Public Health in India: slowly turning Private?

As India aspires to establish itself as a global economic power, ensuring the health and well-being of its citizens is a crucial need. With this end in mind, what India needs right now is health care system which is not just comprehensive and accessible but also cost-efficient and scalable. Achieving these goals by itself would be a formidable task for the government, considering the state of our existing healthcare infrastructure, our rapidly growing population and the sheer geographical size of the country. This is where the private sector can play a key role.

The Need:

Improvement of public health care” is mentioned as one of the primary duties of a state under the Indian Constitution. However, the numbers do not validate this fact. Despite state-driven healthcare facilities being nearly free of cost, national spending on health care is around 1% in India, much lower than other emerging nations. Also, fixed costs like salaries rather than equipment or facilities constitute a major chunk of this expenditure. This leads to dilution in the level of service, reach as well as capacity of government run health facilities. In addition, they are plagued by problems such as staff absenteeism, inadequate equipment and shortage of medical supplies.

Healthcare spend in India across different sectors

Figure: Healthcare spend in India across different sectors

Avenues for collaboration:

As shown in the above graphic, household expenditure on healthcare is significantly greater than government expenditure, indicating popular preference of private medical care instead of the aging public health system. These private service providers include both for-profit and non-profit organizations and they collectively account for more than half of the hospitalizations. While they may not be a substitute for the public sector, involvement of the private sector is imminent to achieve health-related goals.

There are four key areas where private sector collaboration with public sector can prove to be highly beneficial – Infrastructure Creation, Health Insurance, Management & Operations and Medical Education.

Infrastructure Creation

Quality healthcare is a highly capital intensive business. The cost of a bed in a medical facility can be as high as 25 lakhs. Land and building costs account for close to 65% of the initial capital spend. Medical equipment, which are mostly imported are another major cost for hospitals. These capital costs and the resulting high prices for health care services make them unaffordable for a large segment of the population. As a consequence private players are highly circumspect about investing in health care, especially in non-urban areas.

The government can break this circle by incentivizing private investments subsidizing the cost of land. Import tax exemptions on medical equipment and tax relief for capital investments are other measures to encourage private investment in healthcare.

Health Insurance

With less than 10% of population insured, India has one of the lowest penetration levels of health insurance in the world. More than 50% of Indian healthcare spending is an ‘out of pocket’ expense, implying a serious risk to poor households who have to borrow money at exorbitant rates to pay for treatment. However, private sector involvement in central government schemes like the Rashtriya Swasthya Bima Yojana (RSBY) can solve this issue.

Management & Operations

The technical efficiency and operational knowledge of these private players can be leveraged through contract based models for services like housekeeping, catering, infrastructure maintenance, medical inventory management, diagnostics, blood banks and ambulance services. An example would be the partnership model in Andhra Pradesh where ambulance services are operated by private partners using vehicles owned by the government.

Medical Education

Providing health care services in a huge country warrants a large number of skilled professionals. This provides private sector with an opportunity to use the government hospital infrastructure to provide training for nurses, and other paramedic staff. The government can also choose to open up healthcare education to corporate entities to increase training capacity.

The Limitations:

However, the private sector cannot be the all-encompassing solution to the issue and few key areas cannot be left at the mercy of market forces. These include non-profit work like immunization, maternal care and health education. Since treatment is more profitable for private organizations than prevention, the latter will always be neglected under a private sector watch. Disease prevention, child and maternal care  will continue to be a government responsibility.

Another issue of Moral hazards is also worth mentioning. For example, if the government becomes an exclusive buyer of healthcare insurance while the services are provided by corporate entities, it may lead to higher costs through unnecessary tests, surgical interventions and excessive medical prescriptions.

It is clear that the private sector will need to play an important role along with the public sector in the provision of health services. How well the private sector and the government actually work together is something to look forward to.

Sahil is a PGP  student at IIM Ahmedabad and a member of the Consult Club. As an Associate Consultant at Ernst & Young, he was involved in the launch of India’s first domestic debit-card system and other projects in the electronic payments space. He is passionate about technology, new business development and Web 2.0. Sahil holds a B.Tech in Mechanical Engineering from IIT Bombay. 


New Trends in Open Education: MOOCs

The concept of open education is old: universities offering distance learning programs, such as India’s IGNOU, have been around for years. However, open education is more than simply distance learning through the Internet. Two recent ideas include Open Educational Resources (OER) and the more recent Massive Online Open Courses.

