Going forward, what would be the strategy for growth of your India business?
We are currently focusing on three things to drive our business growth here, access, quality and affordability. In healthcare, affordability is a challenge that we have to constantly meet. With more than 600 million people in the country, having almost little to healthcare, we have to focus on making it affordable. We try to look at the challenges in the market, and then design a product that would fill the need gap. As for example, we checked out that infant mortality is major problem with more than 5 per cent infants dying in the country. The Lullaby Baby Warmer, that we used to import earlier, used to cost $30,000. But, now we are manufacturing it in India specially customised for the Indian market and the cost has come down $ 3,000. The new design is based on the market requirements here. We call it the in-country- for- country products. These products have features that one ‘needs to have’ rather than those that are ‘nice to have’.
What kind of investment in involved in product development?
We have a team of 1100 engineers and scientists here, and have recently devoted $55 million dedicated facility to house these people who work on customising products for the Indian market. We add around 150 to 200 people every year and around $50 million is spent annually on research and product development and another $5-6 million on capex. India has the company’s second largest R&D lab after the US for and the country accounts for nearly 20-25 per cent of our global engineer and scientist population. The other two centers are in Munich in Germany and in China. We plan to invest an additional $25 million in lab equipments for engineers in India to develop local products.
Do you also plan to export these in-country-for-country products out of India?
Yes, these are exported to target countries in Eastern Europe, in Arab nations and across the subcontinent. The ultra-sound machines and the Lullaby range of products for babies are top on the list. Nearly, 40 to 50 per cent of our India revenues comes from exports.
How much cost reduction do you target to achieve with these locally developed products?
We target to take out at least five to seven per cent of the costs every year. One has to constantly work on reducing cost, and pass it on to the consumer to survive in a competitive market. We are also working on alternate models to reduce cost for our customers, like we have tied up with the State Bank of India, and now one can pay in equal monthly installments for a diagnostic machine. A paramedic or a general physician in the rural areas or tier-II cities could possibly buy an ECG machine that comes with an interpretation software that helps a non-cardiologist compare standard with actuals. He can earn and pay.
What is the size of the Indian diagnostics market, and what kind of growth do you target this year?
The overall medical devices market in India is around $3 billion and of this around $550 to 600 million is the diagnostics space which is clocking a compounded annual growth rate of 13 to 14 per cent. Net healthcare market is around $45 to 50 billion, and there is huge potential for growth in the diagnostics space where the density is quite low now. We plan to grow by around 30 per cent in revenues this year compared to a 15 per cent growth in 2009. GE Healthcare follows a calender year fiscal.
Which areas would be the main growth drivers for you in 2010?
The growth this year would come mainly from three areas, the in-country-for-country products that will create a new market for itself; the oncology equipments, and from public-private-partnership projects. We are in talks with many state governments in this regard, and some have shown positive response. Government business accounts for nearly 25 per cent of our net turnover, and of this, less than 10 per cent comes from PPP.