Access to healthcare and the general health of a population is a pre-requisite to the sustained economic development of a country. Modern developmental economists all echo the same sentiment- health is a sort of capital that produces benefits. This is in terms of a supply of “healthy” time, that is valued both in and of itself (consumption perspective) and because it allows for earning an income (investment perspective).
The pharmaceutical industry is a crucial aspect of healthcare and therefore, a major driver of economic development. The Indian Pharmaceutical Industry is the 3rd largest in the world by volume and the 14th largest by value. The country also leads the world in vaccine production and is the largest producer of generic medications, accounting for 20% of the total worldwide supply by volume. A robust network of over 10,500 manufacturing facilities, as well as more than 3,000 pharmaceutical firms, can be found in India, as can the largest number of US-FDA approved pharma plants outside of the US. Some of the key segments within the industry are generic drugs, over-the-counter drugs, API/batch medicines, vaccines, contract research & production, biosimilars, and biologics. With a growth rate of 10-12%, and a year-on-year export growth rate of 18.7%, this sector is projected to reach USD 65 bn by 2024, and ~USD120-130 bn by 2030.
Indian pharmaceutical exports* were worth approximately USD 23.5 billion in FY22. India is the largest supplier of generic drugs in the world, meeting around 60% of the demand for vaccines globally and contributing 20% of the global supply by volume. It is also the biggest formula exporter by volume, ranking 12th in terms of export value, and controlling 14% of the world market. With approximately 36% market share, North America was the destination of the majority of Indian pharmaceutical exports in FY22. Exports valued at USD 6472.29 , USD 354.85, and USD 166.80 million, respectively, to the USA, Canada, and Mexico. With 73.31% of total exports, bulk pharmaceuticals and drug intermediates were the third-largest export category, behind formulations and biologicals during FY22.
Export Value of Pharmaceutical Products* in the last 5 years
|Year||Export Value (USD Billions)||% Growth|
|Source: Ministry of Commerce and Industry|
Major Export Destinations for Indian Pharmaceutical Products (2021-22)
|Country||Export Value (USD Billions)|
|United States of America||6472.29|
|Source: Ministry of Commerce and Industry|
*Products considered as pharmaceutical exports include Bulk Drugs, Drug Intermediates, Drug Formulations and Biologicals.
Foreign Direct Investments
The Indian Pharmaceutical sector has seen about 19,405 million (USD) worth of FDI inflow from April 2000-March 2022.
India’s FDI policy for this sector:
In case of Brownfield pharmaceuticals:
Globally, the pharmaceutical sector has seen a slow-down in growth potential in developed markets, whilst concurrently noting impressive growth potential in emerging markets like India. The main driver of this growth would be rising incomes, which would also be aided by the factors like- enhanced medical infrastructure; an increase in the prevalence and treatment of chronic diseases; greater health insurance coverage; the introduction of patented products; and the creation of new markets in already established untapped markets.
From 2021 to 2028, the global market for pharmaceutical goods is anticipated to expand at a CAGR of 11.3%. Over the next five years, it is anticipated that India's spending on medicines will increase by 9-12%. From FY 2021 to FY 2026, India's exports of formulations are anticipated to grow at a CAGR of 6% to 8%, down from a CAGR of 8% to 9% over the preceding five years. The market for medical devices is expected to grow by USD 25 billion by 2025.
The Indian pharmaceutical sector may improve its efficiencies and realise its ambition of being a USD 130 billion industry by 2030 if intellectual potential is integrated into business activities across organizational silos. Additionally, this will help the industry build its competence in pharmaceutical specialties that need a lot of innovation, such as biologics and biosimilars, complex generics, and preventative medicine. The share of Covid-19-related medications in the Indian pharma market's overall sales from April to May 2021 was 44%. This shows the potential of Indian pharmaceutical players to cater to the world demand during the Covid-19 pandemic, especially with multiple variants coming into play.
Indian pharmaceutical sector is increasingly promoting the R&D culture that goes beyond just drug development. For instance, pharmaceutical companies now aim to leverage digital technologies to understand patients and gather insights right from diagnosis to disease management. This data-based insight, in turn, helps improve rapid drug discovery and development to improve the health outcomes of people. The Indian pharmaceutical sector has a promising future ahead of it given the policy-related efforts like the PLI scheme, tele-mental health programme, etc. Infrastructure, industry-academia collaboration, sustained regulatory reforms, and funding for innovation will all be critical elements for this industry’s growth. The industry is well on its way to becoming one of the world's leading players, enhancing India's reputation as the "pharmacy of the world”.
1. Pharma Vision 2020
The Government’s Department of Pharmaceuticals aims to make India a major hub for end-to-end drug discovery.
2. National Pharmaceutical Policy
In 2017, the Department of Pharmaceuticals released a draft National Pharmaceutical Policy with the following objectives:
3. Pharmaceutical Parks
In January 2021, the central government announced to set up three bulk drug parks at a cost of Rs. 14,300 crore (USD 1,957 million) to manufacture chemical compounds or active pharmaceutical ingredients (APIs) for medicines and reduce imports from China.
4. Production Linked Incentive Scheme
In September 2020, the government announced production-linked incentive (PLI) scheme for the pharmaceutical industry worth Rs. 15,000 crore (USD 2.04 billion). The production-linked incentive (PLI) scheme was introduced to encourage Indian manufacturers to produce critical key starting materials (KSMs), drug intermediates (DIs) and active pharmaceutical ingredients (APIs). PLI scheme outlay for bulk drugs is an estimated INR 6940 crores and for Pharmaceuticals Manufacturing, INR 15000 crores.