Open educational resources refer to teaching materials or resources which are freely accessible. Examples include MIT’s OpenCourseWare, started in 2002. NPTEL, which posts lectures from IIT faculty, might qualify as an Indian example.

2011 saw the advent of what are called Massive Open Online Courses (MOOCs). These are web-based, free courses aiming at global participation. Offered by faculty from leading US universities, these courses do not amount to a degree or a credit. The only motivating factor seems to be the chance to learn from and interact with the experts. Technology allows MOOC class sizes to be gigantic. These courses actively involve students through in-class quizzes, homework and examinations that are graded.

One of the first was the Introduction to Artificial Intelligence course, offered by two Stanford faculty. It saw 160,000 participants worldwide, 23000 of which completed it. The class used video lectures, with in-video quiz features. Quizzes and assignments were treated similarly. Students were given the benefit of a discussion forum on, which saw questions being raised and answered at a more advanced level than the class itself. In an effort to simulate real-life office hours, the instructors answered student questions in short videos uploaded to the site.

In 2012, Sebastian Thrun founded Udacity. Funded by Charles River Ventures and Andreessen Horowitz, the start-up offers online courses mostly in science and technology subjects. A similar venture, Coursera currently offers courses with faculty from more than 30 major US universities. It has raised capital from Kleiner Perkins Caufield and Byers and New Enterprise Associates. MIT and Harvard have collaborated to build edX, a not-for-profit platform offering a variety of courses.

The Indian scene

According to industry research, 4.8% of the total students enrolled on Coursera are Indians, with 93 groups in Delhi alone. Interestingly, about 67% of Coursera students are not from the United States and many of those are from developing nations. This might indicate a high interest in either the content of the courses (perhaps for remedial purposes), or the branding associated with elite US universities.

Can MOOCs ever be a viable educational model?

Despite the excitement, these companies’ business model is unclear. None of the courses lead to a university-approved degree. All of them are currently offered free of cost. Suggested revenue models include:

  • charging the students who complete the course a small fee for a certificate (Coursera)
  • serving as a “headhunter” for companies, matching successful students with organizations for a fee (Udacity)

These options depend on portion of the massive student base – those who actually take the courses in order to enhance their resumes, rather than those who take them purely out of interest. Given that the courses do not carry the same weight as traditional degrees, the former are low in numbers and the percentage of dropouts is high. But charging all students a fee is against the main philosophy of the “open education” movement, and risks lowering participation and interest.

A serious criticism of online education comes from educators who assert that online education is a flawed model, since it only delivers content and fails to transfer the classroom experience and faculty contact that forms a university’s worth. Thus, MOOCs can never ‘disrupt’ the present educational system, but at best serve as “dumbed down” versions of courses for the masses. Moreover, how does one monitor students for unethical behaviours?

Platforms like Coursera are planning to experiment with proctored examinations and identity checks. This model allows them to charge fees for serious students, who might then use the course for college credits.

Core challenges remain the following:

  • Credibility: The core utility of an education lies in its ability to impact future careers.
  • There is no data yet about whether students actually benefit from these courses in the job market.
  • Technological constraints: Can technology evolve to the point where MOOCs can be used for subjects whose evaluation is nearly impossible to automat? Without this, will online learning remain restricted to basic courses? If so, what value will they add to a prospective student?
  • Scalability: Similar to technological constraints, does the large-scale nature of these courses mean a significant “dumbing-down” of content?


While MOOCs cannot claim to be a substitute for offline modes of education in any way, they may turn out to be a valuable resource for reskilling and constantly updating one’s knowledge, especially in high-technology sectors. Yet the credibility gap and the lack of a tested revenue model means that it remains to be seen whether this is truly a new trend or a passing fad.

Krittika is a PGP-1 student at  IIM Ahmedabad and a member of the Consult Club. She is interested in technology and learning. She holds a B.E in Information Technology from Netaji Subhas Institute of Technology, Delhi.

Strength for Indian Steel

The aspiration to become the second largest producer of steel in the world has been burning for long and may soon be realized. Developments over the years have presented mixed signals – on one hand, many international players are keen to enter the Indian steel sector and the domestic market promises high demand for the output generated from the teeming steel factories over India; on the other hand, every resource that is required to reach this stage has its own set of problems, posing a new challenge for every project. Yet, the Ministry of Steel is very bullish that the milestone is close approaching.

