India's healthcare system faces major challenges in accessibility, quality, and cost. With only 1.3 hospital beds per 1,000 people in 2024 -- well below the World Health Organization (WHO's) recommendation of three per 100 -- the country struggles to provide adequate care, especially in rural areas. Over the past two decades, private equity (PE) has played a significant role in addressing these gaps. PE investments in India's healthcare and pharmaceutical sector reached $5.5 billion in 2023, a 25 percent increase from the previous year. The country's healthcare market including diagnostics, outpatient consultations, retail pharmacies and hospitals was valued at $180 billion in 2023, and is expected to reach about $320 billion by 2028. Major investments in hospital chains have led to expanded and upgraded facilities, particularly in Tier 2 and Tier 3 cities, improving healthcare access for millions.
As of 2024, India had 44,100 private hospitals and approximately 1.18 million beds in private hospitals, with an expected addition of more than 22,000 beds in the next few years. However, the focus on high-margin services has sparked concerns about rising healthcare costs and inequities in access, as wealthier urban populations benefit more from these investments while rural and low-income communities face continued barriers. These disparities raise questions about how PE investments align with public health objectives and the need for equity in healthcare.
The Indian Healthcare Sector
India's healthcare sector is a mix of public and private entities, with the private sector playing an increasingly dominant role. Historically, the public system has been underfunded, with health spending accounting for only 1.2 percent to 1.5 percent of GDP, well below the 5 percent recommended in order to achieve universal health coverage.
Public facilities are often overstretched and under-resourced, leaving large gaps in service delivery. In contrast, the private sector, consisting of nursing homes to large hospitals, offers better services for those who can afford it. Their exorbitant cost, however, runs the risk of exacerbating inequality in healthcare access.
Since economic liberalization in 1991, the private sector's role has expanded through market reforms and government policies like the National Health Policies of 2002 and 2017. These policies encouraged public-private partnerships (PPPs) to enhance healthcare delivery, focusing on infrastructure, specialized services and universal health coverage. The 2017 policy, in particular, facilitated private investments, integrating private providers into government initiatives like Ayushman Bharat Yojana, which aims to increase healthcare access for underserved populations.
However, this reliance on the private sector has raised concerns about rising healthcare costs and unequal access, particularly for marginalized groups, as private investments are often concentrated in urban areas. In 1986-87, hospitalization in private hospitals cost 2.3 times more than public hospitals in rural areas and 3.1 times more in urban areas. By 2017-18, these gaps widened to 6.4 times in rural areas and 8.0 times in urban areas. This profit-driven healthcare system has widened inequalities, forcing rural areas to depend on poorly funded government hospitals, which often lack doctors, medical equipment, and essential services.
Expanding Private Sector
Private investments have significantly boosted India's healthcare infrastructure over the past decade. Around 63 percent of India's 70,000 operational hospitals and 60 percent of its 1.9 million hospital beds are in the private sector. Projections indicate that over 22,000 new hospital beds will be added in private hospitals in the next 3-5 years, tripling the number added between 2019 and 2024.
PE-backed hospital chains like Manipal Hospitals, Fortis Healthcare, and Care Hospitals have expanded their networks and improved services using PE funds. For instance, in 2024, Fortis announced plans to invest $156 million to expand its facilities, while Manipal Hospitals has, over the last five years, spent $251 million to expand its network through acquisitions. US-based private equity firm Blackstone has, since 2023, reportedly committed nearly $1 billion to the sector.
Between 2021 and 2024, healthcare accounted for 17-18 percent of total PE exits in India. While these firms have invested to tap into India's expanding healthcare market, their ability to divest in response to global market dynamics creates instability, underscoring the need for regulatory oversight to ensure that healthcare infrastructure remains resilient, regardless of market fluctuations or geopolitical shifts.
Beyond physical infrastructure, PE investments have fueled growth in digital health platforms such as Practo, which secured $193 million in funding by 2022. The expansion of telemedicine and online pharmacies has improved access to healthcare services, especially during the COVID-19 pandemic.
Healthcare Costs
The commercialization of healthcare services has resulted in markedly higher medical bills, especially for tertiary care and diagnostic services. In 2024, out-of-pocket health expenditure constituted approximately 54.8 percent of current health expenditure (45.98 percent in 2022) in India, one of the highest rates globally, with private hospitals contributing significantly to this figure. This situation threatens the viability of universal healthcare objectives and fosters indebtedness among families reliant on expensive medical treatments. As of 2023, healthcare expenses pushed 8-9 percent of all Indian households below the poverty line.
In addition, the increased reliance on PE in healthcare impacts the overall system. PE-backed entities may overlook less profitable, yet essential services such as preventive and primary healthcare. Despite the expansion of healthcare infrastructure in India, inequities in access to quality services remain a significant challenge. Private equity investments typically focus on high-return markets, prioritizing urban and affluent populations while neglecting rural and marginalized communities.
Nearly 70 percent of India's population lives in rural areas, where healthcare resources are scarce and access to quality care is limited. PE investments do little to change that. Research shows that private equity-backed hospitals and diagnostic centers are predominantly located in urban areas, with few established in rural regions. This concentration not only reinforces socioeconomic divides but also forces rural residents to travel long distances for medical attention, resulting in delayed treatment and worsening health outcomes.
Meanwhile, the emphasis on specialized treatments and elective procedures comes at the expense of comprehensive primary care, which is essential for addressing public health needs and reducing disparities. This model diverts attention and funding from foundational services that can prevent illnesses and promote community health. Consequently, access limitations for vulnerable populations -- rural or urban -- perpetuate a cycle of inequality where health outcomes closely align with socioeconomic status.
One effort to address this was built into the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) in 2018, in which private hospitals (including in Tier 2 and Tier 3 cities) were encouraged to empanel themselves under the scheme to provide services at affordable rates. However, since then, 609 private hospitals have opted out of the scheme, citing low reimbursement tariffs and delayed payments from the government.
Conclusion
Private equity investments are reshaping India's healthcare sector, enhancing infrastructure and services. However, this transformation presents challenges related to equity, access, and rising costs. The profitability-driven focus of PE-backed healthcare entities has led to increased healthcare expenses and disparities in access. While urban and affluent populations benefit from improved services, rural and low-income communities often face barriers to quality care.
To address these challenges, regulatory policy interventions are essential to ensure that healthcare remains accessible and equitable for all. Indian regulators and policymakers need to do more to understand the influence of profit motives on healthcare access in order to critically assess existing policies that prioritize financial returns over patient care. Even as the private sector invests in expanding India's healthcare infrastructure, policymakers must assess these developments against a framework that encourages public investment in healthcare, expands the availability of comprehensive services, and ensures that marginalized communities receive the care they need.
Additionally, recognizing the systemic barriers created by market-driven approaches allows policymakers to advocate for reforms prioritizing health equity and social justice. Ultimately, fostering a more inclusive dialogue around healthcare can promote a system that values human well-being over profit, paving the way for a more equitable healthcare landscape in India.