Informal Sector Medical Practice in India

While casually reviewing a report yesterday, I learnt that many developing countries are constrained by a disproportionately large informal sector. In some countries in Africa, Latin America and Asia, It is estimated that the informal portion of the economy equates to between half and 70% of the formal GDP. What the real effects of this is on overall growth are perhaps not properly quantified but my thinking is that a large informal sector cannot be a positive economic factor for an economy.

On the other hand, my assumption has been that  a large informal sector is possible especially because of the preponderance of agriculture production and small scale trade. It appears that the informal sector is now going into other professions that have been considered a part of the formal economy such as medicine. Michael Spectre's article appearing in the New Yorker Magazine illustrates how the rise of a "medical red light district" in one of India's main cities complicated the ability to properly diagnose and render treatment for tuberculosis.

Not only is there a number of ill-educated medical practitioners but they are complimented by diagnostic centres that carry out radiological tests and quacks dispensing medicine to poor and vulnerable patients. This superstructure is supported by the perverse incentives that allow for medical practitioners who are employed in public hospitals to have other clinics to which they channel patients seeking help from the public hospitals. This elaborate scheme of brokers means that public hospitals are direct competitors for the private clinics operated by the same doctors. The effect is understandable and has devastating consequences for patients because of the clear sabotage of public facilities.

In my view, this is perfect illustration that public sector professionals are sometimes the greatest obstacles to attaining positive development outcomes. Better pay for medical practitioners may help but I doubt that the lucrative practice would stop just because the doctors have better pay per month. Being doctors who understand that incorrect dispensing of medicine leads to drug resistance shows that they are moved by economic incentives against their better judgement. Part of the solution lies in realigning those incentives to the public interest by rewarding doctors for the health outcomes that they achieve.