The National Steel Policy 2005 envisioned that annual steel production will increase to 110 Million Tonnes (Mt) by 2020 with an annual growth rate of 7.3%. The industry exceeded the projections and today, India is the fourth largest producer of steel (as of 2011 figures).  At present, the installed capacity of Steel plants in India is 90 Mt and the production in year 2011 was 71.3 Mt. The year wise steel production in India is shown in Exhibit 1 and the year-wise list of top 5 manufacturers is shown in Exhibit 2.

Exhibit 1: India Crude Steel Production (2000-01 to 2011-12)


Exhibit 2: Top 5 steel manufacturers (2010 and 2011)



1. China 683.9 Mt China 637.4 Mt
2. Japan 107.6 Mt Japan 109.6 Mt
3. United States 86.4 Mt United States 80.5 Mt
4. India 71.3 Mt India 68.3 Mt
5. Russia 68.9 Mt Russia 66.9 Mt

[Source: World Steel Association]

However, considering the performance in the last 5 years, this policy sounded too conservative and the Ministry of Steel released a new policy last year in June. The new policy predicts that the industry will grow to produce 275 Mt of crude steel by 2025-26 at a CAGR of 6%.

A number of reasons promise the expected sustained high growth of Indian Steel sector over the coming few years. India’s annual per capita steel consumption is 55 kg compared to the world average of 206kg and more than 500kg in the developed nations. This presents a huge opportunity and demand that can be fulfilled over the coming years. This argument is further reinforced by the fact that the 12th five year plan targets infrastructure investments to the tune of $1 trillion. This projects the domestic steel demand to grow at 14% annually.

At the same time, these expectations are moderated by various concerns, primarily, the intricate land allocation process, availability and access to raw materials and the actual growth of India which will define the future requirement of steel. Such a massive expansion of the Steel Industry can’t be achieved by only brown-field expansion. It requires significant investment in green field projects. Ironically, bureaucracy has thwarted this process as every project is stalled or significantly delayed because of issues related to land acquisition. This is the first major roadblock. Even, the Ministry of Steel itself recognizes this issue in the new steel policy draft report in terms of number of agencies involved, issue related to environmental and forest clearances and resistance against land acquisition. The most blistering examples are the POSCO Steel project in Orissa and Laxmi Mittal’s steel project in Jharkhand. Both these investments were announced way back in 2005 and till date neither of the projects has seen substantial construction. The delay in projects hurts the investors’ expectations and increases the cost of the project significantly in future.

Another set of problem is due to the raw materials. Iron Ore and Coking Coal are the two major raw material ingredients for steel production. Although the country has 28 billion tonnes of Iron ore reserves, the exploitation of these resources is a major issue because of environmental and land acquisition disputes. Simultaneously, the international demand of iron ore, triggered primarily by China, has led to the flourishing of illegal mining in India. As a preventive measure the Government of India imposed restrictions over mining in Karnataka. This led to supply side constraints for steel plants in the past 2 years. However, the effect of this ban was somehow mitigated by the increase in export duty on iron-ore. But, a sustainable iron ore supply is required for the Indian steel industry in the future to realize the expected crude steel production of 275 Mt by 2025-26. The second most important raw material is Coking Coal. Although India has plentiful thermal coal deposits, the coking coal resources are limited. Therefore, for the conventional blast furnace plants, the Indian steel makers are heavily dependent on imports. This dependence has hurt the manufacturers from time to time due to fluctuations in exchange rate and international prices of coal. Hence, availability of cheap and good quality raw materials is a major concern that needs to be addressed as it constitutes a major part of the cost stream of steel plants. This concern gains more importance as the crude steel production is expected to go three-fold in next 12 years. The cost of raw materials varies from plant to plant and is as high as around 55% for state owned RINL. The high cost of raw materials leads to high production costs and constrains the manufacturers from decreasing the prices during weak demand cycles.

The expectations are high and the demand side still appears promising but the supply side constraints especially raw materials and land is a major bottleneck which can derail the whole industry in coming future. As the scale of operations is going to increase, an effective and sustainable government policy is the need of the hour, which can take care of the availability of the all the resources as there is no dearth of investors who want a share of the pie of the Indian Steel Industry.

Mani Mahesh Garg is a PGP1 student at IIM Ahmedabad and a member of the Consult Club. He is a graduate from IIT (BHU), Varanasi with B.Tech in Ceramic Engineering. Prior to joining IIM A, Mani Mahesh worked at RINL, a public sector steel manufacturer.

