Tariff turbulence demands India’s urgent shift to healthcare self-reliance

India’s healthcare system, already constrained by infrastructure gaps, cost pressures, and dependency on global supply chains, faces a new US tariff shock on medical device exports and the looming possibility of trade retaliation (see Exhibit 1). Pharmaceuticals may have been spared for now, but that shouldn’t offer false comfort. The deeper risks to India’s economy, healthcare resilience, and global standing are increasing daily. If the government and industry wait too long to act, they’ll be forced to react to a crisis instead of proactively shaping a solution.

Exhibit 1: Surplus in pharma, deficit in devices

Source: Exports Promotion Council of Medical Devices, HFS Research, 2025

The US may be targeting trade imbalances, but these tariffs are a wake-up call for India. They expose the country’s overdependence on key export markets and foreign-manufactured medical supplies, which could destabilize provider finances, squeeze payer margins, and slow down healthcare innovation.

Health insurers may not pay more now, but they’ll pay more soon

India’s health insurance sector, especially public schemes such as PMJAY (Ayushman Bharat Pradhan Mantri Jan Arogya Yojana) and ESIC (Employees’ State Insurance Corporation), might not face direct exposure to tariff changes (see Exhibit 2). However, the indirect impact of rising healthcare delivery costs is inevitable. Tariff-induced price hikes on surgical consumables, diagnostic equipment, and medical infrastructure will result in inflated hospital bills and procedure costs, ultimately driving up claims under public and private insurance plans.

Exhibit 2: Health payers have minimal effect

Source: HFS Research, 2025

Moreover, insurers operate within a tight price-regulated environment, leaving little room for adjusting premiums. With loss ratios exceeding 90% in public schemes (see Exhibit 3), tariff-led inflation could further destabilize their economies, leading to coverage constraints, claim rejections, or delays in treatment.

Exhibit 3: Potential claim ratio may get escalated for India’s health insurance
(2025–26)

Source: IRDAI, NHA, HFS Research, 2025

Indian payers may not face a crisis right now, but the compounding effects of rising healthcare inflation, increased utilization, and global pricing volatility could quickly tip the balance.

Healthcare providers face a brutal cost reality with little room to cope

India’s hospitals are facing increasing financial pressure, but the impact isn’t the same everywhere. In large cities, private hospitals benefit from steady funding, insured patients, and stronger financial systems, allowing them to manage rising costs more effectively. In contrast, rural hospitals and public facilities operate with fixed budgets and limited resources.  Even a slight increase in the price of essential supplies can push the system to a breaking point. These hospitals don’t have the breathing room to absorb shocks, yet they serve the people who need care the most.

The 26% tariff by the US on medical devices hurts exporters and tightens global supply, leading to higher prices of imported equipment and consumables used in domestic care. Unlike the US, Indian hospitals don’t benefit from scale-based contracting or advanced leasing strategies. Instead, many hospitals procure equipment on cash or credit, often without service guarantees. If current cost trends continue, we’ll see deferred upgrades, stalled infrastructure projects, and even clinical service cutbacks, mainly for diagnostics, intensive care, and surgeries (see Exhibit 4).

Exhibit 4: Tariff-exposed medical inputs used in Indian hospitals

Source: FICCI, NATHEALTH, HFS Research, 2025

If current trends hold, India risks entering a two-speed healthcare system with a widening urban-rural divide as private hospitals absorb tariff shocks and innovate while public and rural systems stagnate under rigid budgets, capped reimbursements, and resource constraints.

The Bottom Line: India must treat these tariffs as a signal to reinvent its healthcare supply strategy radically.

These tariffs aren’t just trade penalties but stress tests of India’s healthcare model. With costs rising, exports threatened, and healthcare demand surging, India has no choice but to pivot aggressively toward domestic capability and diversified trade partnerships.

Enterprise and policy leaders must act on four urgent fronts:

1. Rebuild local device manufacturing ecosystems, including those for gloves and gowns and high-tech imaging, monitoring, and surgical equipment.
2. Focus on fair trade deals that ensure zero tariffs and equal access.
3. Create pooled procurement and leasing models for providers to soften inflation spikes on imported tech.
4. Reform insurance models to account for real-world inflation and develop tiered coverage to absorb systemic cost changes better.

India’s future as a global health leader depends on how it responds to this disruption. The opportunity is massive, and so is the cost of hesitation.