Health is of paramount importance in the social and economic development of the world. It is in this regard, that the pharmaceutical industry is widely recognised as a predominant driver in the process of economic development. The Indian Pharmaceutical Industry has acquired a noteworthy position in the global pharma sector and has been achieving significant growth in the recent years. In addition to catering to the needs of the domestic demand, the pharmaceutical industry is also engaged in contract manufacturing, contract research, clinical trials, contract R&D, and direct exports to developed and developing country markets.
Globally, the Indian pharmaceuticals market is the third largest in terms of volume and thirteenth largest in terms of value. Over 65 percent of demand for DPT (Diphtheria, Pertussis, Tetanus) & BCG (Bacillus Calmette- Guerin) and 90 percent Measles vaccines are supplied by India.
By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and 6th largest market globally in absolute size.
Exports
The exports of pharmaceutical products were valued at US$ 14.7 billion during the year 2018-19, registering a year-on-year growth rate of 11.3 percent. The exports have displayed a compound annual growth rate of 5.7 percent during the period 2013-14 to 2018-19, as the value of exports increased from US$ 6.7 billion to approximately US$ 14.7 billion during this period. The exports of pharmaceutical products during 2016-17 remained stable vis-à-vis 2015-16, at US$ 12.9 million. In 2018- 2019, the export of drug and pharma products witnessed exceptional growth of 11.3 percent, which is more than 5 times as compare to previous year.
Exports of Pharmaceutical Products from India
|
Year |
Export value (billion US$) |
Growth Rate (percent) |
|
2013-14 |
11.1 |
10.7 |
|
2014-15 |
11.6 |
4 |
|
2015-16 |
12.9 |
11.4 |
|
2016-17 |
12.9 |
0.2 |
|
2017-18 |
13.2 |
2.5 |
|
2018-19 |
14.7 |
11.3 |
|
Source: DGCIS |
Major Export Destinations of Indian Pharmaceutical Products
|
Country |
2018-19 Value |
Share In Total Pharma Exports (%) |
|
U S A |
5389.74 |
36.53 |
|
U K |
533.08 |
3.61 |
|
South Africa |
531.22 |
3.60 |
|
Russia |
410.22 |
2.78 |
|
Nigeria |
391.52 |
2.65 |
|
Brazil |
269.55 |
1.83 |
|
Canada |
263.74 |
1.79 |
|
Australia |
248.11 |
1.68 |
|
Germany |
229.00 |
1.55 |
|
Kenya |
223.56 |
1.52 |
|
Total |
14754.07 |
100 |
|
Source: DGCIS |
Foreign Direct Investments
FDI Policy
-
100 percent Foreign Direct Investment (FDI) is allowed under the automatic route for greenfield pharma.
-
74 percent Foreign Direct Investment (FDI) is permitted under the automatic route in brownfield pharmaceuticals. Any FDI beyond 74 percent follows government approval route.
-
Drugs and pharmaceutical sector received 8th largest cumulative FDI inflow of US$ 16.2 billion between April 2000- June 2019, a share of 4 percent in total FDI inflows in the country.
Other conditions:
-
‘Non-compete’ clause would not be allowed except in special circumstances with the approval of the Foreign Investment Promotion Board.
-
The prospective investor and the prospective investee are required to provide a certificate along with the FIPB application as per Annexure-10 of Department of Industrial Policy and Promotion (DIPP), Consolidated FDI Policy (Effective from June 07, 2016).
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Government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting approval.
Outlook
Indian pharmaceutical sector remains under pressure from quite some time due to decline in revenues from the US markets (India’s largest overseas market), and increased competition. Moreover, generic adoption reaching saturation levels and regulatory overhang, along with base effect catching up too, remain a big concern for the sector. Despite all these concerns, Indian pharmaceutical industry is expected to recover in coming time on the back of increasing consumer spending, rapid urbanisation, and raising healthcare insurance. Robust growth in Biotech Industry and higher spending in research and development by the major companies spread ray of hopes for the industry to grow extensively in near future.
To bring the pharma industry on right track, the Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. The implementation of the Goods and Services Tax (GST) too is expected to provide fillip to the Indian Pharmaceuticals industry as it will lead to tax-neutral inter-state transactions between two dealers, thereby reducing the dependency on multiple States and increasing the focus on regional hubs.