Winds of Change?

Corporate Social Responsibility and the way forward

Today every major company has a CSR policy and not having one is near blasphemy. Corporate activism and popular issues like climate change have pushed CSR to be a standard cost of carrying out business. Although major companies have adopted the CSR policy, many still see it as superficial spending towards “compliance”. As a result, the recent downturn is being seen as a threat to the CSR industry, which is perceived as an avoidable luxury.

In light of this development, companies are rethinking their CSR strategy and are now partnering with NGOs, the government, other companies and even competitors. But one of the most promising developments has been the advent of social entrepreneurship into the gambit of CSR. This promises to create disruptive change, one which pushes CSR from merely being satisficing in nature to something which is ingrained in a company’s strategy.

The Piramal Foundation, the CSR arm of the Piramal group is a shining example. Their mission statement lucidly puts the point across – “Our method is based on a belief that talented young people, challenged to address some of our country’s most common development issues, will find innovative solutions that are relevant, cost-effective, and applicable to the nation at large.” Accordingly, Piramal has built a repertoire of for-profit social enterprises tackling issues from rural health to the supply of drinking water. Among them, Piramal e-Swasthya (erstwhile Mobile Medics) stands out.

Kavikrut, an HBS alumnus, founded Mobile Medics right out of college. As he puts it – “Lack of existing solutions, a grave challenge, a good business plan, and a seed fund led me to take the plunge. I spent about 2 years at Mobile Medics where we treated 2,000 patients across 12 villages.” This zeal and attachment is typically seen in a social entrepreneur which, as per the Ashoka Foundation, is a loose term for “ambitious and persistent people tackling major social issues and offering new ideas for wide-scale change.”

When Mobile Medics wanted to scale up it saw Piramal’s umbrella a perfect place to be under. It saw synergies which led to the absorption of the Mobile Medics team to start eSwasthya. Such synergies helped Piramal not only in effective CSR but also in extending Piramal Health’s competence to the large rural Indian health market.

Unlike traditional CSR, which often lies on the fringes in large companies, involvement with social entrepreneurs brings greater focus. By involving people who in many cases have used their own money and time on projects brings measurable results and financial rigor in social investments. Therefore, we now see huge money being poured by companies into social enterprises through their CSR arms.

It is inevitable that this entrepreneurial approach of tacking social issues will shake the existing “philanthropic” CSR model. However, till now social enterprises have generated more hype than meaningful change. It may pave the way for hybrid business models in the future, but for the time being the corporate behemoths are the ones who can make a significant difference. As in the case of Piramal and Mobile Medics, established companies will collaborate or absorb successful social ventures to further their goals. If we extrapolate this trend, we reach an important academic theory – Corporate Social Entrepreneurship (CSE).

CSE is a process aimed at enabling business to develop more advance and powerful forms of CSR. It makes CSR an integral part of a company’s strategy. A former CEO of Starbucks puts it elegantly, “Aligning self-interest to social responsibility is the most powerful way to sustaining a company’s success.”

CSE requires corporations to have an entrepreneurial culture where cross functional teams harness synergies across various stakeholders. ITC’s e-choupal is a powerful example of how a social initiative has become core to a corporate strategy which links business and society. e-choupal empowers small farmers by removing middlemen in the Indian agricultural markets by leveraging the internet.

Such examples where entrepreneurial activity is supported in a corporate setting are increasing. Further, we can see that the demand for entrepreneurial talent has increased, who are being empowered and given clear goals consistent with the firm’s values which are crucial in advancing CSR.

The transformation of CSR to CSE, if realized, would mean that social values would no longer be viewed as an accessory, but as an important structural component of an organization. As CSE furthers the core objectives of corporations, it amounts to a paradigm shift in how business is done. Such a transformation will definitely be met with massive resistance. Furthermore, social betterment is an area where corporations’ competencies are doubtful. Changing values to look for such disruptive social innovations would enlarge the phase of transition.

However, Piramal and ITC have shown us that the challenges are surmountable. Also, it is increasingly becoming evident that socioeconomic value creation and synergistic partnerships are vital ingredients to a sustainable business today. Till the CSE dream is achieved, many more Kavikruts will partner with leading corporations to enrich the cusp of business and society.

Sachin Bhardwaj is a PGP 1 student at IIM Ahmedabad and a member of the Consult Club. He is passionate about the social sector and public policy. He holds a B.E. in Electrical and Electronics Engineering from BITS Pilani  and has led rural development projects with the help of UNICEF in the past.

