly leverage emerging technologies to add innovation vectors—including new business models, software-led solutions, and products—that extend beyond more longstanding value engineering considerations.
The overall Indian healthcare market, valued at about $180 billion in FY 2023, is projected to grow at approximately 10–12% CAGR to reach $320 billion by FY 2028. Healthcare innovation is a rapidly growing segment currently valued at $30 billion and accounts for 15% of the overall market. It has almost doubled over the last three years, with 55% of the market size led by exports. This segment is dominated by pharma services (CDMO, CRO, pharma IT) and healthtech with vaccines and biotech, and medtech emerging as green shoots.
“From cutting-edge pharma services to disruptive healthtech and medtech advancements, India’s healthcare innovation landscape is experiencing a remarkable transformation. With its focus on innovation, quality, and cost-effectiveness, India’s healthcare innovation market is addressing domestic needs and making its mark on the global stage. This $30 billion sector is fuelled by rising investments, supportive government policies, a deepening scientific talent pool and is brimming with potential in nascent fields such as Biotech and MedTech” said Aarthi Rao, Partner at Bain & Company.
The Indian pharma services account for approximately 50% of the healthcare innovation market, valued at $16 billion in FY 2023, with 85%–90% of revenue driven by exports. The CDMO segment saw the highest growth, driven by global supply chains shifting away from China and improvement in capacity, capability, and quality by Indian players. Pharma IT also showed robust growth, led by growing global price pressures and demand for omnichannel transformation. International pharma companies are setting up technology ‘innovation hubs’ and global capability centers (GCCs) driven by India’s growing technological expertise. Pharma services is expected to reach $30 billion by FY2028. The shift of focus away from China, coupled with the growing expertise of Indian players, will make India an attractive destination for outsourcing over the next few years.
India’s healthtech market, the next prominent segment within healthcare innovations, witnessed strong growth, as it more than doubled from $3 billion in 2020 to $7 billion in FY2023. This growth, fueled by both the Covid-19 pandemic and efficiency needs in healthcare, has seen healthtech claim roughly 25% of the overall healthcare innovation space. Consumers are increasingly seeking “phygital” experiences with seamless integration across channels. Healthtech players have also started expanding into global markets to increase their addressable patient pool, especially for services with a limited willingness to pay in India. The segment also witnessed consolidation over the last few years as large incumbents and digital natives acquired players in a bid to hasten their foray into digital health.
“Indian healthcare innovation has created a market valued at $30 billion and growing at 15% per annum. Indian healthtech entrepreneurs have served more than 400 million patients by providing access to high quality affordable care thereby creating a $7 billion market in India. This healthcare revolution is at its beginnings. As India’s health tech companies focus increasingly on profitability and grow revenues at 25% CAGR in the next 3 years, investors in the space will keep on generating outstanding returns”, commented Charles-Antoine Jannsen, Managing Partner, HealthQuad.
India’s vaccines and biotech sector, valued at $4 billion in FY2023 contributes 15% to the healthcare innovation market having proliferated in the past three years. India remains a global powerhouse, supplying 60% of global vaccine demand. Supply of Covid-19 vaccines bolstered its position. Additionally, innovative funding models and the entry of new investor classes in biotech are promising advancements for future biotech and vaccine development.
MedTech is evolving from an import-reliant industry to one capable of producing innovative, new-to-the-world products. This $11 billion market, currently dominated by imports (75-80%), witnessed Indian players contribute roughly $2.5 billion in FY 2023, showcasing significant growth. Once focused primarily on value engineering and replicating existing technologies, domestic players are now driving innovation, developing groundbreaking “new-to-the-world” products such as portable diagnostic tools and biodegradable stents. Tightening regulations and price caps also push players to innovate and produce high-quality products at competitive prices.
Investor sentiment around healthcare has remained stable across stages over the last five years. Investments in healthcare innovation typically ranges from $1.5 billion to $2 billion annually. Healthtech consistently attracted interest, netting more than 55% of overall deal volume across the last four to five years. The report highlights a crucial shift in investor focus towards: Higher Unit economics: Investors are increasingly demanding sustainable business models with clear paths to profitability; Growing interest in pharma services: Investments in areas like contract research and manufacturing are expected to rise and increasing appetite of investments medtech and biotech: These nascent sectors are attracting growing investment, powered by promising innovations.
The report further highlights emergence of five key themes that will shape the future of healthcare innovation in India:
· Rising Consumerization of Health: Post-pandemic, individuals are increasingly proactive in managing their health, driving demand for personalized and accessible solutions. Telehealth, wearable devices, and home-based diagnostics are experiencing a surge, empowering individuals to take control of their well-being.
· Reconfigurations to the Global Value Chain: India’s potential as a manufacturing and innovation hub is attracting global players seeking cost-effective solutions and a large talent pool. This reconfiguration will foster international collaborations and accelerate innovation within the Indian healthcare ecosystem.
· Deepening Scientific and Technological Expertise: Talent development and collaborative research initiatives are propelling India’s scientific and technological capabilities in healthcare. Universities, research institutions, and startups are partnering to create a robust innovation ecosystem, fostering groundbreaking discoveries and solutions.
· Regulatory Changes Supportive of Growth: Government initiatives like ease of doing business reforms and open innovation platforms are removing barriers and streamlining processes. These encouraging policies create a fertile ground for startups and established players to flourish.
· AI/ML Technology Integration Across Segments: Artificial Intelligence and Machine Learning (AI/ML) are poised to revolutionize all segments of healthcare. From drug discovery and personalized medicine to diagnostics and robotic surgery, AI/ML algorithms will enhance efficiency, accuracy, and accessibility of healthcare services.
