India’s Hospital Sector Poised for 11–12% Growth as Bed Shortage, Insurance Uptake Fuel Expansion: CareEdge Ratings
- 2 Million Bed Deficit Sets Stage for Volume-Led Growth
Mumbai, 31st December 2025: According to CareEdge Ratings, India’s hospital industry is set for healthy expansion, with a projected CAGR of 11–12% over the next 3–5 years, driven by demographic shifts, rising insurance penetration, medical tourism, and renewed capital expenditure in hospital infrastructure.
At the core of this growth outlook lies India’s chronic underinvestment in healthcare infrastructure. Despite accounting for nearly 18% of the global population, India has only ~16 hospital beds per 10,000 people, significantly below the WHO-recommended norm of 30 beds per 10,000. This gap translates into a structural deficit of nearly two million beds, highlighting the magnitude of unmet healthcare demand. A comparative chart on global bed density underscores that India continues to lag both developed nations and several emerging economies, reinforcing the long-term opportunity for hospital capacity expansion.
The infrastructure shortfall is further accentuated by a pronounced urban–rural imbalance. Nearly 65–70% of hospital beds are concentrated in urban centres, while around 65% of India’s population resides in rural and semi-urban areas. With public healthcare spending historically constrained at 2–4% of GDP, private sector participation remains critical to addressing this imbalance. As a result, private hospital chains are expected to be the primary beneficiaries of incremental demand over the medium term.
Rising Demand Drivers: Demographics, Insurance, and Medical Tourism
India’s ageing population is expected to increase demand for chronic disease management, preventive care, and specialised treatments. Concurrently, health insurance coverage has grown from approximately 20 crore in 2014 to around 55 crore in 2024. Coverage, however, remains around 40%, leaving ample scope for expansion. With initiatives like PMJAY, rising health awareness, and simplified digital onboarding, insurance penetration is expected to reach 47–50% by FY30, driving higher hospitalisation rates and boosting demand for organised healthcare services.
Medical tourism also continues to be a key growth driver. With over 7 lakh medical tourists visiting India in 2024, the country remains a top-10 global destination for healthcare services, offering cost savings of 60–90% compared to international alternatives. Around 85–90% of these visitors are from Africa, West Asia, and other South Asian countries.
“India’s two-million-bed deficit is not a cyclical gap but a long-term structural opportunity. Rising insurance coverage, medical tourism, and expanding Tier-2 and Tier-3 networks are ensuring that new capacities will be absorbed efficiently, supporting sustained volume-led growth alongside stable margins. said Ravleen Sethi, Director, CareEdge Ratings.”
New Capex Cycle Emerging
Positive Business Outlook Supported by ARPOB Momentum and Capacity Expansion
Average Revenue Per Occupied Bed (ARPOB) has grown at a CAGR of 8–9% over the past five years, driven by enhanced case mix, high-end surgeries, and increased insurance adoption. In FY25, ARPOB rose by 7%, and CareEdge Ratings expects continued growth of 5–6% annually over the next two years. Occupancy levels have remained stable at 62–64%, supporting strong cash flows and a renewed capex cycle.
Person Covered Under Health Insurance (crore)
Healthy Margins and Strong Credit Metrics
Listed hospital players have recorded revenue growth at a CAGR of 15–16% over the past five years, with EBITDA margins stabilising at 21–22% due to operational efficiency and cost management. CareEdge Ratings projects that operating margins will remain above 22% despite new capacity additions.
The surge in cash flows post-COVID has triggered a major capex cycle. Leading hospitals added ~3,200–3,300 beds in FY25, with ~15,000 beds planned over the next three years, representing an 11–12% annual capacity growth. Net debt to EBITDA has improved from ~5x in FY19 to ~1.4x, maintaining comfortable leverage even as expansion accelerates.
Strategic Outlook
While most new investments remain concentrated in metro areas due to higher-paying patient profiles and clinical talent availability, hospital chains are increasingly expanding into Tier-2 and Tier-3 cities. Adoption of digital health solutions and AI-enabled diagnostics is expected to enhance utilisation and complement capacity creation in underpenetrated regions.
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