Banking Licenses for Corporates: Is there a catch?

On 20 December 2012, the Parliament gave its nod to the long-awaited Banking Laws (Amendment) Bill, paving the way for issuance of new bank licenses by the RBI. And now, one of the most awaited developments in the banking sector is the RBI`s announcement of the guidelines for new banking licenses. While the RBI has been trying to expedite this announcement, indecision regarding grant of banking licenses to corporate houses has been stalling the process.

While the RBI is opposed to letting corporate houses enter the banking sector, the Finance Ministry believes the RBI`s apprehensions are exaggerated and wants the RBI to change its stance. Both the sides have certain valid points and at stake is the growth of the banking sector.

India is one of the most under-banked nations among the bigger economies in the world. (The loan-to-GDP ratio is a barometer for a country`s banking penetration. India`s loan-to-GDP ratio (2011) stands at 75% vis-à-vis China`s 146% and the US` 233%.) New banking licenses are a major step towards tapping the demand for banking services. Though the number of serious aspirants for a bank license this time could number more than 20, the RBI is not likely to issue more than four. (In 1993, when the RBI licensed some private banks, it received 113 applications. Only nine were approved.)

The RBI has been known for its conservative stance in dealing with issues such as inflation and the new banking licenses are no different. RBI`s primary argument against allowing corporate houses to own banking corporations is the fear of conflict of interest. Hundreds of crores of public money might find its way from the banks to the other group companies. Similarly, it is feared that if realty firms are allowed to own banks, they will use them to fund property development and sell risky projects, which in turn could promote a property bubble.

After a string of collapses, the Indira Gandhi-led Congress government had nationalized most large banks in the 1960s. There were accusations of widespread abuse of public funds by bank owners, who siphoned off money to run risky businesses. The RBI’s unwillingness to grant licenses to corporate houses stems from this and the fact that there is no way to ensure that the business houses will change their ways. Similar considerations have also influenced the RBI’s opposition to real estate firms such as DLF.

Of late, the RBI has also found support from leading figures like Nobel laureate Joseph Stiglitz, chairman of the Prime Minister’s Economic Advisory Council C Rangarajan and economist Percy Mistry. The IMF has also supported RBI`s stance in its report “India: Financial System Stability Assessment Update”.

On the other hand, several leading corporate houses like the Bajaj group, Aditya Birla Group and Reliance are keen on starting banking operations in India. One of the major arguments being put forward by the corporates and the finance ministry is that the Banking Laws (Amendment) Bill gives the RBI sufficient powers to prevent the above-mentioned diversion of public funds. Under the new bill, the RBI can supersede the board of directors of a bank for up 12 months if it feels that the board is not working in the interest of shareholders and depositors’.  In such a case, RBI could run the bank by appointing an administrator during the period. Being armed with such powers, the RBI can effectively regulate and manage the functioning of banks.

Secondly, several of the interested corporates such as the Aditya Birla Group, Mahindra & Mahindra and the Bajaj Group already have full-fledged non-banking financial companies taking deposits and lending funds. These companies have sufficient experience in handling money from a large number of retail investors; they have also created credibility and trust in this regard.

Lastly, the winners in the earlier round of bank license issuances have had a mixed record. There are successes like ICICI Bank (which converted from a development financial institution), HDFC Bank and Axis Bank. But two new banks — Centurion Bank and Bank of Punjab — merged and were later acquired by HDFC Bank. Global Trust Bank was taken over by Oriental Bank of Commerce after a major scam almost wiped out its net worth. So, one can`t say for sure that keeping corporates out of banking will reduce bank failures.

Finally, the middle way being suggested is that priority be given to non-corporate entities or merchant banking institutions who will be “graduating” to retail banking after the licenses. Also, corporate houses shouldn`t be completely barred from the process. The RBI must use its new-found powers to allow greater banking access to the populace while running a tight ship, as it has in the past. There is no other way to increase banking penetration in a 1.25-billion strong country, where over 40% of the adult population doesn`t have access to banking services.

Abhinav Tripathi is a PGP1 student at IIMA, and is member of the Consult Club here. He graduated from BITS Pilani (Pilani Campus) in 2009 with a B.E.(Hons.)  in Computer Science. Prior to joining the post-graduate program at IIMA, Abhinav worked at Equirus Capital, a boutique investment bank.